Safe and Sound

Scottrade Bank

Saint Louis, MO
5
Star Rating
Scottrade Bank is a Saint Louis, MO-based, FDIC-insured bank founded in 2008. The bank has equity of $1.36 billion on assets of $17.01 billion, according to June 30, 2017, regulatory filings.

With 143 full-time employees, the bank has amassed loans and leases worth $4.32 billion, including real estate loans of $3.73 billion. U.S. bank customers currently have $15.59 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Scottrade Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is key. It works as a cushion against losses and as protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.
Scottrade Bank came in below the national average of 13.38 on our test to measure the adequacy of a bank's capital, racking up 8 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Scottrade Bank's Tier 1 capital ratio was 26.07 percent, exceeding the 6 percent level considered adequate by regulators, and above the national average of 25.16 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, Scottrade Bank held equity amounting to 8.01 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having large numbers of these kinds of assets could eventually require a bank to use capital to absorb losses, diminishing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the risk of a future failure.

Scottrade Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.62.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.34 percent of Scottrade Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the that reserve's size to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Scottrade Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Scottrade Bank scored 26 out of a possible 30, above the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. Scottrade Bank's most recent annualized quarterly return on equity was 17.52 percent, above the national average of 9.28 percent.

The bank reported net income of $114.8 million on total equity of $1.36 billion for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.35 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.