Safe and Sound

State Farm Bank, F.S.B.

Bloomington, IL
3
Star Rating
Bloomington, IL-based State Farm Bank, F.S.B. is an FDIC-insured bank started in 1999. Regulatory filings show the bank having equity of $1.84 billion on assets of $16.70 billion, as of December 31, 2017.

Thanks to the efforts of 2,107 full-time employees, the bank holds loans and leases worth $10.64 billion, including real estate loans of $3.89 billion. The bank currently holds $11.21 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, State Farm Bank, F.S.B. exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank fared on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is crucial. It acts as a buffer against losses and as protection for depositors when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.

State Farm Bank, F.S.B. received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. State Farm Bank, F.S.B.'s Tier 1 capital ratio was 16.74 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic downturns.

Overall, State Farm Bank, F.S.B. held equity amounting to 10.99 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these kinds of assets may eventually have to use capital to cover losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, State Farm Bank, F.S.B. scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.12 percent of State Farm Bank, F.S.B.'s loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on State Farm Bank, F.S.B.'s loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is 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 able to withstand financial trouble. Obviously, banks that are losing money are less able to do those things.

State Farm Bank, F.S.B. fell short of the national average on Bankrate's test of earnings, achieving a score of 0 out of a possible 30.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for State Farm Bank, F.S.B. was -0.05 percent, below the national average of 8.10 percent.

The bank recorded net income of $-974,000 on total equity of $1.84 billion for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of -0.01 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 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.