State Farm Bank^® Market Rate Certificate of Deposit

Product is discontinued as of 3/11/08 for new business. Existing accounts will continue to be serviced through their maturity.

This description of the Market Rate Certificate of Deposit, hereinafter "Product," offered by State Farm Bank ("the Bank") contains general information about this Certificate of Deposit.

PLEASE NOTE THAT THIS PRODUCT MAY NOT BE SUITABLE FOR SOME INVESTORS. YOU SHOULD NOT INVEST YOUR MONEY IN THIS PRODUCT IF YOU DO NOT HAVE THE INTENT OR ABILITY TO KEEP YOUR INVESTMENT IN THIS PRODUCT FOR THE FULL FIVE-YEAR TERM. WHILE YOUR PRINCIPAL IS PROTECTED PURSUANT TO FDIC REGULATIONS, YOU SHOULD NOT INVEST YOUR MONEY IN THIS PRODUCT IF YOU ARE UNABLE OR UNWILLING TO ACCEPT THE RISK THAT YOU MIGHT RECEIVE LITTLE OR NO INTEREST ON YOUR INVESTED PRINCIPAL AT THE END OF THE FIVE-YEAR TERM. YOU SHOULD NOT INVEST YOUR MONEY IN THIS PRODUCT IF YOU WANT AN INVESTMENT THAT FLUCTUATES DIRECTLY WITH THE STOCK MARKET. YOU ARE NOT INVESTING IN A STOCK MARKET INDEX BY INVESTING YOUR MONEY IN THIS PRODUCT. PAST PERFORMANCE OF THE S&P 500® INDEX IS NO GUARANTEE OF FUTURE PERFORMANCE.

A. COMPUTATION OF MARKET RATE INTEREST

Market Rate Certificates of Deposit bear interest at the Market Rate, as determined by the Market Measure. The amount of interest is not predetermined at a set rate at the Issue Date. As such, no assurance can be given that you will receive any Interest Earned. Interest Earned, if any, is not compounded. However, one hundred percent (100%) of the principal you invested will be returned to you by the Bank at maturity regardless of how the relevant Market Measure performs. In the unlikely event of the Bank's insolvency, the Product is covered by FDIC insurance.

The amount of Interest Earned, if any, is determined by multiplying the Market Rate by the deposit amount at the Maturity Date. The Market Rate is determined by multiplying by 90% the difference between the Starting Market Value number from the Closing Market Value number, and dividing the result by the Starting Market Value number. The Closing Market Value will be determined by calculating the arithmetic average of the closing values of the S&P 500 Index on the Pricing Dates. Interest Earned is ordinarily payable on the third business day following the Maturity Date, subject to Special Considerations (Section III). No interest shall be paid with respect to any period after the Valuation Date. The following example indicates how Interest Earned would be calculated with respect to a hypothetical Ten Thousand and No/100 Dollars ($10,000.00) Product investment:

Example:

Example:

B. DETERMINATION OF PRICING DATES

The determination of the Closing Market Value is calculated by computing the arithmetic average of the closing value of the S&P 500 Index on the Pricing Dates. If a Market Rate CD has a maturity date of February 18, 2006, the pricing dates are determined as follows:

Assume that January 31, 2006 is the last business day in January 2006 in which the New York Stock Exchange is open for trading. This date would then be the Valuation Date. The other eleven Pricing Dates would be the last exchange business days of the previous eleven three-month periods immediately preceding January 31, 2006. As such the Pricing Dates would be the last exchange business of each of the following months:

1. April 2003
2. July 2003
3. October 2003
4. January 2004
5. April 2004
6. July 2004
7. October 2004
8. January 2005
9. April 2005
10. July 2005
11. October 2005
1. January 2006
   
   

C. IMPACT OF PRICING DATE AVERAGING

Changes in the closing value of the S&P 500 Index on the Valuation Date will have less impact upon the calculation of the Closing Market Value than it would have if the Closing Market Value were determined solely by calculating the closing value of the S&P 500 Index on the Valuation Date. If the closing value of the S&P 500 Index on the Valuation Date is greater than on previous Pricing Dates, the Interest Earned will be lower, as a result of averaging, than if there were no Pricing Date Averaging. If, however, the closing value of the S&P 500 Index on the Valuation Date is less than on the previous Pricing Dates, the Interest Earned, as a result of averaging, will be higher than if there were no Pricing Date Averaging.

D. THE S&P 500 COMPOSITE STOCK PRICE INDEX

1. General Description

The S&P 500 Index is a widely used measure of large U.S. company stock performance. Standard and Poor's selects companies for inclusion in the S&P 500 Index based upon the following factors: a) market value, b) industry group classification (so that the Index represents a broad range of industry segments within the U.S. economy), c) trading activity in the company's common stock, to ensure ample liquidity and efficient share pricing, and d) fundamental analysis, to ensure that companies in the Index are stable.

2. Disclaimer

This Product is not sponsored, endorsed, sold, or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or implied, to the owners of this Product or any member of the public regarding the advisability of investing in this Product, or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Bank is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index which is determined, composed and calculated by S&P without regard to the Bank or this Product. S&P has no obligation to take the needs of the Bank or the owners of this Product into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of this Product or in the determination or calculation of the equation by which this Product is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Product.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE BANK, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

"Standard & Poor's®" "S&P®" "S&P 500®" "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc., and have been licensed for use by State Farm Bank. The Product is not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P").

E. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

1. General

The following is a summary of certain U.S. federal income tax considerations that may be relevant to you if you are a U.S. citizen or resident alien. This summary is based on laws, regulations, rulings and decisions now in effect, all of which are subject to change that, in some cases, may have retroactive effect. This summary applies only if you hold the Product as a capital asset and does not address tax considerations that apply to you if:

• you are a nonresident alien, or
• you hold the Product as part of an integrated investment (including a "straddle") comprised of the Product and one or more other positions.

YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING THIS PRODUCT IN YOUR OWN PARTICULAR SITUATION, AS WELL AS ANY CONSEQUENCES UNDER THE LAWS OF OTHER RELEVANT TAXING JURISDICTIONS (INCLUDING THE INCOME TAX LAWS OF THE STATES AND LOCALITIES OF WHICH YOU ARE A RESIDENT OR IN WHICH YOU TRANSACT BUSINESS).

2. Long-Term Contingent Market Linked Deposits

There are significant tax implications if you do not hold this Product in a qualified tax-deferred account. Under income tax regulations applicable to contingent payment debt instruments such as the Product, you are required to include on your federal income tax return as interest income an amount of "original issue discount" ("OID") for each year that you hold the Product, even though actual interest payments on the Product (if any) will not be made until maturity. The amount of OID is calculated by accruing interest compounded annually on the principal amount of the Product, and then allocating to each day of each year you hold the Product a ratable portion of the interest that accrues in such year. The rate at which interest is deemed to accrue (the "Deemed Interest Rate") will be based on an assumed interest rate that will be fixed following the Issue Date of the Product. If you would like a schedule of the timing and amount of the assumed interest payment and the Deemed Interest Rate, please call State Farm Bank at 1-877-734-2265 or write us at State Farm Bank, P.O. Box 2316, Bloomington, Illinois 61702. For each calendar year prior to the year in which the Product matures, during which you hold the Product, State Farm Bank will issue you an IRS Form 1099-OID after the end of each year that will report the amount of interest that you are deemed to receive on the Product. These amounts will also be reported to the Internal Revenue Service.

The Deemed Interest Rate is used to determine accruals of interest for tax purposes only and are not assurances by State Farm Bank with respect to the actual yield of, or payments to be made in respect of, the Product. Further, the Deemed Interest Rate does not necessarily represent State Farm Bank's expectations regarding such yield or the amount of such payments. THE DEEMED INTEREST RATE IS NOT A PREDICTION OR GUARANTEE OF WHAT THE ACTUAL YIELD MAY BE ON THE PRODUCT.

BECAUSE YOU MAY NOT WITHDRAW FUNDS INVESTED IN THE PRODUCT PRIOR TO MATURITY AND WILL NOT RECEIVE ACTUAL PAYMENTS OF INTEREST PRIOR TO MATURITY, YOU MUST BE PREPARED TO PAY INCOME TAX ON THIS INTEREST INCOME WITH ANOTHER SOURCE OF FUNDS. BECAUSE OF THE RULES THAT APPLY IF YOU HOLD THE PRODUCT OUTSIDE OF A QUALIFIED TAX-DEFERRED ACCOUNT, IT IS POSSIBLE THAT YOU WILL BE REQUIRED TO PAY TAX ON INTEREST INCOME THAT YOU NEVER RECEIVE. IN THIS EVENT, HOWEVER, YOU WILL BE ENTITLED TO DEDUCT THE EXCESS AMOUNT AS AN ORDINARY LOSS IN THE YEAR OF MATURITY. If at maturity the total interest actually paid on the Product is greater than the OID reported to you as interest on the Product in prior years, you must report this amount as income for the year of maturity. You will receive a Form 1099-OID from State Farm Bank reporting this amount. If the OID reported to you in prior years exceeds the total interest payable at maturity, you will not report any interest income on the Product. You will be entitled to claim an ordinary loss in the year of maturity equal to the excess of the previously reported OID over the amount of interest you actually receive. If this amount exceeds your income after other deductions for the year, the excess may be carried over and deducted in subsequent years. BECAUSE STATE FARM BANK WILL NOT PROVIDE YOU WITH A STATEMENT IF THE OID REPORTED IN PRIOR YEARS EXCEEDS THE TOTAL INTEREST PAYABLE AT MATURITY, IT IS CRUCIAL THAT YOU RETAIN FOR YOUR TAX RECORDS EACH FORM 1099-OID YOU RECEIVE OVER THE TERM OF THE PRODUCT OR OTHERWISE MAINTAIN RECORDS THAT WILL ALLOW YOU TO CALCULATE THE AMOUNT OF ANY LOSS YOU MAY CLAIM IN THE YEAR OF MATURITY.

3. Individual Retirement Accounts and Coverdell Education Savings Accounts

If this Product is purchased in connection with a Traditional or Roth Individual Retirement Account (an "IRA") or a Coverdell Education Savings Account (a "Coverdell ESA," formerly called an Education IRA), special terms apply, and you should keep certain factors in mind in considering whether the Product is an appropriate investment choice for you.

If you will be older than age 65 ½ by the end of the year in which you invest in the Product, you may not purchase this Product in connection with a Traditional IRA. This is because the Product's withdrawal restrictions might otherwise prevent you from taking distributions required under the Internal Revenue Code by April 1st of the year following the year in which you reach age 70½ and by December 31 in subsequent years. In addition, you may not purchase this Product in connection with a Coverdell ESA if the designated beneficiary has reached age 25 by the date on which the Product is purchased. Otherwise, the Product's withdrawal restrictions could prevent the designated beneficiary from using the funds in the Coverdell ESA for higher education by his or her 30th birthday and could, therefore, result in adverse tax consequences for the designated beneficiary.

You should consider your and, if applicable, your designated beneficiary's personal circumstances in determining whether this Product is an appropriate Traditional or Roth IRA or Coverdell ESA investment choice. For example, you may not want to choose this Product as your IRA investment if you expect to need the funds invested in the IRA for retirement or other needs before the expiration of the five-year Product Term or if you believe that the designated beneficiary of a Coverdell ESA will need the funds for a higher education expense before the expiration of the five-year Product Term. Finally, once you reach age 59½, you can generally take withdrawals from an IRA without incurring a 10% penalty tax. You should keep in mind that even if you reach age 59½ during the Product Term, the Product does not permit withdrawals until the end of the Product Term.

4. Issues Upon Death

In the event that a Depositor dies prior to the Maturity Date, and a subsequent beneficial owner and/or authorized holder elects to exercise the Early Withdrawal Option pursuant to Section II.E. herein, the owner/holder may be precluded from recovering the benefit of any taxes paid on this Product by the decedent/owner during his/her lifetime.

F. BANK PROCEDURE

This Product is only issued on the eighteenth (18th) day of a given month (excluding weekends or bank holidays), as determined by the Bank. In the event that the eighteenth (18th) day of a given month falls on a Saturday, Sunday, or on a scheduled bank holiday, then the Issue Date shall be the business day immediately following the proposed Issue Date.

The Bank shall use its best, commercially reasonable efforts to execute orders for this Product on the eighteenth (18th) day of the month that most closely follows the date upon which State Farm Bank receives the funds and necessary documents from you. The Bank must receive the funds, the signed Suitability Analysis Form, the account application, the Customer Acknowledgement Page, and transfer or rollover request documentation, if applicable, before any order will be executed. Funds and necessary documents received after the 11th day of a particular month will cause the funds to be invested in the Product issued on the eighteenth day of the following month. If the eleventh day of a month falls on a Saturday, Sunday or on a scheduled Bank holiday, the funds and necessary documents will need to be received on the business day immediately preceding the eleventh in order to be invested on that month's Issue Date. For purposes of this provision, "Receive" means that the actual funds, rather than simply a check representing a promise to pay those funds, is in the possession of State Farm Bank.

During the period of time between when you complete an application for this Product and the Issue Date, the funds that you invest will be held in a State Farm Bank deposit account. This may include an existing account or an account that is opened on your behalf to hold funds until the Product Issue Date. For Individual Retirement Account investments, the invested funds must be placed in a Market Rate CD Holding Account, to ensure that the funds receive appropriate treatment. If the funds are held in an existing State Farm Bank account, then State Farm Bank will transfer only the Requested Amount of the Certificate into the Product on the Issue Date. If a Market Rate CD Holding Account is opened on your behalf, State Farm Bank will mail you a Receipt for Certificate of Deposit - Market Rate Holding Acct. The ownership of the holding account will be identical to the ownership you selected for the Product. On the Product Issue Date, State Farm Bank will transfer the funds from the Market Rate CD Holding Account, including any accrued interest, into the Product and the Market Rate CD Holding Account will be closed.

1. Market Rate CD Holding Account

Invested funds placed in the Market Rate CD Holding Account will be credited interest at the rate and Annual Percentage Yield disclosed in your account receipt. At our discretion, the interest rate and APY may change daily. Contact us at 1-877-734-2265 for current rate information. Interest will begin to accrue on the business day the funds are received. Interest is compounded daily. We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day, at the end of the business day. Subject to the Early Withdrawal Provisions outlined herein, funds placed in the Market Rate CD Holding Account may not be withdrawn until the maturity of the Market Rate CD.

2. Issue Date

The Bank does not guarantee or warrant that any orders received shall be executed on any specific Issue Date, and in no event shall the Bank assume any liability for any compensatory, special, punitive, indirect or consequential damages, including lost profits, as a result of any failure on the part of the Bank to issue this Product on any specific Issue Date. The Product Term will commence on the Issue Date.

II. PRODUCT DISCLOSURES

A. MARKET RATE

Because the Closing Market Value is determined by any number of market factors affecting the S&P 500 Index, the Market Rate of any Product offering may be more or less than a fixed rate of interest earned from other standard CDs. As stated above, Interest Earned is not accrued throughout the Product Term. As such, the Market Rate does not change or vary at preset intervals, and is not quoted or determined on any date other than the Valuation Date. There is no fixed limitation on the growth or decline of the Market Rate and the Market Rate is not quoted as a compounded rate of interest.

If there is no change, or if there is a decrease in the Market Measure from the Starting Market Value to the Closing Market Value, no Interest Earned will be paid with respect to the relevant Product offering. The Bank does not guarantee any specific rate of interest, and offers no warranties, either express or implied, that any Product offering will result in any Interest Earned. As such, the Bank disclaims any liability for damages incurred by any Depositor by way of any loss of interest, or any other damages incurred by any Depositor as a result of the purchase of any Product, including compensatory, punitive, indirect, or consequential damages (including lost profits) incurred.

B. TERM

The term of this Product shall be for five (5) years from the Issue Date. Each Product offering will begin on the Issue Date specified in the relevant schedule and will terminate on the Maturity Date specified in the relevant schedule, subject to adjustment in the event of Special Considerations (Section III).

C. NO AUTOMATIC RENEWAL

On the Valuation Date of any specific Product Offering, the Market Rate will be calculated according to the S&P 500 Index (See Section I.B. above). Interest Earned will be paid, together with principal, on or before the third business day following the Maturity Date, subject to Special Considerations (Section III). There is no option available for an automatic renewal of a specific Product past the Maturity Date.

D. AMOUNT

This Product is available to all Depositors at a minimum principal amount of Five Hundred and No/100 Dollars ($500.00). Following the Issue Date, you may not make any additional deposits in any specific Product.

E. EARLY WITHDRAWAL PROVISIONS

1. Early withdrawal is only available upon the death of a Depositor prior to the Maturity Date of this Product. Upon such death, a subsequent beneficial owner and/or authorized holder has the option of exercising Early Withdrawal at any time during the Product Term. Said owner/holder shall identify the date of withdrawal in writing, and shall produce a certified death certificate which verifies the date of death of the Depositor. The Early Withdrawal Amount would then be computed on the specified date, and the Early Withdrawal Amount would be paid to the beneficial owner and/or authorized holder within five (5) business days immediately following said date.

2. Calculation of Early Withdrawal Due to Death Amount

If an election for Early Withdrawal is made, one hundred percent (100%) of principal will be paid. Additionally, if an Early Withdrawal is made, interest will not be calculated at the Market Rate, as described in paragraph I., A. above. Rather, interest will be calculated at a fixed annual interest rate of 2.00%. The APY will depend upon the length of time that the principal remains invested in the Product. This rate will be compounded daily and will be credited to the account at the time of the Early Withdrawal. We will use the daily balance method to calculate the interest upon Early Withdrawal. This method applies the daily periodic rate to the principal in the account each day, at the end of the business day.

F. FEES/BONUSES

There shall be no application, maintenance, or other fees paid by a Depositor, and there shall be no bonuses offered a Depositor during the Product Term.

G. FDIC INSURANCE

The principal invested in Market Rate CDs is insured by the Federal Deposit Insurance Corporation ("FDIC") to a maximum amount of One Hundred Thousand and No/100 Dollars ($100,000.00) for each Depositor, subject to FDIC Regulations. Because Interest Earned, if any, is not calculated until the Maturity Date, FDIC Insurance coverage will only apply to the principal amount invested. FDIC insurance coverage up to $100,000 per depositor will apply to the principal and the Interest Earned, if any, once the Product has reached its Maturity Date and the Interest Earned, if any, can be calculated.

III. SPECIAL CONSIDERATIONS

Unforeseen events may occur on the Pricing Dates of any specific Product offering, which may adversely distort the Market Rate. In the event that any of the following unforeseen events should occur on any Pricing Date, during the Product Term, the Bank shall act in accordance with the following provisions in determining the Closing Market Value:

A. MARKET DISRUPTION EVENTS

A "Market Disruption Event" shall mean, with respect to any Product offering, the absence of any calculation and announcement of the value of the S&P 500 Index on any Pricing Date. If a Market Disruption Event occurs on any Pricing Date, the Market Measure for said Pricing Date shall be determined the next business day in which the S&P 500 Index is calculated and announced.

B. MATERIAL CHANGES IN THE S&P INDEX

Changes in the way the S&P 500 Index is calculated may be announced on any Pricing Date. Such material changes are outside the control of the Bank, and may significantly affect the calculation of the Market Rate. If the S&P 500 Index is (i) not calculated and announced by S&P, but is calculated and announced by a successor publisher, or (ii) replaced by a successor index using the same or a substantially similar formula for any method of calculation as used in the calculation of the S&P 500 Index, then for the purpose of determining the closing value of the Market Measure on any Pricing Date, the Market Measure will be deemed to be the index so calculated and announced by that successor publisher or that successor index, as the case may be.

C. LIABILITY

The Bank shall assume no liability to any person or entity for any mathematical errors regarding the S&P 500 Index, or any changes in the method by which the S&P 500 Index is calculated. Further, the Bank shall assume no liability which arises out of any decision by S&P to cease the compilation and publication of the S&P 500 Index or to terminate the license held by the Bank, together with any possible adverse effects that a successor or replacement index may create. The Bank shall be immune from any liability under Section II. of this "Product Description and Disclosure Statement" for any and all judgments, damages, costs, expenses, losses or liabilities which any person or entity may incur, including inter alia, any compensatory, special, punitive, incidental or consequential damages sustained, including lost profits. The Bank makes no express or implied warranties of merchantability or fitness for a particular purpose or use with respect to the S&P 500 Index or any data included therein.