Banks with Muscle

While most banks only insure up to $250,000 of your interest-bearing deposits through the FDIC, Banks with separate "charters" make it possible for your deposits to be insured well over the $250,000 advertised by the federal government's protection/deposit insurance program.

Frequently as banks merge, they re-brand themselves under one name. Some decide to drop the charters and additional paperwork filing associated with each separate banks in order to reduce overhead. Others however decide to keep their separate charters with the FDIC. The trade-offs are judged by and announced by the surviving management of the remaining bank and the actions typically have little to do with the size of the bank.

For instance, Fifth Third Bank holds 3 separate charters with the FDIC. It therefore can pass on up to $750,000 of insurance to depositors using its three different charters.

Glacier Bank of Kalispell, Montana conducts business as First Security Bank of Missoula, Valley Bank of Helena, Big Sky Western Bank of Bozeman, Western Security Bank of Billings, First Bank of Montana of Lewistown; as well as Mountain West Bank in Idaho, Utah and Washington; It also has charters with 1st Bank in Wyoming, Citizens Community Bank in Idaho, and First National Bank of Morgan in Utah. I'll let you do the math.

Impressively, FirstBank of Colorado advertises on their website: "FirstBank's 25 separate charters make it possible for your deposits to be insured up to $6.25 million, keeping your money safe and secure."

Do I see weakness here? No.

In fact Glacier Bank (GBCI), placed an additional 6,325,000 shares of common stock at a price of $15.50 per share, including their over-allotment of 825,000 shares in the midst of this "economic crisis." They bankrolled, $94,000,000 in that public placement on November 19, 2008. Several week later they further flexed their muscle with the acquisition of the Bank of the San Juans in Durango, Colorado. They announced a dividend payout to their shareholders several weeks later.

Does it get any better than that for a bank given the perceived financial turmoil? Yes.

On Dec 30, 2008, Glacier issued this statement: "We greatly appreciate the federal government's recognition of our financial strength in approving Glacier's participation in the TARP Capital Purchase Program. However, with the $94 million in net proceeds from our successful common stock offering, we are already one of the most strongly capitalized banking companies in the country, with total risk-based capital of approximately 16%. Consequently, we do not believe that participation in TARP is in our shareholders' best interests."

One of my readers recently asked if I read the 10Q financial statements of individual banks. You bet I do: "More of them than I care to admit publicly." The more that you do read of these disclosures, the more you realize that this banking "crisis" is very narrowly focused on the top 10 banks with a over-allocation of "junk" in their asset collections. Conversely, these second tier banks (highlighted in this post) have quite impressive capital portfolios. (For some other excellent examples take a peek at the fine banks that Peter Cohan reviews.) These firms all are strong, safe, secure, and committed to a solid US banking system. We should reward them in every way possible.

Overall it's just another reminder of the assertion back in November: "There really is no credit crunch at most US banks..."


(Do you have a example of a strong bank in your area? Please comment below, or send an email to good.news.econ@gmail.com)