Several Banks Are Surviving, Even Thriving

Wells Fargo shocked the market Thursday when it revealed that it expects to have earned $3 billion in the first quarter. (Yes, that was after announcing $3.3 billion in write-offs, but hey, who's counting?)

While signs of post-TARP animation from any of the big players are comforting, the fact is there are plenty of banks that are holding their own or even gaining ground, despite today's dismal economic climate. Chris Whalen of Institutional Risk Analytics, a company that monitors bank performance, says there are thousands of banks in the United States that aren't in danger of failing, which tends to get overlooked by the attention focused on the 250 or so that need a lifeboat.

What makes a bank less bad in this climate? Formulas for figuring out the health of other types of businesses (like manufacturing or retail) can't be usefully applied to banks because these firms tend to be so highly leveraged. In theory, you could look at a capital-to-asset ratio or a liabilities-to-asset ratio. The hitch with both of these, of course, is that many banks today are carrying assets that are hard to value because there's no market for them anymore.

There are a few indicators that can help paint a picture of a bank's relative robustness. Analysts also like banks that focus their business on lending. Despite the mortgage mess, writing loans is still safer than managing securities portfolios and trading derivatives and other exotic instruments.

Sometimes, it's a size thing. Many healthy banks are regional or community institutions that never got involved in the high-stakes derivatives trading that brought down higher-profile institutions. In some cases, a smaller geographic footprint helps. Banks with sizable offshore operations have to divert resources to feed those hungry enterprises.

The Big Money talked to market watchers and number crunchers to come up with a short list of banks notable for how far they haven't fallen.

-- BB&T: In a season when cutting dividends is the new black, just holding steady at 47 cents per share was enough to make BB&T Corp. stand out from the pack. Though there's been a bit of controversy as to whether a Troubled Assets Relief Program recipient should be sharing the wealth -- BB&T took $3.1 billion from the government -- analysts point out that handing capital to banks like the North Carolina-based BB&T puts them in a position to absorb smaller, weaker banks that might otherwise die on the vine.

-- Beal Bank: Texas-based and privately owned, this bank is a bit of an odd duck, as Forbes pointed out in a recent profile of Beal's eponymous, poker-playing, libertarian founder. Beal (the bank, not the man) is kind of like the gawky AV-club member at the prom who turns up at the reunion with a Rolex on one arm and a blonde on the other. The bank effectively sat out the credit boom, putting the brakes on its standard M.O. of gobbling up loans on the secondary market just when everyone else was clamoring to get in the game. In 2008, Beal turned out an eye-popping 8.1 return-on-assets ratio (a number in the range of 1 to 1.5 is considered good).

-- Hudson City Savings Bank: This bank is an industry pace car; its so-called "stress level," which takes into account factors such as its loan defaults and lending capacity, has been nearly flat over the past two years. Looking at Hudson City's numbers in a vacuum, no one would suspect the current level of market turmoil. While its percentage of nonperforming loans has risen to nearly 1 percent as of last month, that's still well below the industry standard. What's more, Hudson City never so much as dipped a toe into exotic derivatives like the credit-default swaps that were the downfall of so many.

-- Signature Bank: Despite being headquartered a scant few miles from the wreckage of Wall Street, this New York-based bank has managed to stay above the fray. Although bigger players, including Goldman Sachs and Bank of America, have announced they're planning to return TARP money -- eventually -- Signature was among the first to put its money where its mouth was, giving back $120 million earlier this month. It's in a stronger position than many of its peers because that TARP infusion came just after Signature raised $148 million in a public offering.

-- US Bancorp: Despite a bruising 65 percent drop in profit in the last quarter of 2008, thanks to a quadrupling of nonperforming assets, this Minneapolis-based bank has a long history as a conservative lender. In addition, although its Midwestern home turf has been beset by job losses in manufacturing and other industries, this part of the country never saw the speculative real estate bubbles that exploded in Miami and Las Vegas. In November, the Office of Thrift Supervision gave this TARP recipient a tacit vote of confidence when it sold to US Bancorp the deposits and assets of failed California bank Downey Savings and Loan.

Martha C. White is a New York freelance writer.