A-plus rated institutions is dominated by community banks. Goldman Sachs Bank USA was formed in November 2008, when Goldman combined the former Utah industrial bank of the same name with its New York trust company, and instantly joined the group of 20 largest U.S. banks. The deposits of wealth-management customers were funneled in, and more than $100 billion in assets tied to Goldman's trading, lending and servicing, structured finance, custody and other businesses were moved on to the bank's balance sheet. Goldman converted to a bank holding company in September 2008, making the company eligible for a capital infusion via the Troubled Asset Relief Program, or TARP, while allowing the bank and holding company to participate in the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program and opening up other sources of liquidity, including a greater ability to gather deposits and the ability to borrow from the Federal Reserve. The Federal Reserve required Goldman Sachs Bank USA to maintain capital ratios in excess of those required for most banks to be considered well-capitalized. After a net loss of $250 million during 2008, which reflected trading losses, the bank reported strong trading revenue and net income of $2.8 billion for the first three quarters of 2009.
For the third quarter, net income was $1.1 billion, or a return on average assets of 3.8% and a return on average equity of 28.4%, according to SNL Financial. That's, by far, the strongest earnings performance by any bank on the list. Goldman Sachs Bank USA has limited credit exposure from nonperforming loans. Loans comprised just 3% of total assets as of Sept. 30. The second-largest bank on the list is BancorpSouth Bank of Tupelo, Miss., the main subsidiary of BancorpSouth ( BXS). It had $13 billion in assets as of Sept. 30, operating a growing network of more than 300 branches in eight states. While provisions for loan-loss reserves have reduced earnings performance over the past year, asset quality has been good, considering the bank's focus on commercial real estate, construction and business lending. The nonperforming-assets ratio was 1.23% as of Sept. 30, compared with an industry aggregate of 3.07%, according to the FDIC. The annualized ratio of net charge-offs to average loans for the third quarter was 0.68%, compared with a national aggregate of 2.71%. Next is Silicon Valley Bank of Santa Clara, Calif., which is held by SVB Financial Group ( SIVB), which had $12 billion as of Sept. 30. The bank focuses on lending to technology and biotechnology companies, the wine industry and venture-capital firms. Silicon Valley Bank's asset quality has suffered over the past year, leading to mediocre earnings performance as the bank has worked through problem loans. Still, the bank has remained profitable, and the B-plus rating reflects several years of stable and strong earnings performance through 2008.
The fourth-largest bank on the recommended list is GE Capital Financial, a subsidiary of General Electric ( GE). The institution focuses on industrial finance, and has posted good earnings over the past three quarters, despite a moderate (in the current credit environment) decline in asset quality. Capital levels are very strong, with tier 1 leverage and total risk-based capital ratios more than twice those required for most banks to be considered well-capitalized. Free financial-strength ratings: TheStreet.com Ratings issues independent and very conservative financial-strength ratings on the nation's 8,500 banks and savings-and-loans. They are available at no charge on the Banks & Thrifts Screener. -- Reported by Philip van Doorn in Jupiter, Fla.