Looking for the safest banks in the country? According to data from BestCashCow, you should look to New England. Along with snow, steepled churches and the New England Patriots, the New England states have the safest banks based on average weighed Texas Ratios. Georgia takes last place with the dubious distinction of having the least safe banks in the fifty states. Using data from the FDIC, BestCashCow calculated the Texas ratio for each state using data from banks with assets under $10 billion. The Texas Ratio compares the amount of loans at risk and the amount of owned real estate with the amount a bank has on hand to cover any losses. While it is not a definitive guide to bank risk and soundness, it has been found to be a good indicator in the past.

If you look at the Texas Ratio of some recently failed institutions you can see that high numbers are an indicator of bank stress:

Closed Bank Texas Ratio

Community First Bank 206.85%

North Georgia Bank 732.82%

American Trust Bank 571.69%

The average Texas Ratio for all FDIC insured banks as of December 31, 2010 is: 24.44%

So, how did each state fair? The chart below shows the Texas Ratios for each state. Lower Texas Ratios are better.

Rhode Island claimed the top spot as the safest state with a Texas Ratio of only 9.77%, followed by three other New England states – Vermont, Massachusetts, New Hampshire. Georgia claimed the bottom spot with a Texas Ratio of almost 79%. Florida came in second from the bottom at 52%, and South Carolina came in third at 51%.

This data matches up well with past bank failures. According to FDIC data, the New England states combined saw only one bank failure between 2008-2011, in Massachusetts. Georgia alone saw 57, the most in the country. Florida was second with 47. New England banks have been safe and look likely to stay that way into the future.

Why Does New England Have Safer Banks?

In general, states with low Texas Ratios have banks with a low percentage of non-performing loans. All New England states were in the top 15 for the best non-performing loan to assets ratio with none of the states above 2.02%. Georgia had a non-performing loan ratio of 8.47%. New England states had also had more capital on their balance sheets, with only Vermont having a capital ratio of less than 10%.

“New England banks have fewer bad loans on their books and more capital to protect against future bad loans,” said Sol Nasisi, Chief Economist of BestCashCow.com. Interestingly, they also have lower loan loss reserves (money set aside to offset bad loans) because they anticipate fewer problem loans.

Why the Regional Differences?

So, why do New England banks have such a better loan portfolio? The data suggests a combination of factors:

• Slower Population Growth. States with lower Texas Ratios generally have lower population growth rates based on US Census data. The inverse is also true. A growing population translates into a more speculative environment, and laxer lending standards. For example, Georgia was the fourth fastest growing state between 2000-2009. Flordia was #9 and South Carolina #10. Rhode Island by comparison was the second slowest growing state in the country behind Michigan.
• Lack of New Bank Formation. This goes hand-in-hand with low population growth. States with stable populations saw very little new bank formation while growing populations generally saw the most new bank formation. Since 1995, Florida saw the second largest numbers of new banks formed (144) while Georgia was #3 on the list (103). California was #1 at 146 new bank formations. In comparison, Rhode Island was 40^th in new bank formations during this same period. New banks may be overly aggressive building up their loan portfolios or may not have the experience or systems in place to prevent risky lending.
• Lending and Oversight. Banks in some states just did a better job lending money, probably in concert with more effective regulatory oversight. While Texas is #6 in population growth and had the fourth greatest number of bank start-ups since 1995, its Texas Ratio is in the bottom half of all states. Texas has done a better job managing its banks than many other fast-growth states. A fast-growing state with a lot of young banks does not need to translate into a slew of bank failures if the banks are well run and well regulated.

Consumer Implications

All of the banks covered in this analysis are FDIC insured which means that in any state, regardless of the Texas Ratio, depositors who stay within FDIC limits will not lose money. So why does this all matter? But there are several ways that bank failures can impact consumers:

• A depositor may lose some or all of the money above FDIC limits if a bank fails.
• Any CD or CD IRA which a consumer holds in a failed bank may be reset once the bank’s assets are transferred to another bank or cashed out by the FDIC. For example, a depositor who holds a 5-year CD paying 6% APY from 2007 might find the CD called, resulting in lost interest.
• Failing banks may not have the time and money needed to provide top-notch customer service and support. They are fighting for their survival.
• The cost of bank failures is ultimately borne by the consumer. Money spent by the FDIC to insure bank deposits comes from a fee levied on all banks. The fee that a bank pays, is passed through to the consumer in the form of higher account fees, bank charges, and interest rates on loans. Ultimately, if the bank failure is big enough or systemic enough, the general public must come up with the funds to bail out the banks, as with the TARP and the S&L bailout in the 1980s.

While bank failures are always about an individual institution, state averages show that in some states, bank regulators and management have further work to do to protect depositors and taxpayers.

The Capital One InterestPlus Online Savings account has long offered one of the best interest rates around for Internet banking. Now, they're offering another bonus for customers who are able to deposit and maintain high balance limits. If you open a Capital One InterestPlus account using the offer code FUND218DF and have a balance of $10,000 or more on May 2, 2011, you will receive a $50 bonus. Your account must remain open 4 - 8 weeks after May 2, during which time your bonus will be credited to your account. If you maintain a $10,000 or more average monthly balance in your savings account, every quarter you will get an additional 10% bonus on the interest earned for that quarter.

Don't have $10,000 to deposit? Unfortunately, that means that you are ineligible for the $50 bonus deal. However, you can still get the 10% quarterly bonus if you have and use your Capital One credit card once month. Additionally, you only need to have an account balance of $1,000 or more to qualify for the high 1.10% APY. Balances less than $1,000 will earn 0.10% APY. It's just one more incentive to build up your savings.

It's always nice when you can get your checking account to give you some money back, especially when it's to the tune of a couple hundred dollars. If you open your first Citizens Bank checking account between April 9, 2011 and May 6, 2011, you can earn up to $240 over six months by using online bill payment. Each month, if you make at least five bill pay transactions at $50 or more, you'll get a bonus of $40 for that month. This bonus offer is good for the first six months of your checking account, so you can earn up to $240.

Since there are multiple banks doing business under the Citizens Bank name, this offer relates only to the bank owned by Royal Bank of Scotland and doing business in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.

While Citizens Bank doesn't offer any condition-less free checking accounts, there are still ways that you can get the monthly service fee waived. If you opt for their Green Checking account, the $4.99 monthly service fee is waived if you make five bill pay transactions each month. Since you'll be making the five bill pay transactions each month anyway to get the $40 bonus, just keep up the bill pay transactions and the checking account will remain free. Alternately, if you maintain an average balance of $1,500, the monthly service fee for the Green Checking account will also be waived. The Green Checking comes with one additional bonus: it offers Green$ense.

With Green$ense, every time you pay without paper (like using a debit card or using online bill pay), you will earn a 10-cent bonus on each transaction you make and you can earn up to $120 per year in Green$ense bonuses. For this account, you will automatically be enrolled in paperless statements and online bill pay, and you will receive a debit card made from recycled plastic. You must have at least 10 eligible transactions in a month to receive a Green$ense earnings credit for that month. If you have at least 10 eligible transactions in a month, you will receive 10 cents for each eligible transaction up to a maximum of 100 eligible transactions in the month ($10 monthly cap).