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Checking Account with Rates up to 3.00% at Solera National Bank in Colorado

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Solera National Bank
Solera National Bank is offering a checking account with some competitive rates. The account is called Innovations Checking, and it has the following tiered rates as of 5/31/09:
  • 3.00% APY $250K and above
  • 2.50% APY $100K to under $250K
  • 2.25% APY $50K to under $100K
  • 2.00% APY $20K to under $50K
  • 1.00% APY under $20K
These rates along with a description of this account are listed in the Innovations checking document (pdf) as of 5/31/09.

This isn't a reward checking account so it doesn't require debit card usage or direct deposit. Minimum initial deposit is $100. Some of the attractive features include free Bill Pay service and up to 6 surcharge-free ATM transactions per statement cycle.

I called the bank Friday, and I was told that they could open this account by mail. Note, small banks often change their policies on this. According to the CSR, all of the balance qualifies for the rate once your balance reaches a tier. So if you have $250K in the account, all of the $250K will qualify for the 3% APY. Joint accounts are allowed so this can provide at least $500K in FDIC coverage. The CSR didn't know how long this rate may last, but she said it has remained unchanged for the last 4 months.

It's a small, one-office bank that was just established in 2007. It's located in Lakewood, Colorado which is in the suburbs of Denver. Since it's new, BauerFinancial doesn't have rating for it. Bankrate.com gives the bank 3 stars (performing) for safety and soundness based on 12/31/08 financial data. It's a member FDIC (FDIC Certificate # 58534).

Credit for this find goes to FW member ichaelm who mentioned it at this FW thread.

  Tags: Colorado, checking account, Solera National Bank

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Comments
10 Comments.
Comment #1 by Anonymous posted on
Anonymous
I went to the Bank's website today and poking around I found out that as of 12/31/08, they had 20 employees and assets of about $65 million. This small bank was started in late 2007 and has already replaced two senior officers--not sure why exactly.

The Bank is appealing to a niche of hispanic customers, and has many well known local success story hispanic Board members on board.

Wish I lived closer to take them up on offer of high yield checking (without the usual rewards checking requirements).

OC Steve

1
Comment #2 by Anonymous posted on
Anonymous
If only 200 people open $250K accounts, the FDIC will close them down for being insolvent.

1
Comment #3 by Anonymous posted on
Anonymous
The prior post is not far off. If 200 people were to open $250K accounts, that would zoom up the bank assets by about $50 million, essentially closely doubling the Bank size. The Bank is well capitalized, so it would not technically be insolvent, but the capital ratios would be a bit lower, still above "well capitalized" status.


So, very fast asset growth through rapid deposit raising, will pose a problem to the Bank. As a new bank, they have agreed to limit growth during the first three years of operations (standard for new banks chartered in the last few years).

As a case in point, we have seen several FAST growing banks in GA and a few of them have been closed with the Bank less than 5 years old, due to bad lending.

My educated guess is that this Bank will limit accounts to locals only, when they start to feel the popularity of our Blog. Just like Ken always says, small banks can change their rules very quickly with little notice. Enjoy!

OC Steve

1
Comment #4 by Anonymous posted on
Anonymous
To OC Steve.

Yes, the bank will be immediately insolvent due to the fact that the deposits are liability to the bank and not a capitol investments, since there would be no time the bank to find borrowers for the new money, hence, FDIC will knock on the door of the CEO.

1
Comment #5 by M (anonymous) posted on
M
Thanks, commentors: I see why some of my applications were aborted.

1
Comment #6 by M (anonymous) posted on
M
Does anyone believe that rate is going to hold up as the money pours in? I'm tired of these short-term deals.

1
Comment #7 by Anonymous posted on
Anonymous
The rate will plummet the moment the banks reach its goal of new funds.
It could be days or weeks depending on influx of new money.

1
Comment #8 by Anonymous posted on
Anonymous
The statement that a bank is insolvent if it takes in deposits that it can not loan out immediately is not true. A bank can use deposits for things other than direct loans. Banks make other investments all the time. (Note: these investments are "assets") They could buy corporate bonds, portfolios of personal or student or mortgage or business loans or leases from other institutions, real estate to build a new branch or even buy the branch of another bank if they wish to expand. As long as they are pricing and match-funding reasonably well and adequately assessing asset risk, fast growth does not equate to insolvency.

Denver Dave

1
Comment #9 by Anonymous posted on
Anonymous
PS...I spoke with a personal banker at the bank today and she stated they have a savings account product with a $100 min. balance that is paying 3%. As a savings account you obviously can't write checks off of it but if you open a checking account you can use their online banking service to to transfer funds to the checking account as needed. A branch visit is required or they can open accounts via a combination of e-mail and regular mail. No online application process is available.

Denver Dave

1
Comment #10 by Anonymous posted on
Anonymous
Denver Dave-
You are quite correct in your comments. I guess I should have tried to be more concise in my answer to the other poster. I have been in Banking in a prior career, so I know the background and the pitfalls.

Maybe the other poster was abit confused. If a Bank raises a large amount of costly deposits quickly, they can only park the funds temporarily in Fed Funds sold (yielding maybe 0.25-0.50%) or in money market mutual funds (again, low yield--less than 1%) or perhaps in FHLB deposit account (yield less than 1%).

A quality institution will assess asset risk (investments, direct loans, mortgage backed securities, auto loans, consumer credit card loans, etc.) and will attempt to balance raising funds just fast enough to fund these loans/investments, with a little extra towards general liquidity.

Generally liquidity (vault cash, cash and due from banks, FHLB deposits, FRB balances, etc.) are targeted to be no more than about 10% of deposits. This liquidity would pay off maturing CD's, customer checking activity, unexpected customer deposit withdrawal demands, loan fundings, etc.

To support profitable asset growth, you would need to slowly raise deposits to fund these asset investments as they present themselves. Too much liquidity holdings will result in generally negative earnings.

In my research on this Bank, I noticed that they have not yet reached break-even. They have incurred substantial start-up costs and pre-opening losses and post-opening current operating losses of $5-6 million thus far. The institution is young (under 3 years old) and typically break-even is expected in 2.5-3 years or a little longer, but NEED to be profitable soon in order not to reduce their initial capital to "less than well capitalized" levels.

Hope this bit of information is helpful to all.

OC Steve

1