West Bancorporation, the parent of West Bank, issued its 1st quarter results on Thursday. West Bank currently holds the deposits of the SmartyPig online savings accounts. When 4th quarter 2009 results were issued in January, West Bank announced that "SmartyPig's success in attracting deposits is outgrowing West Bank and in all likelihood SmartyPig deposits will transition to a much larger bank in 2010." In the 1st quarter results, West Bank provided additional details. The plan is now to transition SmartyPig to a larger bank in the second quarter. Here's an excerpt from the press release:
West Bank's deposits totaled $1.36 billion at March 31, 2010, compared to $1.19 billion a year ago. Deposits associated with SmartyPig, the online savings program developed by Des Moines entrepreneurs, totaled $231 million at quarter end. As previously reported, SmartyPig's success in attracting deposits is outgrowing West Bank and at this time we would expect the SmartyPig deposits to transition to a much larger bank by the end of the second quarter. West Bank has been planning for this transfer and has adequate liquidity to facilitate that transfer.
SmartyPig's deposits grew from $187 million to $231 million in the first quarter. That's almost a 24% increase. Another interesting thing mentioned in the 1st quarter results is that the bank entered into a memorandum of understanding with the Iowa Division of Banking and the FDIC. According to the FDIC, a "memorandum of understanding is a means of seeking informal corrective administrative action from institutions considered to be of supervisory concern, but which have not deteriorated to the point where they warrant formal administrative action." Here's an excerpt from the press release regarding this memorandum of understanding:
Given the level of nonperforming assets at West Bank, this is not unexpected. The agreement directs West Bank to seek approval from the IDOB in order to pay dividends to the Company for the purpose of paying dividends to common shareholders and establishes a requirement for West Bank's Total Capital ratio to be at least 12% and its Tier 1 Capital to Average Assets ratio to be at least 8%. As shown in the table above, West Bank's capital ratios exceed those requirements. The agreement also outlines other requirements. We do not believe the provisions of the agreement will have an adverse effect on the operations of West Bank.
SmartyPig just recently announced that it will be raising its savings account rate from 2.01% to 2.15% APY for balances up to $50K. However, the rate plummets to 0.50% if the balance is over $50K. As I recently described the rate falls for the entire balance. It'll be interesting to see how this affects SmartyPig's deposits. With interest rates so low, SmartyPig may have attracted many savers with large balances.
In addition to SmartyPig accounts, many readers have West Bank's reward checking account which currently pays 4% APY on balances up to $30K. This account used to be available nationwide, but this changed a year ago when West Bank restricted it to just Iowa residents (see my West Bank reward checking review).
For more information on SmartyPig, please see my SmartyPig review in which I review issues like FDIC coverage and transfer speeds.
Hat tip to Peter who mentioned this news in the comments.