Three Banks That Eat Other Banks

| About: Valley National (VLY)

The FDIC has a list of 775 troubled banks (see here). Since the start of 2008, 245 banks have failed with 82 so far in 2010 (see here). The FDIC isn't giving out the names of those 775.

One thing is certain. NYB, VLY, and FCNCA aren't on that list. These 3 banks belong to a very short list: banks that have repeatedly won bids for failed financial institutions. The FDIC considers their balance sheets superb, allowing them to return to the table to take over weak banks. They have the FDIC seal of approval. They've all been allowed to gorge on the assets and deposits of belly up banks more than once.

NYB swallowed the mammoth AmTrust with assets in Ohio, Arizona, and Florida, going from a regional to a major national player in one fell swoop. It chased that down with Desert Hills Bank, based in Arizona. NYB's net income rose 40%, outpacing share count increases. NYB has a 6.2% dividend. We've written about NYB before (see here).

VLY gobbled up Liberty Point Bank and Park Avenue Bank bringing in $469 million in deposits and $425 million in covered loans. VLY's nonperforming loans come to only 1% of their portfolio, a truly remarkable number, coupled with an increasing net interest margin spread of 3.65%. The government has VLY's back: the acquired loans are covered with a favorable 80:20 split, after which an even better 95:5 coverage occurs. Indeed, NYB and FCNCA share the same advantageous arrangement.

FCNCA, a bank largely held by insiders, has $21 billion in assets, is followed by only one analyst, never goes down in p rice, and had the biggest increase in EPS of any stock I follow, going from 83 cents to $10.31 for the quarter. They don't give conference calls. First Citizens is largely owned by the Holdings family which through FCNCA and FCNCB shares controls a majority of the vote. FCNCA has the distinction of taking over 4 failed banks over this year.

Disclosure: Author holds long positions in NYB, VLY, FCNCA