Recent news of Bear Stearns and other financial industry downturns may have brought to light some confusion over the differences between a commercial bank or thrift and investment banking.  

• Commercial bank and thrift institutions take deposits for checking and savings accounts from consumers and businesses.  These deposits are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor per insured bank.  To get this FDIC protection, commercial banks must follow a multitude of regulations based on a standard of safety and soundness.  These banks lend this money to consumers and companies for autos, homes, business equipment, etc.
  Note: The standard insurance amount of $250,000 per depositor is in effect through 12/31/2013.
  

• Investment banks operate differently.  The primary purpose of these firms is to facilitate the sale of stocks and bonds, and they cannot accept federally-insured deposits.  Instead, these Wall Street firms operate as advisers and agents for companies that want to raise capital, often by issuing more stock or other securities.

For more information or to ask questions regarding banking or the financial industry, contact Brad Davis, Hampton State Bank President and CEO, at 641-456-2559 or email him at bdavis@hamptonstate.com.   

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