Academic journal article ABA Banking Journal

Banking's Top Performers 2004: Part 2: Banks and Thrifts with Assets under $1 Billion

Academic journal article ABA Banking Journal

Banking's Top Performers 2004: Part 2: Banks and Thrifts with Assets under $1 Billion

Article excerpt

Life has been easier for community banks than it was in 2003. The best of them still know their markets and their customers better than the competition (unless it's another well-run community bank!). But the environment in which they operate continues to change.

The branch expansion by mega-banks, backed by ever-more-sophisticated market-opportunity and site-location analysis is one challenge. Then there are improved tools for customer data mining; the proliferation of niche programs and improved targeting of high-profit segments; and the ability to reach more people in more places via the internet and other non-branch channels. All these factors are combining to require more aggressive approaches to geographic expansion, product development, marketing initiatives, competitive response, and financial management.

In the face of declining margins and ever-increasing competition, making wise and more timely business decisions is absolutely vital to survival and success going forward. Many community banks are meeting the challenge, and most are still quite profitable.

In the following pages we present Part Two of the 12th annual ABA Banking Journal performance rankings, in which we look at the overall results and some of the strategies of 150 of the best-performing community banks. Some are "traditional" banks and thrifts, some are anything but. A more detailed look at the strategies of six of the top performers can be found beginning on page 51.

Ranking methodology

Our ranking assesses the performance of three groups of community financial institutions, defined by size and corporate structure:

* Non-subchapter S commercial banks, thrifts, and bank holding companies with consolidated total assets between $100 million and $1 billion,

* Non-subchapter S commercial banks, thrifts, and bank holding companies with consolidated total assets less than $100 million, and

* Subchapter S commercial banks, thrifts, and bank holding companies with consolidated total assets less than $1 billion.

The rankings are based on consolidated statistics for the highest regulatory reporting level available for each institution. We believe this provides the most complete picture of the business' strategies, including those that involve diversification into nontraditional or fee-based businesses for which data may not be captured at the subsidiary level. There were 115 holding companies for which consolidated information was not available. For those that hold only one subsidiary that accounts for at least 95% of their assets, the subsidiary's data was used.

In addition, we have excluded from the analysis special purpose industrial loan companies and institutions with less than 10% of their assets in loans, less than 10% of their liabilities in deposits, or over 70% of their loans in credit card receivables. Also excluded were banking companies that were not in operation for the full year.

Within the three groups identified, institutions were ranked on their return on average equity for 2003. The institutions with the highest ROAEs were selected as the top performers in their categories. Data was obtained from SNL Financial LC and reflects operations for the year ending Dec. 31, 2003 as reported in regulatory filings. Restated data was used where applicable.

Non-S banks from $100 million to $1 billion

There were 2,891 banks, thrifts, and holding companies with assets between $100 million and $1 billion at the end of 2003, three more than the previous year. Thrifts dominated the top of the list this year, in part as a result of continued robust mortgage and home equity lending fueled by historically low interest rates. NCB, FSB of Hillsboro, Ohio, earned the top ROE of 45.81% in 2003 serving a specialty niche--cooperatives and other member-owned organizations--across the country. The ascension of NCB knocked last year's first and second place performers, Gateway Bank of San Francisco, and Crescent Banking Co. …

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