RALEIGH, N.C.--(BUSINESS WIRE)--Based on an analysis of data from more than 4,100 banks in the United States, Sageworks, a financial information company, identified the 15 best-run community banks using a combination of their return on average assets (ROAA) and efficiency ratio. State Bank of Texas, headquartered in Dallas, an institution with $836 million in assets, topped the list as the best-run community bank in the U.S., based on its 2017 ROAA and efficiency ratio. Rounding out the top five were another Texas bank, as well as two banks in Nevada and one in California. The data set was taken from Sageworks Bank Information, a web-based data platform that includes thousands of data points on all U.S. banks and credit unions. Community banks specializing in commercial or agricultural lending in terms of asset concentration, with between $100 million and $10 billion in assets – a total of 4,140 banks – were evaluated for the list.
Of all community banks meeting the asset criteria that were considered for the analysis, five of the banks that made the top 15 list hold assets above the $1 billion mark. Nearly two thirds of the banks on the list – 9 of the 15 – have more than $500 million in assets.
15 Best-Run Community Banks by ROAA and Efficiency Ratio - 2017
|1||State Bank of Texas||Dallas||TX||8.3%||20.1%||839,631,000|
|2||First Credit Bank||Los Angeles||CA||5.7%||9.6%||460,352,000|
|3||Beal Bank, SSB||Plano||TX||5.3%||38.5%||1,889,185,000|
|4||Town & Country Bank||Las Vegas||NV||4.6%||34.4%||160,843,000|
|5||Beal Bank USA||Las Vegas||NV||4.0%||36.3%||5,597,010,000|
|7||Bank 7||Oklahoma City||OK||3.7%||36.5%||702,648,000|
|9||John Deere Financial, F.S.B.||Madison||WI||3.1%||32.5%||2,856,384,000|
|10||Cross River Bank||Teaneck||NJ||3.0%||38.3%||1,372,916,000|
|11||Home Bank of California||San Diego||CA||2.9%||38.8%||159,084,000|
|12||Corydon State Bank||Corydon||IA||2.8%||21.2%||120,740,000|
|13||The Yellowstone Bank||Laurel||MT||2.8%||39.7%||722,681,000|
|15||Metro City Bank||Doraville||GA||2.7%||37.0%||1,292,216,000|
“One important thing to note about having a low expense ratio is that this frees up money to use on other things that create value for a bank (increased bank dividends, book value), or that could be allocated toward the ALLL provision to cover bad debt,” said Robert Ashbaugh, executive risk management consultant at Sageworks. “ROAA measures how efficiently a bank is generating profits on its deployed assets. Banks can increase their ROAA a number of ways, such as keeping expenses low, pricing risk efficiently and carefully monitoring credit and portfolio risk.”
Sageworks looked at two key indicators of a well-run bank – return on average assets (ROAA) and efficiency ratio. ROAA measures how effectively each bank generates income using their available assets, and it can be used to compare the performance of banks of any size. The community banks on the top 15 list all demonstrate that they have used their assets – loans, investments, fixed or physical assets, etc. – to more efficiently generate income for their institutions.
The second ratio used to determine the ranking, efficiency ratio, compares how much a bank is spending to how much it is making in a given time period, speaking to how well the bank is controlling spending and managing assets to generate profit. The FDIC defines it as a measure of a bank’s ability to generate revenue from its non-funding-related expense base. While this ratio can be impacted by the types of products offered by a bank (i.e., if a bank only provides lower cost products such as auto loans and home mortgages, it will have an easier time maintaining a low efficiency ratio than a bank providing more complex, expensive products), it is a frequently assessed metric to determine bank performance, as it reflects the bank’s overhead as a percentage of its revenues. The Efficiency Ratio is calculated by dividing the bank’s noninterest expenses by its net income.
About the Ranking
To determine the list of the 15 Best Run Community Banks in the United States by Return on Average Assets and Efficiency Ratio, Sageworks evaluated the complete list of U.S. banks with total assets between $100 million and $10 billion as of 2017, then eliminated those that don’t specialize in commercial lending. The remaining list that was analyzed contained approximately 4,140 financial institutions. Sageworks then ranked these institutions by two key indicators of a well-run bank – return on average assets (ROAA) and efficiency ratio. To make the top 15, a bank had to be among the top 5 percent for both ROAA and efficiency ratio. ROAA was then used to determine the rank order of the top 15 (e.g., using this methodology, an institution with the highest ROAA of any community bank would make the No. 1 slot on the list, as long as its efficiency ratio was also in the top 5 percent of all community banks).
Sageworks offers banks and credit unions lending, credit risk and portfolio risk software to efficiently grow and improve the borrower experience. By automating the life of the loan with Sageworks, bankers book commercial loans faster and reduce risk. Sageworks uniquely provides integrated solutions and industry expertise to more than 1,200 financial institutions that achieve an average of 38% higher loan growth than peers. Visit www.sageworks.com to learn more.
Sageworks Bank Information is a web-based data platform that includes data on all 5,672 U.S. banks and 5,680 credit unions. The platform provides data to financial institutions, investors and banking industry vendors to allow them to easily analyze financial performance, compare financial institutions to peer groups and contact C-level bank and credit union decision makers.
To find out more about the list or to purchase additional U.S. financial institutions, email firstname.lastname@example.org. or call 919-322-1400 for more details on Sageworks Bank Information.