Which Small Bank Has the Biggest ROAE? Read On

Profitability is under a lot of pressure for small institutions — expenses are up and yields on loans are down. But some are handling that pressure better than others, as our annual ranking of publicly traded banks and thrifts with less than $2 billion of assets shows.

The overall group of 684 institutions that fit the criteria for our ranking had median noninterest expense growth of 4.25% last year. For those that earned a spot in the top 200, expenses grew at an even faster pace of 5.85%.

But several factors — including loan growth and core deposit growth — helped offset the higher expenses for both the standouts and the larger peer group, which is allowing profitability to remain stable for now, according to an analysis by Capital Performance Group.

The rate at which institutions in this size range added loans improved slightly in 2015 compared with the previous year. Net loans were up a median of 8.39% for the top 200 and 8.1% for the peers.

Unlike in 2014, core deposit generation outpaced loan growth — which allowed for funding the loan growth cheaply. "This is important, as it helped ameliorate the impact of lower earning assets on the margin," said Kevin Halsey, a consultant at CPG.

The top 200 institutions — ranked here by return on average equity across three years — had median core deposit growth of 10.33% last year, with the peer group posting an also impressive 9.26%. The median cost of funds improved 5 basis points for both the top 200 (to 0.44%) and the peers (0.47%).

At the same time, the yield on average earning assets fell by 7 basis points for both, to a median of 4.19% for the top 200 and 4.05% for the peers.

For American Banker subscribers: If you'd like an Excel sheet with all 684 publicly traded banks and additional data points such as cost of funds, core deposit growth, yield on average earning assets and ratio of noninterest expenses to average assets, send an email before May 27 to Bonnie.Mcgeer@SourceMedia.com to request a copy.

Note: Ranking is of bank holding companies, banks, and thrifts that had total assets of less than $2 billion as of Dec. 31, 2015. and that are publicly traded or report financials to the SEC. Ranking is based on three-year average ROAE for 2013 to 2015. Additional data shown here is for the 12 months ended Dec. 31, 2015. Financials are sourced from SEC filings. If unavailable, regulatory financials were used. Excludes institutions that didn't report GAAP or regulatory data for any year during the ranking period. Excludes institutions with a leverage ratio of less than 5%, a Tier 1 risk-based capital ratio of less than 6%, or a total risk-based capital ratio of less than 10%. Excludes industrial banks and institutions that operated as a subchapter S corporation at any time during the ranking period. Also excludes institutions that received a tax benefit of greater than 10% of net income in 2013, 2014 or 2015. Using the preceding criteria, 684 institutions qualified for the ranking. All data as of March 23.
* Denotes institutions that were acquired or merged between Jan. 1, 2016, and March 23, 2016.
Source: Capital Performance Group analysis of data provided by SNL Financial
© 2016 American Banker Magazine