This report gauged the financial health of the top 100 banks. Financial health of banks is something that is typically not viewed a whole lot during boom times in the economy, but following a financial crisis of the depth we have seen, it becomes a big issue. Each of the banks were evaluated on the amount of non-performing loans (NPL) on their books, leverage ratio, and reserves to non-performers. The healthiest banks are those who did not take huge risks during the bubble phase of the housing crisis, and therefore did not see the large returns on investment in 2004/05, but were not exposed to catastrophic mortgage failures.
| Rank | Company | Total assets ($bil) | Return on avg equity | NPLs/total loans | Reserves/ NPLs* | Tier 1 ratio | Leverage ratio |
| 1 | Prosperity Bancshares | $10 | 9.30% | 0.10% | 1030% | 15.50% | 7.70% |
| 2 | Bank of Hawaii | 13 | 15.7 | 0.8 | 317 | 17.6 | 7 |
| 3 | First Republic Bank | 27 | 15.2 | 0.1 | 191 | 13.8 | 9 |
| 4 | Community Bank System | 7 | 10.7 | 0.5 | 246 | 13.8 | 8.2 |
| 5 | Signature Bank | 14 | 13.5 | 1 | 124 | 17.3 | 9.8 |
| 6 | East West Bancorp | 22 | 10.5 | 1.4 | 111 | 14.6 | 9.3 |
| 7 | Commerce Bancshares | 21 | 12.3 | 1 | 203 | 14.6 | 9.7 |
| 8 | SVB Financial Group | 19 | 11.2 | 0.6 | 210 | 13.4 | 8 |
| 9 | First Citizens BancShares | 21 | 11 | 1.7 | 104 | 15.5 | 9.8 |
| 10 | Cullen/Frost Bankers | 20 | 10.1 | 1.5 | 94 | 14.6 | 8.8 |
Source: Forbes
What should be immediately evident when looking at the rankings on Forbes list is that the top performers did not have the highest returns to equity with the least healthy banks actually having the highest returns to equity. However, there is a dark side to higher returns, increased risk. The best banks are those that focus on the long run and manage risk as best they can. All too often, however, a manager will get caught up in chasing the highest returns and subject their firm to unacceptable risk. The top bank on the list - Prosperity Bancshares - apparently was not caught in the chase, did their due diligence, and are not carrying bad loans. This can be seen by the highest reserve to NPL ratio on the list of 1030%. Their return to equity and leverage ratio are also some of the lowest of the top 100 banks.
Banking in the long run is always won by the tortoise who steadily accumulates. However, the structure of our current financial system seemingly encourages hare-like activity to achieve the highest gains as quickly as possible (see: AIG, MF Global, Long Term Capital, Savings and Loans, Indy Mac, etc.)
Disclaimer: The founder of Prosperity Bank is a family friend.
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