Here are America's best and worst banks

Prosperity Bancshares of Texas leads the way as the best-run financial institution in the country.

By Forbes Digital Dec 19, 2013 1:40PM

This year, the U.S. banking industry continued its slow recovery from its nadir in 2010, as banks cleaned up their balance sheets and reduced nonperforming loans and assets.

There were only 24 bank failures in 2013 versus 51 last year. Failures peaked at 157 in 2010. The FDIC's "Problem List" of banks shrank to 515 from 694 a year ago (it was 888 in March 2011).

Yet there is still a broad disparity between the best and worst banks. In order to gauge the financial health of the 100 largest U.S. banks and thrifts, Forbes turned to Charlottesville, Va., financial data provider SNL Financial for information on asset quality, capital adequacy and profitability.

The data is based on regulatory filings through the third quarter of 2013. SNL provides the data, but the rankings are done by Forbes.

Leading the way is Prosperity Bancshares (PB), which also ranked first in 2011. The $16 billion bank has 218 locations, with one-quarter of them in the Houston area, where it is headquartered. The bank has only six branches outside of Texas. The share of Prosperity's loans that are nonperforming (0.1%) and assets that are nonperforming (0.1%) both rank among the three lowest in the banking industry. Its level of reserves/NPLs is an eye-popping 1,144%. Prosperity ranked in the top 10 in five of the nine metrics we evaluated the banks on.

Prosperity skirted the housing crisis for the most part thanks to the resilient Texas economy, and it has been snapping up other Texas banks. Its latest acquisition is FVNB, completed last month. Prosperity also reached a deal to acquire Tulsa, Okla.-based F&M Bank. FVNB and F&M had combined assets of $4.9 billion as of the third quarter. Acquisitions have helped fuel revenue growth of 30%, fourth best among the 100 biggest banks. The stock is up 42% year-to-date and trades at 1.6 times book value.
Signature Bank (SBNY) moves up one spot from last year to No. 2 in our ranking. The New York bank is one of the most profitable financial institutions, with a return on average equity of 12.7% for the latest 12 months. State Street (STT) fell two places after ranking first last year. The $217 billion firm has the lowest levels of both nonperforming loans and assets of any bank.

"We are on the backside of the crisis and companies are starting to look for growth," says SNL bank analyst Tyler Hall. It hasn’t been easy given rock-bottom interest rates. Only 44% of banks with more than $1 billion in assets increased revenue in the third quarter, according to SNL. It is even worse for the biggest banks. M&T Bank (MTB) was the only one of the 27 banks with more than $25 billion in assets to increase revenue in the most recent quarter.

With the search for growth in mind, we tweaked the methodology of this year's list for the first time since we began ranking the largest banks in 2009. We added revenue growth as an equally weighted component to the other eight metrics (Prosperity would have ranked first under the previous methodology as well). The average revenue growth for the 100 largest banks was just 1.1% over the last 12 months.

While banks search for growth, they also are bracing for new regulatory policies like the Volcker rule and Basel III. "The regulatory concern is out there," says Hall. "Banks are spending significant time and money looking at how it is going to impact them." Zions Bancorp (ZION) announced this week it would sell some collateralized debt obligations that it can no longer hold due to the Volcker rule, taking a charge of $387 million to write down the value of the securities.

The performance of the four banks that dominate the industry was mixed -- the fourth-biggest U.S. bank, Wells Fargo (WFC), is four times the size of the fifth largest by assets, Bank of New York Mellon (BK).

Citigroup
(C) is tops among the Big Four and ranks No. 39 overall, up three spots from last year. The $1.9 trillion bank was hammered during the 2008 financial crisis and was bailed out by $45 billion in federal aid in exchange for preferred shares in the company. But the government ended its ownership of the bank in 2010 and Citigroup has cut its ratio of nonperforming assets to total assets to just 0.7%.

Citigroup’s risk-based capital ratio of 16.7% ranks in the top quartile of big banks, as does its 8.1% leverage ratio. Citigroup’s stock has doubled over the past two years, although sales growth remains elusive at -0.5% the last 12 months.

The nation's biggest bank, JPMorgan Chase (JPM), ranks No. 54 overall, same as last year. The $2.5 trillion bank fares poorly for its 2% net interest margin (93rd best) and level of NPLs (80th). JPMorgan scores well for its low level of nonperforming assets, and its leverage ratio of 6.9% is second best among the 100 largest banks.

The bank settled with the Justice Department for $13 billion last month for its role in the credit and mortgage crisis, bringing total settlements by the six largest banks to $86 billion since 2010, according to SNL. The settlements are not done yet, with Reuters reporting that the Justice Department plans to file civil fraud charges against Citigroup and Bank of America's Merrill Lynch unit for selling "flawed" mortgage securities.

The huge settlements are impacting profitability. The nearly 7,000 FDIC-insured financial institutions reported net income of $36 billion in the third quarter. It marked a 3.9% decline from the prior year and the first drop in 17 quarters. Litigation expenses, reduced mortgage activity and lower gains on asset sales contributed to the fall.

Wells Fargo moves up 11 places this year to No. 73. The $1.5 trillion bank ranks sixth-best for its 13.3% return on average equity, but nonperforming loans remain stubbornly high at 2.7% of total loans due to its large mortgage portfolio.

Bank of America (BAC) fell nine spots to No. 95. "We have continued to clear away issues that were obscuring the true power of our company, and we have built capital to industry leading levels. We have streamlined our businesses and continued to reduce risk and the complexity of our company," says a Bank of America spokesperson. "We know we have more work to do."

The $2.1 trillion bank has improved its profitability and significantly reduced its nonperforming loans and assets. Yet both its Tier 1 risk based ratio and risk-based capital ratio are lower compared to a year ago, which pushed down Bank of America's overall rank. Revenue is also down 7%.

Puerto Rico's Doral Financial brings up the rear of the rankings for the second straight year at No. 100. Fitch Ratings released a review of Puerto Rico's banks this month and affirmed its CCC rating for Doral, which implies "substantial credit risk" and "default is a real possibility." The bank did not respond to a request for comment from Forbes.

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25Comments
Dec 19, 2013 7:13PM
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why did the football coach go to the bank? to get his quarter back.

where does the snowman hide his money? in the snowbank.

why did the banker break up with his girlfriend? he lost interest.
Dec 19, 2013 2:43PM
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This report addresses the "profitability" of the banks, not the best banks for customers.  I have had issues with 3 of the top 5 and wouldn't consider them as my bank.  I don't accept payments from the 3 either.  My vendors are more than willing to make whatever arrangements are necessary to obtain my services.
Dec 19, 2013 5:18PM
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Seeing as every Fed Member Bank has had artificial help, zero should be on ANY list. We know that the Housing Crisis hasn't ended so asset quality data is bogus. We know that tapering will reduce fee income and we know that most people hate and don't trust banks. So what was the purpose of this article? 
Dec 19, 2013 4:56PM
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"We are on the backside bla bla bla bla bla and starting to look for growth,"  - Code for you're fixing to get it in the azz.
Dec 19, 2013 4:26PM
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Worthless rhetoric by the banks ! Criminal banking cartels out to rape,pillage and plunder the American Middle Class =SCREW THE PEOPLE !  DIE BANK OF AMERICA DIE !
Dec 19, 2013 3:31PM
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The banks are just pseudo-fed agencies.  Customers are serviced accordingly.
Dec 19, 2013 4:19PM
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There are good and bad banks?...Well I'll be...
Dec 19, 2013 7:07PM
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The bank I use here is Peoples United and was ranked one of the worst.  The people in the banks are super but I question management.  Wish they had never bought Chittenden as I liked things the way they were before the takeover as do their employees at every branch I have been to in Vermont.


On the flip side, Trustco Bank is not to be seen on the list as are many other regional and local banks. Trustco never got caught up in the real estate mortgage problems except as a victim of the big players.  They only do solid loans to qualified customers because they do not spin off the mortgages to a 3rd party.  Other banks operate this way as well and they suffered due to the greedy slime balls on Wall Street. 


Anyone wanting a bank or considering switching?  Please consider a local or regional bank instead of the big boys.  We will all be better off for it!  

Dec 19, 2013 5:12PM
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Yup,,,,Bend over, guess who's driving...??
Dec 31, 2013 12:18AM
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There was a time when banks were important for America's growth, in the days before The Treasury Department's banking cartel; cartels are illegal under federal law (law which is routinely ignored by most of the federal government on a daily basis; do your own research). Now banks are spy agencies for the federal government and the IRS. They are assisting in the fleecing of your lifestyle and wealth. Only a fool would be in bed with them.

If you have money in banks, accounts within, loans or investments, you should be in full withdrawal mode. Don't look outside the USA, the cartel is world wide. So all banks should be on your "no fly list". Read the fine print; when the collapse happens, your money is their wealth.

Google: "The FDIC Illusion of Insured Bank Deposits", 
"Derivatives: The Unregulated Global Casino for Banks",
"Federal Reserve's Money Printing Failure" or
"Cyprus Financial Crisis: Deposit Confiscation" for a the likely scenario for bank failure in the USA. Banks are not your friend.

Dec 20, 2013 2:16AM
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Can I have a list of the most greedy and least greedy people of the world please.
Dec 19, 2013 7:20PM
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Corporations are people my friend.
Jan 2, 2014 2:51PM
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Well I have been acquiring banks stocks since 2010. In fact, a couple of times I have mentioned it on the forums, and I got all the usual garbage from the forum morons. Unfortunately, these fools don't understand that a strong economy isn't possible without a strong financial system - translation banks.

I bought only the biggest banks, because they were the ones primarily involved in the sub-prime mortgage crisis. Why? Because they got hit the hardest on their stock prices. I have now around 10,000 shares in total of the biggies and equal dollar amounts of each:

JPM
BAC
WFC
C or Citi
USB

They have all done very well in resolving their issues with the government regarding capital requirements, paying back loans, resolving sub-prime mortgage issues, and civil and criminal litigation by the DOJ. 

As these issues recede into the background, their share prices have improved. A few years down the road they'll all be healthy thriving institutions. 

About the only foreseeable problem is Dodd-Frank, and even it won't really be much of a hindrance to the bank's earning capabilities. I figure the bank lobbyists and lawyers will tie the regulators up in knots for years to come.

I plan in 2014 to buy more shares, since most are still relatively cheap compared to the market. Anyway ain't free market capitalism great little fellows?

Har har har!
Jan 17, 2014 2:45AM
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THE INTERNET IS THE BEGINING OF THE END OF LIFE AS WE KNOW IT.....IT IS THE BANE

OF HUMAN-KIND......

Jan 16, 2014 12:23PM
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The Federal Government in there pursuit of offshore accounts held by Americans are scaring the pants off all banks. If you are a working American ( not neccesarily a citizen, but legal resident)  you cannot open an account in a bank in your own country. Don't know if it will be successful in catching the likes of Romney and his ilk, but it sure as hell will affect the little guy. 
Dec 20, 2013 10:27AM
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In Missouri Bank of America was the worst , they sold their Bank in several parts of the State, they had no customers , was not friendly or business like , the Feds. bailed them out several years ago , they would of went out of business except for the Obama gang.
Dec 19, 2013 5:15PM
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All i can say is the bank are not like they use to be.happy days  BYE
Dec 19, 2013 3:32PM
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thanks for the data on these banks. I did not know that.
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