Overall Industry Performance
CPG analyzed bank performance for the twelve months-ended March 31, 2015, based on data from SNL Financial, LC. Banks were categorized by three asset tiers: Large Banks defined as those institutions with assets of greater than $10 billion; Midsize Banks ($1 billion and $10 billion); and Community Banks (less than $1 billion). To analyze industry performance, we examined a number of ratios and metrics including those related to profitability, yield, balance sheet and capital levels, asset quality, and growth. Comparisons for each group were for the twelve months-ended March 31, 2014, versus the twelve months-ended March 31, 2015.
For the past twelve months-ended March 31, 2015, the Midsize Banks group was the most profitable, recording a median ROAE of 8.47%. The Community Banks group was the least profitable of the three, with a median ROAE of 7.64%. The Community Banks group, however, was the only group that saw an increase in median ROAE during the period. Noninterest income growth remained a challenge for all groups, as noninterest income to average assets remained largely unchanged between periods. Many banks attempted to combat falling fee income via expense reduction. Median noninterest expense to average assets declined for all groups. Net interest margins compressed among the Large Banks group and remained roughly the same for the Midsize Banks and Community Banks groups.
Core deposit growth increased for the Large Banks and Midsize Banks groups. Loan growth rates also improved for all groups between periods, primarily led by growth in C&I loans and owner-occupied CRE loans. Loan growth was highest for the Midsize Banks group, which recorded median net loan growth of 11.36% between March 31, 2014, and March 31, 2015. The Large Banks group experienced median net loan growth of 7.75%, and the Community Banks group saw median net loan growth of 6.07%. The leverage ratio improved for the Midsize and Community Banks groups, but declined for the Large Banks group.
Drivers of High Performance
To determine the drivers of high performance, CPG also examined high-performing banks, defined as those banks in each asset tier that rank in the top 25th percentile in terms of ROAE for the twelve months-ended March 31, 2015. A shared characteristic among high-performing banks of all three asset groups was that the median net income growth for each group was in the double-digits. High-performing Midsize Banks recorded median net income growth of 15.02%, while the median net income growth for all Midsize Banks was 9.87%. High-performing banks were also more efficient compared to the overall bank groups. This efficiency can be attributed in large part to higher revenue growth for high-performing banks. High-performing Midsize Banks had a median revenue growth of 7.63%, while all Midsize Banks had a median revenue growth of 6.04%. Even though noninterest expense growth increased for all high-performing banks, revenue growth outpaced noninterest expense growth rates. High-performing banks in all asset tiers grew core deposits and net loans at faster rates than peers. High-performing Midsize Banks grew core deposits at 10.56% and net loans at 12.58%, while all Midsize Banks had a median core deposit growth of 9.35% and a median net loan growth of 11.36%. High-performing banks found a way to achieve above average growth in loans and deposits that translated into above average revenue growth.
Shown below are links to the full analysis of industry financial performance for each group by asset tier for the twelve months-ended March 31, 2015.