From Mount Olive, North Carolina to Anchorage, Alaska, each of the top 10 banks on Forbes’ ranking of 100 publicly traded banks are relatively tiny institutions with less than $25 billion in assets.
By Hank Tucker, Forbes Staff
Four thousand miles from the New York headquarters of JPMorgan Chase or Citigroup, Betsy Lawer, 75, operates one of America’s top-performing banks in Anchorage, Alaska.
With 28 branches scattered among 19 cities in its state, First National Bank Alaska safeguards $5.6 billion in assets for customers and small businesses, competing with non-bank real estate lenders and institutions like Wells Fargo, the nationwide player with the largest presence there since acquiring National Bancorp of Alaska, then the state’s biggest bank, in 2000. Under Lawer’s watch for the last decade, First National has added $2 billion in assets and grown its annual net interest income 60% to $167 million.
First National has been in Lawer’s family since before Alaska even became a state. Her grandfather, Warren Cuddy, bought a controlling interest in the bank, which specialized in lending to fur traders and gold miners, in 1941 and became its president. After he died in 1951, her father D.H. Cuddy took charge. Lawer has spent her whole life in Alaska learning the family business, aside from detours to California and North Carolina for her college years at UC-Santa Barbara and Duke University, where she earned her degree in economics in 1971. Lawer has worked for the bank for 51 years, became board chair after her father’s death in 2015 and still serves as its chair and CEO.
“It was the only thing I ever wanted to do. My father would do his business calls with customers on Saturday mornings and he would take me along with him, and I heard wonderful stories from Alaskan entrepreneurs,” says Lawer, the oldest of six kids. “We stored pelts and gold in our vault for our customers, and the vault could get kind of smelly because some people didn’t tan the furs as well as other people did.”
The Alaskan bank is sixth on Forbes’ annual list of America’s Best Banks this year, up from 30th a year ago, with improvements in nearly every metric used to calculate the rankings. Its risk-based capital ratio and Common Equity Tier 1 ratio, a measure of its core capital against risk-weighted assets, are both among the top five of all 200 banks examined by Forbes, and non-performing assets make up just 0.16% of its total assets, also in the top decile. Its shares, traded over the counter with the ticker FBAK, are up 15% in the last year.
To create the list, Forbes analyzed the 200 largest publicly traded banks and thrifts by assets and ranked the top 100 based on 11 equally-weighted metrics measuring credit quality, profitability and 52-week stock performance, with data from the last 12 months as of September 30, 2024. The metrics include efficiency ratio, net charge-offs, return on average assets and return on average tangible common equity (see the full methodology here).
Number one on the list is another small regional bank, Mount Olive, North Carolina-based Southern Bancshares (SBNC), which is also traded over the counter. Southern Bank has $5.3 billion in assets and 60 locations in North Carolina and Virginia—it excelled in return on tangible common equity at 26% and return on assets at 2.2%. Its net charge-offs as a percentage of average loans were best in class at -0.02%, meaning it had more recoveries than charge-offs in the last year.
“They work with multiple generations of families and small business owners and farmers and so on—that’s who they are, and that’s who they want to continue to be,” says Peter Gwaltney, CEO of the North Carolina Bankers Association, noting that the bank’s roots are in small towns in eastern North Carolina. “More recently they’ve expanded into larger communities, but by having such a large presence in smaller communities, I think it also keeps their cost of funds down because they’re not competing in the most expensive markets.”
Southern Bank was founded as the Bank of Mount Olive in 1901 and expanded into Virginia with the 2011 acquisition of the assets of the Bank of the Commonwealth, a failed bank that had entered FDIC control. CEO Drew Covert has worked for the bank since 1998 and took charge in 2020, and its board includes North Carolina banking royalty Olivia Holding and her sister, Hope H. Bryant.
Their brother, Frank Holding Jr., is the chairman and CEO of Raleigh-based First Citizens Bank, one of North Carolina’s largest banks which burst onto the national scene in 2023 with its opportunistic acquisition of the failed Silicon Valley Bank. First Citizens’ stock jumped 50% overnight following the deal and has doubled further in the two years since. With $220 billion in assets, it’s the second-largest bank to make Forbes’ top 100 list, slotting in at No. 83. Although it has a higher percentage of nonperforming assets than most of its peers, which pushed its ranking down, its stock performance ranked among the best, and its net interest margin and CET1 ratio were in the top quartile of the 200 banks evaluated.
“Their tangible book value growth has been off-the-charts good,” says Chris McGratty, head of U.S. bank research at KBW. “The number one metric that the management team has incentivized is tangible book value growth, and they held up their end of the bargain better than pretty much any other bank.”
The lone bank larger than First Citizens to make the list is JPMorgan Chase, the biggest bank in the U.S. at $4.2 trillion in assets. While it’s ranked 17th on the list, none of JPMorgan’s trillion-dollar peers—Bank of America, Citigroup or Wells Fargo—even cracked the top 100. It raked in a record $58.5 billion in net income in 2024, helping its stock gain 44%, and its efficiency ratio, the bank’s expenses as a percentage of revenue, is 56%, far better than its large peers. Analysts say its sheer size and scale give it a leg up on its competition.
“Adding an incremental account is not very expensive, and a lot of that will flow down to the bottom line,” says Stephen Biggar, director of financial institutions research at Argus. “That gives you increased profitability for each new dollar that comes in.”
But that doesn’t mean regional banks are on life support like many appeared to be after the failures of SVB and First Republic Bank in 2023. None of the top 10 banks on Forbes’ list have more than $25 billion in assets, and only three of the top 100 have more than $100 billion. When dealmaking activity is as slow as it’s been for the last three years, major banks with expansive capital markets departments are often less profitable. Bank of America and Wells Fargo both posted meager low single-digit gains in net income last year, but they have the potential to swing much higher when the economy heats up.
Small banks’ growth is typically more plodding, not an exciting recipe for their share prices, but the KBW Nasdaq Regional Banking Index gained 10% in 2024 to finish recovering the 24% it lost in the first half of 2023. It neared a record high following Donald Trump’s election win in November. Investors are hopeful that deregulation will bring down compliance costs and relax capital requirements, helping banks make more loans and generate more interest income.
“Regional banks tend to score better on efficiency. They’re not big spenders on people or technology. The branches aren’t exactly lavish,” says Biggar. “They’re bread and butter.”
MORE FROM FORBES
Read the full article here
