20 BESTWorst&

Banksfor 2017

BY Kurt Badenhausen

WWW.FORBES.COM/NEWSLETTERS 2

U.S. bank stocks have been on a tear since

the November presidential election. The

KBW Nasdaq Bank Index is up 23% since

that time, with investors expecting interest rates to

rise, propelling bank profits, and for President

Donald Trump to ease regulation of the sector.

It has been a turbulent decade for the banking

sector. Banks have mostly recovered from the late

2000s financial crisis after a

multitude of asset write-

downs, settlements and fines.

There have been only 13 bank

failures the past two years,

compared to 297 during

2009 and 2010. “The

banking industry is healthy.

Across the board, banks are

well-capitalized and credit

quality is strong,” says Chris

Vanderpool, senior analyst

at S&P Global Market

Intelligence. “Despite those

things, loan growth has been

sluggish and profit margins

are compressed.”

To gauge the financial

condition of the biggest banks,

Forbes turned to S&P Global

Market Intelligence, for data

regarding growth, credit

quality and profitability for the 100 largest banks

and thrifts by assets. The result: America’s Best

Banks 2017. The ten metrics used in the rankings are

based on regulatory filings through Sept. 30. The data

is compliments of S&P Global Market Intelligence, but

the rankings are done solely by Forbes.

We ranked the banks based on metrics related to

growth, profitability, capital adequacy and asset

quality. Metrics include return on average tangible

equity, return on average assets, net interest margin,

efficiency ratio and net charge-offs as a percent of

total loans. We also factored in nonperforming

assets as a percent of assets, risk-based capital ratio

and reserves as a percent of nonperforming assets

( w e p r e v i o u s l y c o m p a r e d r e s e r v e s t o

nonperforming loans).

We tweaked two of the metrics this year with 12-

month operating revenue growth replacing total

revenue growth, which

includes gains on sale of

securities and can be volatile,

according to S&P Global

Market Intelligence analyst

Robert Clark. CET1 ratio

replaces the Tier 1 common

capital ratio under the U.S.

Basel III revised regulatory

capital rules. Each of the ten

metrics are weighted equally

in the final rankings.

The number one-ranked

bank this year is Los Angeles-

based PacWest Bancorp, the

holding company for Pacific

Western Bank. The $21

billion-in-assets bank scores

in the top 20 in eight of the ten

metrics we measured,

including a 5.4% net interest

margin, third-best among the

100 largest banks, and 1.6% return on average

assets, which ranked fourth.

PacWest offers commercial banking services at 77

branches throughout the state of California. The

firm also has one office in Durham, N.C., acquired in

the fourth quarter of 2015 when PacWest bought

ten-year-old Square 1 Financial for $815 million—it

focuses on lending to venture capital and private

equity investors. The Square 1 purchase added $3.1

billion in assets and was the 28th acquisition for

The four biggest

banks in the U.S. have

a combined $8.5

trillion in assets, or

nearly $4 trillion more

than the combined

total of the next 100

biggest banks and

thrifts. Yet, none of

the Big Four could

crack the top 50 of

America’s Best Banks.

WWW.FORBES.COM/NEWSLETTERS 3

PacWest since it was founded in 1999. PacWest’s

stock is up 38% over the last 12 months, but it still

trades at just 1.5 times its book value compared to an

average of 2.1 times book for the rest of the banks

ranked in the top 20.

Ontario, Calif.-based CVB Financial ranks second

this year, down one spot from 2016. CVB is the

holding company for Citizens Business Bank, which,

like PacWest, is focused on the California market.

CVB is the second smallest of the 100 largest banks

with assets of $8 billion, but it is has been

incredibly consistent with 158 straight quarters of

profitability and 109 consecutive cash dividends.

CVB ranked in the top ten in half of the ten

metrics we used to rate the banks, with its net

charge-offs as a percent of average loans second

lowest in the country. CVB is expected to close its

acquisition of Valley Commerce Bancorp in the

first quarter, which will add more than $400

million in assets.

The four biggest banks in the U.S. have a combined

$8.5 trillion in assets, or nearly $4 trillion more than the

combined total of the next 100 biggest banks and thrifts.

Yet, none of the Big Four could crack the top 50 of

America’s Best Banks thanks to low net interest

margins, weak revenue growth and high levels of net

charge-offs as a percent of loans. JPMorgan Chase was

the best performer at No. 57, followed by Wells Fargo

(No. 63) and Citigroup (No. 72).

Bank of America ranks No. 97. The $2.2 trillion-in-

assets financial behemoth only ranked in the top half

of banks on one of ten metrics (risk-based capital ratio)

and operating revenue was down over the past 12

months. “The metrics in this report are backward-

looking and don’t reflect the current performance of

Bank of America,” according to a BofA spokesperson.

Wells Fargo had the biggest drop of the Big Four,

down 11 spots. The bank had a brutal year with

revelations of a cross-selling scandal in which Wells’

sales staff created up to two million unauthorized

consumer accounts in order to hit sales goals.

Embattled CEO John Stumpf retired amidst the

scandal after ten years in charge of the country’s

third biggest bank.

WWW.FORBES.COM/NEWSLETTERS 4

#1 PacWest Bancorp (PACW)Headquarters: Los Angeles, Calif.Assets: $21.3 billion Price/Book value: 1.5Efficiency ratio: 41% Risk-based capital ratio: 16.2%

#2 CVB Financial (CVBF)Headquarters: Ontario, Calif.Assets: $8 billion Price/Book value: 2.5Efficiency ratio: 45% Risk-based capital ratio: 18.3%

B E ST BA N K S

5

#3 Community Bank System (CBU)Headquarters: Dewitt, N.Y.Assets: $8.7 billion Price/Book value: 2.1Efficiency ratio: 62% Risk-based capital ratio: 18.8%

#4 Western Alliance Bancorp (WAL)Headquarters: Phoenix, Ariz.Assets: $17 billion Price/Book value: 2.8Efficiency ratio: 44% Risk-based capital ratio: 13.1%

WWW.FORBES.COM/NEWSLETTERS

6

#5 Glacier Bancorp (GBCI)Headquarters: Kalispell, Mont.Assets: $9.3 billion Price/Book value: 2.4Efficiency ratio: 56% Risk-based capital ratio: 16.9%

#6 First Republic Bank (FRC)Headquarters: San Francisco, Calif.Assets: $68 billion Price/Book value: 2.6Efficiency ratio: 56% Risk-based capital ratio: 14.3%

WWW.FORBES.COM/NEWSLETTERS

WWW.FORBES.COM/NEWSLETTERS 7

#7 Bank of Hawaii (BOH)Headquarters: Honolulu, HawaiiAssets: $16 billion Price/Book value: 3.3Efficiency ratio: 58% Risk-based capital ratio: 14.7%

#8 Home BancShares (HOMB)Headquarters: Conway, Ark.Assets: $9.8 billion Price/Book value: 3.0Efficiency ratio: 39% Risk-based capital ratio: 12.6%

WWW.FORBES.COM/NEWSLETTERS

#9 Prosperity Bancshares (PB)Headquarters: Houston, Tex.Assets: $21.4 billion Price/Book value: 1.4Efficiency ratio: 41% Risk-based capital ratio: 15.1%

#10 FCB Financial (FCB)Headquarters: Weston, Fla.Assets: $8.5 billion Price/Book value: 2.1Efficiency ratio: 46% Risk-based capital ratio: 12.0%

8

9

#10 Huntington Bancshares (HBAN)Headquarters: Columbus, OhioAssets: $101 billion Price/Book value: 1.5Efficiency ratio: 68% Risk-based capital ratio: 12.6%

#9 KeyCorp (KEY)Headquarters: Cleveland, OhioAssets: $136 billion Price/Book value: 1.4Efficiency ratio: 71% Risk-based capital ratio: 12.6%

WWW.FORBES.COM/NEWSLETTERS

W O R ST BA N K S

WWW.FORBES.COM/NEWSLETTERS 10

#8 SunTrust Banks (STI)Headquarters: Atlanta, Ga.Assets: $205 billion Price/Book value: 1.2Efficiency ratio: 63% Risk-based capital ratio: 12.6%

#7 Valley National Bancorp (VLY)Headquarters: Wayne, N.J.Assets: $22.3 billion Price/Book value: 1.4Efficiency ratio: 73% Risk-based capital ratio: 11.6%

11WWW.FORBES.COM/NEWSLETTERS

#6 Comerica (CMA)Headquarters: Dallas, Tex.Assets: $74 billion Price/Book value: 1.6Efficiency ratio: 69% Risk-based capital ratio: 12.8%

#5 First Horizon National (FHN)Headquarters: Memphis, Tenn.Assets: $28 billion Price/Book value: 2.0Efficiency ratio: 73% Risk-based capital ratio: 12.1%

#4 Bank of America (BAC)Headquarters: Charlotte, N.C.Assets: $2.2 trillion Price/Book value: 0.9Efficiency ratio: 67% Risk-based capital ratio: 14.2%

#3 EverBank Financial (EVER)Headquarters: Jacksonville, Fla.Assets: $28.7 billion Price/Book value: 1.4Efficiency ratio: 71% Risk-based capital ratio: 13.0%

12WWW.FORBES.COM/NEWSLETTERS

WWW.FORBES.COM/NEWSLETTERS

#2 Hancock Holding (HBHC)Headquarters: Gulfport, Mass.Assets: $23.1 billion Price/Book value: 1.4Efficiency ratio: 65% Risk-based capital ratio: 12.2%

#1 Associated Banc-Corp (ASB)Headquarters: Green Bay, Wisc.Assets: $29.2 billion Price/Book value: 1.3Efficiency ratio: 67% Risk-based capital ratio: 12.5%

13

14WWW.FORBESNEWSLETTERS.COM

Click here for America’s 100 Largest Banks

Kurt Badenhausen is a senior editor at Forbes who

mainly focuses on the business of sports and Forbes’

annual franchise valuations. He also heads up Forbes’

B-School rankings, list of America’s Best Small Companies

and annual features on the Best Places for Business. Follow him on Twitter

or Facebook.