Bank Director’s Nifty 50

The top 50 best users of capital

Bank Director magazine went hunting for banks that deliver high returns, despite high levels of capital.

In an age when regulators are demanding higher capital, which tends to produce lower earnings, this can be extremely hard to do.

Bank Director’s Nifty 50

Bank Director’s Nifty 50

Investment firm Sandler O’Neill + Partners compiled this list from the 484 banks and thrifts listed on the NYSE, NYSE Amex and NASDAQ OMX stock exchanges, using core return on tangible common equity and the ratio of average tangible common equity to tangible assets.

Republic Bancorp looks for non-traditional product opportunities where returns are higher. It is the largest processor of income tax returns in the country. The FDIC forced it to scale back the product after 2012–citing riskiness.

The winner of the Nifty 50 was Republic Bancorp Inc., a Louisville, Kentucky-based bank holding company with $3 billion in assets.

Steve Trager, CEORepublic Bancorp, Inc.

First Financial Bankshares Inc., based in Abilene, Texas, was the second ranked best user of capital.

“Our board’s approach has always been to maintain high levels of capital because capital is what got us through the hard times,’’ says F. Scott Dueser, chairman and CEO of the $3.8-billion asset holding company.

Scott Dueser, chairman and CEO of First Financial

Like Republic, First Financial invests most of its earnings back into the company, rather than paying high

dividends.

Bank Director’s Nifty 50

National Bankshares Inc. in Blacksburg, Virginia, was the third best user of capital.

Commercial National Financial Corp. in Latrobe, Pennsylvania, was no. 4 on the ranking.

Bank Director’s Nifty 50

State Bank Financial Corp. in Atlanta was the 5th best user of capital.

Joe Evans and his team sold Atlanta-based Flag Financial Corp. in 2006 and were in a position to buy another bank in 2009 in an FDIC-assisted transaction. State Bank was born. It soon acquired five other failed banks.

Joe Evans, chairman & CEO of State Bank Financial Corp.

Comparison of Top 5 Banks

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5

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Republic Bancorp

First Financial National Bankshares

Commercial National Financial

State Bank Financial

Core ROTCE Average TCE/TA

* Core ROTCE is return on tangible common equity and based on core income as defined by SNL Financial and average TCE for eight quarters ending June 30, 2011. Average TCE/TA is tangible common equity to tangible assets and represents the average for eight quarters ending June 30, 2011.Source: SNL Financial and Sandler O'Neill + Partners

Mark Fitzgibbon, director of research at Sandler O’Neill + Partners, says most of the top ranked banks are located in smaller, urban markets where business conditions are probably better.

Bank Director’s Nifty 50

Another similarity is low expense ratios, attractive net interest margins–a reflection probably of pricing advantages compared to banks in more competitive markets–and low credit costs, which suggests the top ranked banks and thrifts are better lenders.

Bank Director’s Nifty 50

Mark Fitzgibbon, director of research at Sandler O’Neill + Partners

Check out the full Nifty 50 ranking here, where it appeared in Bank Director magazine’s 1st quarter issue.

Bank Director’s Nifty 50