America’s largest banks echoed the U.S. economy in 2021, rebounding to a strong position following the upheaval and disruption of Covid-19 that continues to spread but with less disruptions to daily life.
Coming out of pandemic shutdowns aimed at slowing the spread of the virus served as a resiliency test for the sector, the likes of which hasn’t been seen since the Great Recession.
The pandemic and the response by the Federal Government set the stage for the current environment in which the U.S. emerged from the quickest recession in U.S. history and an exceptional economic rebound not only brought 5.7% GDP growth but also inflation that measured at 7% on the consumer price index in December, the highest since 1982.
America’s banks were on the frontlines of that robust pandemic response, helping facilitate forgivable loans for mom-and-pop businesses across the country through the Paycheck Protection Program. That federal response not only saved many Main Street businesses but also allowed the damage to banks to be limited to only four bank failures.
Mike Mayo, managing director and head of U.S. large-cap bank research at Wells Fargo, told Forbes that the best banks were “acting as part of the solution during the pandemic, as opposed to part of the problem the way the industry was during the global financial crisis.” That success story was a product of upgrades made over the last decade to improve capital, liquidity, technology and resiliency, according to Mayo.
As is reflected in the rankings, Mayo sees a rosy picture for smaller banks, adding that there is Main Street banking growth for the first time in the digital age. The increased digitalization of the banking sector should improve margins, especially for smaller Main Street banks.
“Main Street banking is back because of historic dry powder in terms of cash deposits and capital, the return of loan growth and likely higher interest rates,” Mayo says, adding that his team is forecasting the best growth in Main Street banking in over three decades. Bank stocks have already outperformed in anticipation of rising rates and improving net interest margins. In the last year iShares U.S. Regional Bank ETF has nearly doubled the return of the S&P 500 Index.
The more than 5,000 banks and saving institutions in the United States that have survived the past couple years are now in position to thrive as pent-up demand and a full reopening of the global economy press on.
Originally conceived in the aftermath of the 2008 financial crisis, Forbes has worked with S&P Global Market Intelligence for 13 years on its America’s Best Banks ranking. Factoring in financial data on the growth, quality and profitability of the 100 largest publicly-traded banks and thrifts by assets, the metrics that are used to make the rankings are based on regulatory filings current through Sept. 30, 2021. While S&P provides the data, the rankings are done by Forbes.
The metrics considered to make this list include: non-performing assets as a percentage of total assets; reserves as a percentage of non-performing assets; CET1 ratio, which compares a bank’s capital against its risk-weighted assets; risk-based capital ratio; return on average tangible common equity; return on average assets; net interest margin; operating revenue growth; and net charge-offs as a percentage of total loans. This list excluded banks where the top-level parent company is not based in the U.S.
Home Bancshares, the bank holding company behind Centennial Bank, was the top-rated bank in America, up four spots from last year when it finished fifth. The Conway, Arkansas based community bank parent company was in the top-50 for every metric Forbes tracks, outperforming most notably with its risk-based capital ratio of 19.6%, a CET1 ratio of 15.2%, an efficiency ratio of 40.2%, net-interest margin of 3.9% and return on average assets of 1.9%, all of which landed it in the top-10.
Smaller institutions were once again dominant on the top of the list, with only two banks with more than $100 billion in assets in the top-40.
Ontario, California-based CVB Financial, the parent company of Citizens Business Bank, was ranked fourth on the list after having been the top-ranked bank over the past two years. The rest of the top-10 included Little Rock, Arkansas-based Bank OZK at #2, Irvine, California-based bank holding company Pacific Premier Bancorp at #3, Olney, Maryland-based Sandy Spring Bancorp at #5, Houston, Texas-based Prosperity Bancshares at #6, McLean, Virginia-based Capital One Financial Corporation at #7, Kalispell, Montana-based Glacier Bancorp at #8, Portsmouth, Virginia-based TowneBank at #9, and Wheeling, West Virginia-based WesBanco at #10.
Pacific Premier cited the booming economic recovery as a reason for its strength in 2021, citing increased business loan activity and credit demand, specifically with commercial loans, as a major factor in its strong 2021 numbers.
For Prosperity Bancshares, that realized uptick in business activity was paired with a regional boom with the Texas bank’s CEO David Zalman saying that he expects Texas and Oklahoma to have outsize growth at the reopening is paired with businesses and individuals relocating and moving to the region for its preferred tax rates.
Glacier Bancorp’s strong year was partially powered by a sizable acquisition, bringing in Altabancorp, the parent company of American Fork, Utah-based Alta Bank, which was the largest acquisition in company history and brought along more than $4 billion from the largest community bank in Utah.
Nine of the top-10 banks have less than $37 billion in assets with Capital One serving as an outlier with more than $425 billion in its coffers. Capital One, which has specialized in credit cards since beginning as a credit card company in 1994, was also among the major risers on the list, gaining 37 spots from its perch as #44 last year. Capital One was the top ranking bank when it came to return on average tangible common equity, return on average assets and net interest margin.
Another of the lists largest banks, The Bank of New York Mellon Corporation, saw one of the largest drops on the list, dropping 58 spots from #8 last year to #66 this year with net interest revenue being a major cause, dropping 9% year over year, according to the New York banking giant’s Q3 2021 earnings which were used for this list. BNY’s net interest revenue dropped 12% year-over-year in 2021, which the bank attributed to low interest rates on interest-earning assets.
The country’s largest bank, JPMorgan Chase & Co. and its nearly $4 trillion in assets moved up three spots from #51 to #48. CEO Jamie Dimon attributed the successful year to his firm “benefiting from elevated capital markets activity and a pick up in lending activity…firmwide” in comments accompanying the bank’s fourth quarter earnings.
Fellow trillion dollar bank Wells Fargo moved up one spot from last year from #98 a year ago to #97, finally seeing the expiration of a 2016 Consumer Financial Protection Bureau consent order resulting from the firm’s retail banking scandal.
The other two trillion dollar banks fell in the rankings. Citigroup came in at #88, a drop from #65 last year and Bank of America was at #91 after finishing #74 a year ago.