Scoreboard: Which Mid-South bank had the best quarter?
Published on: May 13, 2014
Rob Robertson, Memphis Buisness Journal
Memphis community banks (plus First Tennessee) have had a nice start to the year, with all but two banks turning a profit and most banks maintaining or improving their asset quality.
Measures of performance
Banks measure performance in all kinds of ways, but for this list we stick to return on average assets (ROAA) and Texas ratio. You can read more about those ways here.
ROAA(annualized net income divided by average assets) indicates how well a bank’s assets are being used to generate profits regardless of balance sizes.
The Texas ratio(total non-performing assets, including loans more than 90 days delinquent, divided by the sum of the company’s tangible equity capital and loan loss reserves) is one of the best single ways to look at a bank’s health, because it considers equity strength as well as potential losses. The lower the Texas ratio, the better. Banks with Texas ratios above 1:1 (or 100 percent) are considered to be at the greatest risk of failure.
Net income is also a useful way to chart how a bank is doing, but it does not adjust for the bank’s size, which makes it hard to compare how one bank is doing relative to another. Still, it’s always nice to see a bank’s bottom line, so we’re including it here.
How we ranked them
Wecollected data from the first quarter on commercial banks with average assets of more than $100 million that are either based in Memphis or hold most of their deposits here. We then ranked the banks’ performance based on a combination of return on assets (ROA) andTexas ratio relative to one another.
How they fared
Most community banks in the Memphis market did fine in the first quarter. All but two finished in the black and most improved either their ROA or Texas ratio or both.
Memphis-based Financial Federal Bank and Collierville’s Landmark Bank tied for the best performance of the quarter, though the two go about their business in different ways.
Financial Federal has one ( soon to be relocated) office and specializes in private and business banking, while Landmark has seven branches and runs a more traditional retail operation that emphasizes small business and mortgage lending.
This is not the first time in the past few weeks that Landmark’s performance has been noticed.
Independent Bank, Memphis’ largest community bank, also had another strong quarter as it continues to de-emphasize auto lending (a relative term here since auto loans still make up about 65 percent of all iBank loans) and ramp up its commercial real estate and home mortgage portfolios.
About First Tennessee
At more than $23 billion in assets, First Tennessee Bank is quite obviously not a community bank. I still like to include it on this list because it’s such an important bank in this market and because people are going to want to know how it might compare anyway.
As it stands, First Tennessee is one of the better performing banks in the Mid-South, regardless of size, with solid-if-not-exciting performance ratios. It has now notched two good quarters in a row and seems poised to celebrate its sesquicentennial in style.