Naming the Best Banks
Most of the best banks in the nation are names that won’t surprise any of our readers. In Bank Director’s 2022 RankingBanking report published this week and sponsored by Crowe, JPMorgan Chase & Co., SVB Financial Group, and Western Alliance Bancorp. top the list.
Those are the National Merit Scholars of banking. But some names in our latest ranking may be less familiar. Merchants Bancorp. in Carmel, Indiana, and FS Bancorp in Mountlake Terrace, Washington, are the tops for small regional and community banks, respectively. Merchants benefited from strong growth due to its focus on the booming mortgage sector. FS Bancorp’s financial performance was driven by a highly capable and focused leadership team that places a high value on culture. Meanwhile, Popular, the parent of Banco Popular de Puerto Rico and New York-based Popular Bank, emerged as a bright spot during difficult times, making it to No. 7 among the best regional banks in the country.
Popular is profitable and has generated high shareholder returns, but it also excels in an area that we spend a lot of time thinking about here at Bank Director: governance. Popular got on our radar because we wanted to do more this year than just rank banks by profitability, which any banking publisher can do. We wanted to look at the qualities that make banks great.
Our Vice President of Research, Emily McCormick, started by identifying the top 10 publicly traded banks in each asset class based on profitability: return on average assets and return on average equity. Profitability is certainly important, and we gave those metrics a double weight in our scoring to recognize that. We also ranked those high performers based on five-year total shareholder return, because it reflects how shareholders fared, and year-over-year growth in pretax, pre-provision net revenue, because that reflects the bank’s earnings trajectory. We also ranked the high performers based on asset quality, as well as leadership, board excellence and innovation, because those qualities reflect the bank’s sustainability going forward. The study ranks the 50 best banks in the industry as a result.
For those more difficult to measure qualities, leadership and board excellence, we considered external ratings from Institutional Shareholder Services, to assess governance risk. We used Glassdoor and Indeed to consider employee feedback. We looked at proxy statements, bank websites and annual reports to determine the skill and experience level of board members and the leadership team, as well as diversity in terms of race and gender. To measure innovation, we looked at the bank’s strategic initiatives to transform in a digital age as well as expertise and annual technology spending.
After reviewing hundreds of corporate documents and press releases, we feel confident this list measures the year’s best of the best among publicly traded banks.
• Naomi Snyder is editor-in-chief at Bank Director
