Lessons From the Best Banks

The strategies and areas of excellence found in the best banks identified by Bank Director in its 2022 RankingBanking report, sponsored by Crowe LLP, vary greatly. But all top performers have a few things in common, including a long-term focus on strategic execution. Crowe Partner Kara Baldwin, who leads the firm’s national financial services audit practice, shares her insights on what the best banks have in common, from technology adoption to culture.

  • The Main Driver of Strong Performance
  • Growth Predictions
  • Setting Technological Priorities
  • Building a Strong Culture

Uncover more about the nation’s best banks in the 2022 RankingBanking study, which identified the top performers by asset size based on financial performance; the ranking also considered innovation, growth, leadership and corporate governance.

Core Provider Ranking: FIS Satisfies More Bank Executives


core-provider-12-30-16.pngBank executives don’t exactly give their core providers a ringing endorsement in Bank Director’s Core Provider Ranking, conducted in September and October 2016, particularly when it comes to these companies’ willingness to integrate with third party applications and their ability to offer innovative solutions.

Eighty-six executives, including chief executive officers, chief information officers and chief technology officers, rated the overall performance of their bank’s current core provider, and within individual categories that explored aspects of the provider’s service to the client bank, on a scale of 1 to 10, with 10 indicating the highest level of satisfaction. An average score was then calculated based on the individual ratings. Participants were not asked to rate other core providers. The executives surveyed represent banks between $100 million and $20 billion in assets. Forty percent of respondents indicate that Fiserv is their bank’s core provider, while 26 percent use FIS and 19 percent Jack Henry. Sixteen percent indicate that they use another provider.

While respondents express some disappointment in what is likely their biggest vendor relationship, one core provider does come out on top.

#1 FIS

Average overall score: 7.18

According to 67 percent of its customers, FIS, headquartered in Jacksonville, Florida, is the only core provider that keeps pace with innovations in the marketplace.

FIS has been the most active acquirer of the big three core providers. David Albertazzi, a senior analyst at Aite Group, says FIS has a great track record of acquiring and integrating innovative companies into the firm’s suite of products. Beginning in 2012, FIS has acquired six firms, according to crunchbase, a data firm that tracks the technology sector. These include two compliance solutions, a payments technology company and a mobile banking solution. Its most recent acquisition was the software firm SunGard, in 2015.

FIS features nine different core systems in the U.S. The company came out on top within all individual categories but one, rating highest for being a cost effective solution, communicating with clients about new products and updates, providing high quality support, offering innovative solutions and for the company’s willingness to integrate with third-party applications.

#2 Jack Henry & Associates

Average overall score: 6.63

Jack Henry, based in Monett, Missouri, came in just behind FIS in many of the individual categories, but rated highest of the three when it comes to being easy to contact and responsive when issues and problems arise. Albertazzi says customer service is a core tenet for the company, and Jack Henry regularly measures how well its IT and support staff are performing. Those efforts are clearly recognized in the industry.

Jack Henry offers a more streamlined product selection compared to FIS and Fiserv— according to Aite, just six core systems. Recent acquisitions include Banno, in 2014, a mobile account platform, and Bayside Business Solutions in 2015, which expanded the provider’s commercial lending suite.

#3 Fiserv

Average overall score: 4.97

Brookfield, Wisconsin-based Fiserv features 18 core systems, according to Aite—the most of the three core providers. That variety, along with its ubiquity in the banking space—Fiserv serves one-third of all U.S. banks and credit unions—may account in part for its low rating.

Client perceptions of their core provider’s performance can be muddied by several factors, including the age of their core system, says Albertazzi. The client bank may be loath to take on a conversion, and instead remain on an old system that the provider is no longer fully supporting. Bank Director did not rank individual systems, but rather the companies’ performance overall. A client running an outdated, basic core would be more apt to criticize a vendor than one using a shiny new system tailored to integrate with the latest-and-greatest fintech solution on the market.

If acquisitions have the potential to jumpstart innovation for legacy core companies, Fiserv could see a boost soon. Fiserv has been a significantly less active acquirer in recent years, compared to Jack Henry and FIS, with just one acquisition in 2013. But Fiserv recently acquired Online Banking Solutions, an Atlanta, Georgia-based provider of business banking technology, which promises to deepen Fiserv’s relationships with commercial banks.

As a group, other providers averaged a score of 6.07, just above the overall average for all providers of 6.02. One-quarter of retail banks could end up opting for startup providers for their online and mobile banking solutions by 2019, predicts Stessa Cohen, research director at Gartner, a research and advisory firm. Currently, 96 percent of banks rely on their core provider for services outside of core banking, according to Bank Director’s 2016 Technology Survey. As banks open up to other technology vendors, it’s possible they’ll lessen their dependency on the legacy core providers, and even open up to newer core solutions.

Who Are the Top Growth Banks?


bank-growth-5-20-16.pngTo every rule there is an exception—or in this case, 10 of them.

Conventional wisdom says that revenue growth at commercial banks and thrifts in the current environment is challenged by continued downward pressure on net interest margins as the competition for loans remains fierce. But there is a group of banks that are thriving in today’s banking market despite the competitive pressures facing the industry. Working with Atlanta-based Bank Intelligence Solutions, a Fiserv subsidiary that collects and analyzes performance data on depository institutions, Bank Director identified 10 banks and thrifts that exhibited strong top line growth over a five quarter period ending March 31. Bank Intelligence Solutions CEO Kevin Tweddle admits that the industry’s growth performance over that period of time has not exactly been stellar. “These aren’t numbers that jump off the page,” says Tweddle. “It’s a really tough environment.” Still, these companies have been able to rise above the environment and post strong performances—which are all the more impressive given the economic headwinds that most banks have to deal with. The ranking includes public and private institutions over $1 billion in assets.

The issue of growth will be addressed at Bank Director’s Growing the Bank conference, which is scheduled for May 23-24 in Dallas. Included on the agenda are sessions on how to grow your business through smart branching decisions, collaboration, partnerships and acquisitions.

The conference attendees could also learn a thing or two from the 10 banks on our ranking, where the order was determined by their compound average growth rate in revenues over the five linked quarters. The top ranked bank—Sioux Falls, South Dakota-based MetaBank—led the pack with a growth rate of 19.3 percent over that period. The $3 billion asset bank is well diversified across multiple business lines, although lending still accounts for a significant part of its growth and profitability. MetaBank operates from 10 branches in Iowa and South Dakota, and reported 22 percent loan growth in its most recent fiscal year, which concluded September 30, 2015.The bank also saw 10 percent loan growth in the first two quarters of its 2016 fiscal year, which ran through March 31. Loan growth was particularly strong in commercial and agricultural sectors, although MetaBank also benefited from its December 2014 acquisition of AFS/IBEX, then the seventh largest U.S. insurance premium finance company. This unit makes loans to commercial businesses to fund their property/casualty insurance premiums, and it grew at an annualized rate of 52 percent between the date of acquisition and Meta’s fiscal year end in September of last year. MetaBank’s is also one of the country’s largest prepaid card issuers in the country, and in fiscal year 2015, that business grew its deposits by 25 percent and fees by 16 percent.

MetaBank also has a significant tax related business following its September 2015 purchase of Refund Advantage, which provides tax refund transfer software to electronic return originators (EROs) and their customers. An ERO is a tax preparer who has been authorized by Internal Revenue Service to submit tax returns to the IRS in an electronic format, and MetaBank earned significant software usage fees during its second quarter which ended March 31. Although the prepaid card and tax related operations are run as separate businesses from the retail bank, they are included in MetaBank’s overall results for reporting purposes.

The third ranked bank on our growth list, San Diego-based BofI Federal Bank, is a digital bank that operates nationwide through online and mobile platforms. The bank’s compound average growth rate through the five-quarter period was 11.93 percent. Of late, BofI has been seeing considerable growth in jumbo single family loans, small balance commercial real estate and commercial and industrial loans. It has also benefited from its August 2015 acquisition of H&R Block Bank, which provided BofI with 257,000 new deposit accounts and the opportunity to cross-sell its products to that bank’s customers.

Growing revenues in the current economic environment is a challenge even for most of the banks on this list, although their performance shows that strong growth can be achieved. One thing that MetaBank and BofI have in common is a degree of specialization—agricultural loans and prepaid debit cards for MetaBank, jumbo mortgage loans for BofI. And if there’s one secret to cracking the revenue growth code, it might be having a niche that differentiates your bank from the rest of the pack.

The Top 10 Banks for Growth
Rank Bank Headquarters Assets (millions) Growth Percentage*
1 MetaBank SD 3,071 19.3
2 Academy Bank, N.A. CO 1,034 18.13
3 BofI Federal Bank CA 7,696 11.93
4 HarborOne Bank MA 2,246 11.49
5 Sterling Bank and Trust FSB CA 1,766 11.21
6 Beverly Bank & Trust, N.A. IL 1,012 10.62
7 WashingtonFirst Bank VA 1,755 9.74
8 First Foundation Bank CA 2685 9.7
9 Franklin Synergy Bank TN 2,298 9.7
10 TD Bank USA N.A. NJ 19,675 8.6

Source: Bank Intelligence Solutions and bank call reports
* CAGR based on revenue for bank for five trailing quarters through March 31, 2016
** MetaBank’s results include significant fee income from card and tax service related activities that are reported as part of its results.