Banking Ranking: First National on Top

All too often, bank performances are judged by the amount of their deposits- a figure easily manipulated at the end of a reporting period. Now bank stock analyst Sheshunoff & Co. has compiled a four-volume study, Bank Quality Analysis, which analyzes bank financial data and reports some interesting findings on Dallas banks.

Sheshunoff studied the nation’s 1,000 largest banks by dividing them into four categories, according to size, and then comparing banks of similar size. The performance of First National Bank in Dallas was outstanding and Republic National Bank’s showing was good.

First National finished 12th among the nation’s 83 largest banks in “return on average assets,” a traditional, all-encompassing measure of how profitably a bank employs all of its assets – cash, securities, buildings and equipment. Republic finished 21st.

First National was top among the banks in “profit margin,” a calculation of the bank’s management efficiency. Republic was 17th. “Profit margin” judges the ability of a bank to earn strong profits on its loans and securities investments, while holding down expenses such as salaries and building occupancy costs.

The only category First National finished low in was “purchased money.” Its 78th place finish indicates that a large portion of the money First National loans out is brought into the bank by certificates of deposit, on which the bank has to pay interest. Other banks were able to fund their loans with a higher percentage of money from checking accounts, on which they pay no interest.

MercantileNationalBank finished third among 89 banks in its size category for profit margin. It also finished first in “loan loss coverage,” an indication that Mercantile has strong earnings and relatively small loan losses – suggesting its loan policy is quite conservative. Mercantile is also”over-capitalized,” meaning simply that it is not as aggressive with its money as most banks its size are.

Among Dallas’ second tier of banks – Texas Bank, National Bank of Commerce, Preston State Bank, Exchange Bank and Oak Cliff Bank, only Oak Cliff measured up consistently well. In six of ten categories Texas Bank ranked in the bottom fifth of its peers, while NBC fell into the bottom fifth in nine out of ten categories.