Louisiana, seven years out of a petroleum and real estate debacle that led to dozens of bank failures, is challenging Texas as the state with the most top-performing independent banks.
Texas has held that distinction since California's fall from grace in 1990. Last year, it had 22 institutions among the top 100. But Louisiana, which in past years barely registered as a place for high-performance banks, came in a respectable second with 15. That's a wildly disproportionate showing, considering that Louisiana has only about 200 banks with assets of $50 million to $1 billion. Texas, by virtue of having more than 900 banks in that category, has always been well represented in the top 100.
In 1993, Louisiana had a mere six banks on the list. Experts and bankers there cite several reasons for the sharp uptick in high-performance banks. Foremost is the economic recovery in the state, bolstered by new industries and the strength of the Southeast in general.
"Everything is in an up-mode here," said Kenneth Pickering, a former Louisiana bank commissioner who is now a lawyer and bank consultant in New Orleans.
"The economy is very strong right now in Louisiana," said Peter Tuz, an analyst at Morgan Keegan Co. in Memphis. "There's a lot of pent-up loan demand."
Mr. Pickering also chalked up Louisiana's good showing to a crop of smart bankers, many of them new to the business, who made fortuitous moves in the early 1990s buying up failed banks and are now reaping the rewards.
Chief among these is Tri-State Bank and Trust in Haughton, La. Tri-State was the 1989 creation of Ed Kennon, who bought three failed banks over the next two years. Tri-State's 4.7% return on assets made it the second-best- performing community bank in the country.
Another new-style Louisiana bank on the list is First Bank and Trust in New Orleans, started by Joseph C. Canizaro in 1991. According to Mr. Pickering, Mr. Canizaro, also a newcomer to banking, started First Bank with $3 million, made a skillful acquisition of a failed bank, and now has $10 million in capital. In 1994, First Bank's 2.4% return on average assets made it the 48th-best-performing community bank in the country.
For other Louisiana banks on the list, being conservative during the recession is paying off big now. Small banks in the state are starting to realize tax benefits from previous net operating losses. In addition, banks are releasing loan-loss reserves built up during the late 1980s.
"The main reason we're so far up on the list is that while the rest of the country was benefiting from the (net operation loss carryforwards), our profits hadn't come up enough for us to take advantage of it," said Russell Blanchard, executive vice president of First National Bank of Houma, the nation's eighth-best performer among community banks.
All told, First National's 1994 bottom line included $5 million in net operating loss carryforwards and reversals in the loan-loss reserve.
"From normal operations, our ROA would have been well over 1%," Mr. Blanchard said. "But nothing like the ROA that we had (3.4%). It's nice to be in the top 10, though."
Mr. Blanchard wasn't surprised that so many of the state's banks were on the top 100 list. He said the state's economy is changing drastically - away from its historical reliance on oil and gas to service-driven gaming and health care - creating a wave of opportunity for nimble small banks.
"The oil and gas business hasn't come back to what it was in the '80s, and we don't want it to," said Mr. Blanchard, whose bank is in mostly rural Terrebonne Parish, southwest of New Orleans. "The health care industry has really stabilized things here. We have a top-notch heart clinic in our area, and it's drawing people from all over the world."
The fortunes of Louisiana's small banks - the average ROA for all banks in the state was 1.36% in 1994, well above the 1.16% national average - mirror those of the Southeast in general.
For instance, the Southeast's share of the top 100 best-performing community banks in 1989 was 19%. In 1994, it was 32%.
In fact, charting the distribution of top-100 banks among the different regions over the last six years is like reading a diary of the rolling recession.
Texas, buoyed by a combination of protective laws, consumer disenchantment with out-of-state regionals, and a booming recovery from the oil and real estate disasters, remains the best place to be a community bank. Since 1990, it has had more top-performing banks by far than any other state and pushed the Southwest's share of top performers well above other regions.
