WASHINGTON An analysis of more than 700 banks that maintained CAMEL 1 ratings over the past six years has found no single commonality for that success.
Instead, the study by the Federal Reserve Bank of St. Louis did reveal a common trait among these banks they all have top-notch managers who know their markets.
“The guys that we talked to could run a good bank just about anywhere,” said Andy Meyer, a senior economist at the St. Louis Fed. “They each found some way to serve their community. There clearly was no one-size-fits-all model.”
According to American Banker, an affiliate of Credit Union Journal, among the more surprising findings were the study’s insights on size.
Rather than the $1-billion minimum in assets most often cited as necessary to prosper, the St. Louis Fed's research shows that the asset range with the most “thrivers” the term it used to describe these remarkable banks was $100 million to $300.
Thirty-eight percent of the thrivers were in that range. The next asset category with the greatest number of these banks was even smaller $50 million to $100 million. Slightly more than 22% of the “thrivers” were that size, American Banker reported.
Only 36 banks of these 702 banks had more than $1 billion of assets.
Other notes: thrivers did not have high loan-to-asset ratios, which in turn led to relatively low levels of interest income and interest expense. Most had low operating expenses as well.
They tended to have high capital ratios, but some did operate near regulatory minimums. These banks were able to maintain a Camels 1 rating because they took on so little credit risk, the St. Louis Fed said.
Of the 702 banks, 16% had commercial real estate concentrations that exceeded the federal guideline of 300% of risk-based capital.
