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 million.
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 Findings
The study also found:
* 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 CAMEL 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.
