Sandler O'Neill included several new additions to its annual ranking of top-performing small banks and thrifts, suggesting that small lenders are slowly returning to pre-crisis health.

Twenty-nine banks and two thrifts made the investment bank's ninth annual list of the nation's top small lenders. Ten have never appeared on a previous version of the list.

As a group, the 2013 list performed far better than the industry as a whole over the last 12 months, with an average increase in earnings per share of 16.6%, compared to 5.6% for all publicly traded banks and thrifts. The group's return on average assets was 11.3%, compared to 7.4% for all publicly traded banks and thrifts.

Loan and deposit growth also surpassed the overall industry. The 31 lenders had an average Tier 1 capital ratio of 12.4%, compared to less than 6% for all banks and thrifts that Sandler O'Neill evaluated.

This year's list suggests that small banks from states that were hit hard by the financial crisis and recession may be bouncing back, the company's research analysts said. While the list was dominated by banks in the mid-Atlantic states and the Northeast, as it has been every year since 2008, four California banks made this year's list, the most since 2006. Prior to 2008, banks from high-growth states used to dominate the rankings, with California accounting for roughly 30% of the list, Sandler O'Neill said.

The top performer on the list in terms of increased earnings per share in the past year, as a percent change, was 1st Century Bancshares (FCTY) in Los Angeles, followed by Heritage Oaks Bancorp (HEOP) in Paso Robles, Calif., and Southwest Georgia Financial (SGB) in Moultrie, Ga. All three were newcomers to the list.

The three banks on the list with the highest percentage growth in loans over the past year are First Financial Bancshares (FFIN) in Abilene, Texas, 1st Century, and BofI Holding (BOFI) in San Diego. First Financial and BofI are also appearing on the list for the first time. BofI is one of two thrifts to appear, along with Investors Bancorp (ISBC) in Short Hills, N.J.

Sandler O'Neill said its list seeks to "uncover the next crop leading mid-tier banks and thrifts before they are discovered by the rest of the world." To compile the rankings, the firm's analysts reviewed all 450 publicly traded banks and thrifts with market caps of $25 million to $2.5 billion, focusing on growth, profitability, credit quality and capital strength. The analysts looked at metrics such as earnings per share, asset growth, return on average equity, loss reserves, chargeoff ratio and Tier 1 capital ratio.

The five other lenders that are appearing on the Sandler O'Neill list for the first time this year are 1st Source (SRCE) in South Bend, Ind.; City Holding (CHCO) in Charleston, W.Va.; Customers Bancorp (CUBI) in Wyomissing, Pa.; First Business Financial Services (FBIZ) in Madison, Wis.; and Sandy Spring Bancorp (SASR) in Olney, Md.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.