California has once again become a hotbed for small banks.

Sandler O'Neill's annual ranking of small-cap "all-stars" shows that, after a long recovery from the housing bust, California is again home to more high-performing community banks than any other state. Of the 35 institutions Sandler selected this for 2014, eight are located in California, which is double the tally from a year earlier.

California and other high-growth states dominated Sandler's rankings before 2008. Since then, the list has been led by banks in the Northeast and mid-Atlantic, where the economy recovered faster than the rest of the country.

"The big change we saw this year was the large increase in the number of banks from California," said Casey Orr, an analyst at Sandler O'Neill who co-wrote the report with Mark Fitzgibbon, the firm's research director. "This is the most we've seen [from the state] since 2006."

Overall, 14 of the investment bank's top-performing institutions are headquartered in the Northeast or mid-Atlantic.

Massachusetts had four, the second highest total of any state: Century Bancorp, Enterprise Bancorp, Independent Bank and Hingham Institute for Savings. Hingham was one of two thrifts to make the list, along with BofI Holding in San Diego.

All told, three banks each from New York and Pennsylvania, two from New Jersey and one each from Maryland and Rhode Island made the list. A pair of Texas lenders — First Financial Bancshares in Abilene and Hilltop Holdings in Dallas — also made the list.

The list, now in its 11th year, is intended to identify the best-performing small banks before they catch the attention of Wall Street investors. To assemble the list, Sandler analyzed 450 publicly traded banks and thrifts with market caps of $2.5 billion to $25 million, then assessed them by growth, profitability, credit quality and capital.

California's recovery from its massive housing bust has been slow and uneven, but there have been signs this year that its economy is picking up, aided by one of the nation's hottest housing markets. California's existing home sales grew nearly 7% in the second quarter, compared to a year earlier, and it has one of the lowest housing inventory rates in the country.

Five California banks had never appeared on Sandler's list before: Cathay General Bancorp in Los Angeles; CU Bancorp in Encino; Heritage Commerce in San Jose; Oak Valley Bancorp in Oakdale and Opus Bank in Irvine. The three banks returning to the list are BofI, Bridge Capital Holdings and Pacific Premier.

Banks in states with strong energy sectors were also strongly represented. Along with the two Texas lenders, First NBC Bank in Louisiana and BancFirst Corp in Oklahoma City made the list. First NBC and Hilltop were on the list for the first time.

Apart from California, the western United States did not make a strong showing, with just two listed banks: CoBiz Financial and Guaranty Bancorp, both in Denver.

CoBiz made its first appearance on the list since 2005, while Guaranty was one of 12 banks appearing on the list for the first time. The $2 billion-asset Guaranty made the list after recording year-over-year earnings-per-share growth of 26%, loan growth of 16% and 7% deposit growth.

Other banks appearing for the first time are Arrow Financial in New York; Bank of South Carolina in Charleston; First Bank in New Jersey; and ServisFirst Bancshares in Alabama. ServisFirst, First NBC and Opus all went public within the last year.

Banks on the list benefitted from trends that other industry observers have noted in the past year, like rapid loan growth and improving credit metrics. Loan growth averaged 14.5% and depositgrowth averaged 12.2% for the banks on the list, compared to industry medians of 7.6% and 4.1%, respectively. Nonperforming assets, net chargeoffs and loan-loss reserves at the recognized banks were also significantly better than industry averages.

As with the industry as a whole, Sandler's all-stars showed slower earnings-per-share growth than in 2013. Average EPS growth for this year's group increased by 14.1%, compared to 16.6% for banks honored last year. For the banking industry, earnings per share grew by an average of 2.7% this year, down from 5.6% last year, Sandler said.

This year's all-stars ranged in size from the $359 million-asset Bank of South Carolina to the $14.6 billion-asset PrivateBancorp in Chicago, which is appearing on the list for the first time in seven years after being recognized every year from 2004 to 2007.

The other all-stars are Bryn Mawr Bank in Pennsylvania; CNB Financial in Pennsylvania; Eagle Bancorp in Maryland; First of Long Island in New York; Home BancShares in Arkansas; Lakeland Financial in Indiana; Peapack-Gladstone Financial in New Jersey; Pinnacle Financial in Nashville; S&T Bancorp in Pennsylvania; Suffolk Bancorp in New York; Washington Trust Bancorp in Rhode Island; and West Bancorp in Iowa.

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