Ronald Umphress offers a simple reason why his bank is so profitable year after year.
"We don't charge country club memberships to the bank," said Mr. Umphress, president and chief executive of Citizens State Bank, Princeton, Tex. In fact, he said, executives get "no perks at all."
Keeping costs low and maintaining an active bond trading business helped the tiny Texas bank make the 1996 list of the 100 most profitable community banks in the country. It earned a whopping 3.25% return on assets.
Though analysts and consultants often tout the success of large superregional banks, the list compiled by American Banker using Sheshunoff Information Services data found high achievers among the smallest and most obscure community banks-those with less than $50 million of assets-and those of $50 million to $1 billion. (Complete tables begin on page 8.)
"Small banks are doing so well sometimes you worry for them," said Arnold Danielson, chairman of Danielson Associates Inc., a Rockville, Md., consulting firm. "They may think it's the future forever."
How did last year's strongest performers do it? The stories range from cost cutting to buying risky loans to maintaining close relations with local customers.
For example, among the stars in the $50 million-$1 billion range was $165 million-asset Yellowstone Bank of Laurel, Mont. Vice president James K. Harris credits the bank's decision to move into the faster-growing Billings market.
Among even smaller banks the standouts include First State Bank of Keene, Tex. President Peter G. Bennis attributes its startling return on equity-more than 30% a year for three years running-to buying more than $30 million in loans from the Federal Deposit Insurance Corp. since 1991.
Buying the loans, which came from failed Texas banks, "was very nerve- racking," Mr. Bennis said, "but we realized it was something we needed to be doing."
Some bankers cited special circumstances for their exceptional returns. Reading (Kan.) State Bank, with $4 million of assets, said its ROA was inflated by a profit on stock it owned and by the sale of some assets. Reading returned 4.77% on assets last year, compared with 0.40% in 1995. The bank is now looking for a buyer.
