All banks are faced with tighter margins, higher costs to do business, and heightened competition for customers. But high-performing banks still managed to deliver double-digit returns on equity capital last year, no small feat at a time when the S&P 500 and other benchmarks barely made it into the black (and only when adjusted for dividends).

In the more than 20 years my colleagues and I have studied the industry's top performers, we've found a few traits set them apart. Generally, the top banks are:

  • More efficient and more productive. This will not come as much of a surprise. Margins in banking have been declining for more than two decades. Efficiency levels will differ based on the business model of a bank, but top performers tend to be more efficient than peers with similar business models. In addition, they are more productive. Though they have higher rates of growth in expenses, they have even higher rates of growth in revenue, generating positive operating leverage well beyond that of their peers. Top performers also grow their balance sheets at much faster rates and are thus able to build scale that allows them to offset rising compliance and technology costs. The highest-performing banks across all asset sizes consistently achieve median efficiency ratios that are 5% to 15% lower than their counterparts.
  • More agile. Standouts demonstrate the ability to shift strategies in response to marketplace trends. Recognizing that certain profitability challenges won't disappear, many of today's best performers began years ago to diversify their loan portfolios away from concentrations in mortgages and commercial real estate loans; build stronger value propositions for deposit-rich industries; and simplify processes to improve customer experiences and drive down costs. Now, these banks are able to achieve higher levels of profitability through margin and efficiency advantages — and refocus saved dollars into higher growth opportunities.
  • A choice in today's marketplace. The top performers are increasingly distancing themselves from their competitors in the minds of customers and prospects. They've recognized the need to be the bank of choice in a crowded marketplace, and their management teams have embraced a strategy of building stronger brands and delivering better or unique value to customers. These banks don't just reward their shareholders; they reward their customers too.
  • Action-oriented, with can-do cultures. At many of the top banks, performance itself is a way of life. Management teams at these banks generally foster action-oriented, high-performance cultures. There is little tolerance for mediocre results. Incentive structures are aligned to encourage exceptional performance. But beyond performance, employees at high-performing institutions are rewarded for action. These institutions promote individuals who build teamwork, motivate others and champion organizational change.
  • Focused and aligned. The banks on the list of top performers are quite different from each other. The leaders at these banks have purposefully chosen unique paths to drive results: some are fee income superstars, while others focus on traditional intermediation activities, but do so more effectively than their peers. A number of highly profitable banks pursue niche advantages, often by developing expertise in specialty lending, enabling them to attain higher yields and superior margins. Regardless of the route that is pursued, these banks have a well-defined, well-understood plan that gets them to pay dirt, and they align their resources accordingly.

Achieving high performance is a challenge. The median return on average equity last year for community banks (those with less than $2 billion in assets) was 13.52% for the top performers vs. 7.41% for their overall peer group; for midsize banks (those with $2 billion to $10 billion in assets), 13.31% vs. 8.84%; and for large banks (those with $10 billion to $50 billion in assets), 13.26% vs. 7.91%. Certain traits help the standouts drive such impressive results. When taken together, these traits suggest that the real similarity among the elite banks is strong leadership.

Mary Beth Sullivan is a managing partner at Capital Performance Group.