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Rates are low and compliance costs are rising. But banks with $2 billion or less in assets still have momentum in several key areas, based on data compiled by Capital Performance Group.
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Improving Returns
Return on average equity is climbing at smaller banks. The median ROAE last year improved 24 basis points from 2013.
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Profitability Rises
Net income at smaller banks increased at an accelerated rate last year, compared to 2013.
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Steady Growth
Net income, as a function of assets, also improved at all community banks. The ratio held steady at top-performing institutions.
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Spread Income Stabilizes
Healthy lending activity has helped community banks keep net interest income stable, as a percentage of total assets.
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Margins Widen – a Bit
In addition to loan growth, net interest margins slightly expanded at community banks last year.
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Fee Income Holds Steady
Noninterest income, as a percentage of assets, was stable last year, indicating that banks are boosting fees in line with their increasing size.
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Revenue Outpaces Expenses
Community banks were able to increase revenue last year at a faster rate than expense growth.
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Lower Credit Costs
Provision expenses continue to decline at smaller institutions, though many bankers believe such costs will inevitable start to rise because of higher loan levels.
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Bad Assets Decline
Banks are continuing to purge nonperforming assets, allowing some to release reserves and pad earnings.