We've been hard at work at Bauer (not just eating turkey and watching football) updating bank star-ratings based on September 30, 2024 financial data. We expect to have credit union ratings out shortly. In the meantime, let's talk about how some community banks are expanding their lending.
There are 51 community banks rated either 5-Star or 4-Star that increased their lending by 35% or more - organically - during the 12-month period ending September 30, 2024. Only 5 non-community banks can say the same, and three of those are limited-service banks.
All New Bank Star-Ratings and Data This Week
Welcome back. We hope you all had a wonderful Thanksgiving Holiday. Data stops for no one, however, so while we did pause to give thanks, we were also busy getting new bank star-ratings updated. We are pleased to report that all bank data and star-ratings are now updated based on September 30, 2024 financial data.
Credit union data, as usual, is a little slower to be released. We will get those reports analyzed and ratings assigned as soon as we can. Hopefully that will be within the next week, but no promises just yet.
As we all know, the banking industry continues to consolidate. There are dozens of mergers and very few new banks opening. We did welcome one de novo in the third quarter, though (the second of 2024). 3½-Star Four States Bank, Carthage, MO opened its doors on August 26th.
The focus of Four States Bank will be to meet the needs of both small and mid-sized businesses as well as consumers in Joplin County, MO. As a community bank, it will place special emphasis on both Small Business Administration (SBA) loans and U.S. Department of Agriculture Farm Service Agency Loans.
In its first month (thru September 30th), it had already provided $8.2 million in loans. Of those, $2.9 million were single family residential, $1.2 million were agriculture loans, but commercial real estate loans accounted for the most, with $3.5 million worth.
The last new banks to open in the “Show-Me” state were 5-Star Guaranty Bank, Springfield, MO and 5-Star Parkside Financial Bank & Trust, Clayton, MO, which were both chartered in 2008.
Community Banks ARE Lending
The American Banker ran an article (just before Thanksgiving) that we’d like to address. It suggests that banks, community banks in particular, “are struggling to expand loan portfolios”. That may be true as lending tends to be cyclical, but it is not limited to community banks. In fact, during the 12 months ending September 30th, 81.9% of all U.S. banks (versus 82.3% of community banks) grew their total loans. Additionally:
- Over 68% of community banks grew loans by more than 2% in that time-frame;
- More than 100 community banks grew their loans by at least 35% over the year; and
- Over 60 of those grew their loans by more than 50%.
In fact, you will find 51 community banks listed on page 5 that are all recommended by Bauer (rated either 5-Stars or 4-Stars) and that organically grew their loan portfolios by 35% or more (i.e. without the aid of an acquisition). Only five non-community banks meet those criteria; three of them are limited service banks.
That leaves just two: 4-Star Northeast Bank, Lewiston, ME, (which some of you may know from its AbleBanking.com division) and 5-Star SoFi Bank, N.A., Cottonwood Heights, UT (which we last wrote about in September 2023 (JRN 40:38)). They each had year-over-year loan growth between 35% and 40%. During that same time, some community banks, more than doubled their loan portfolios.
Two are fairly new banks, so rapid growth is expected. They are: 4-Star FWBank, Chicago, IL (short for First Women’s Bank), which was established in 2021 (JRN 38:19). Its primary objective is to bridge the gender gap. According to FWBank’s website, women-owned businesses only receive 16% of all conventional business loans. They want to provide increased access to capital for women and women-owned businesses.
The other, 4-Star Texas Traditions Bank, Katy, TX, opened in 2022 (JRN 39:46) to support local business owners in its community. Texas Traditions Bank’s total assets grew 60% over the 12 months, while the loan portion grew more than 150%.
Next, 5-Star Community Savings, Caldwell, OH is about as far from a de novo as is possible. It was established in 1885 by a group of six individuals who made it possible for many generations to realize their financial dreams. Originally known as Caldwell Building and Loan Company, Community Savings was started with just $100k of paid-in capital. The name has changed, but the bank has stuck to its roots as a building and loan with 97% of its loans still financing single family homes.
We have added Community Savings to our rate pages this week. Another JRN listee found on page 5 is 4-Star Newtek Bank, NA, Miami, FL. Unlike Community Savings, Newtek Bank seems to reinvent itself about every 20 years. Established in 1963 as Flushing National Bank, Flushing, NY, in 1982 it became National Bank of New York City, NY while moving its headquarters to Manhattan. Another move and another name change occurred in January of 2023, which resulted in Newtek Bank in Miami.
It doesn’t matter where it’s located as Newtek Bank is an online only bank now. It has been growing by leaps and bounds since making these changes. Loans have increased 285%; total assets are up 340% and interest bearing deposits (like your Jumbo CDs) have increased a whopping 515%. Newtek Bank made a commitment to attract new business accounts and it is certainly succeeding.
