America’s Best & Worst Banks For 2010
There is a classic saying that bad ages to live through are good ages to learn from. By all accounts, today’s times constitute a bad age for banking and financial companies, and the experiences many Americans have with them. However, nothing is easier than complaining. Far more useful and instructive is examining how various banks are being run and extrapolating the behaviors of these institutions. In short, what sets good banks apart from bad banks? Why are some continuing to thrive while others (even frighteningly similar competitors, in some cases) are spinning their wheels? Today, BillShrink sets about answering these questions with profiles of the six best and six worst banks in America for 2010.
The Best Banks
Bank of Hawaii
Topping Forbes’ list of America’s best banks is Bank of Hawaii, whose conservative strategy was vindicated during the reckless 2000’s. According to HonoluluAdvertiser, Bank of Hawaii prospered mainly by “sticking to a conservative policy on loans at a time when many banks were lured into risky real estate deals by the promise of higher returns.” Expressing pride in the chief virtue of his bank, Bankoh CEO told Forbes that “boring is good”, contrary to the behaviors of more “exotic” banks and finance companies over the last decade. In fact, Bankoh’s success highlights a timeless lesson in just about any industry – while competitors will often rush to chase the “next big thing” (subprime mortgages, in this case), rewards often await those who stick to the fundamentals that have worked for generations. Nor, it should be noted, did Bank of Hawaii accept any bailout money.
UMB Financial
Kansas City-based UMB Financial can boast truly humble beginnings, opening its doors with $1,100 in first day deposits. The fact that it holds $10.2 billion in assets today owes largely to the same conservative, old-fashioned, fundamentals-focused approach Bank of Hawaii exhibited. Mariner Kemper, UMB’s CEO, remarked that “As most banks are looking forward to forgetting 2009, we look back knowing our hard work and adherence to traditional business practices continues to reap rewards” when asked his thoughts on being recognized as America’s second best bank, according to Yahoo Finance. As it turned out, regional banking was key to UMB’s success. Rather than expanding its business throughout the U.S., UMB stuck to “our time-tested prudent business practices, such as making loans within our territory, building relationships with our customers and understanding that strong underwriting practices produce quality results.” Perhaps uncoincidentally, UMB also declined to participate in the federal government’s TARP program.
Commerce Bancshares
Yet another bank to maintain strong performance and high assets thanks to a conservative management strategy is Kansas City-based Commerce Bancshares. After joking that there “must be something in the water” for KC to boast 2 of the top 5 banks in the country, TradingMarkets.com points out that it’s hardly the water. More instrumental to the success of Commerce and it’s more than $18 billion in assets is the fact that only 1.6% of its loans were categorized as “non-performing.” Put another way, Commerce had in reserves an amount roughly equal to 114% of its non-performing loans. Local consumers unsure of where to park their money during the recession (and after) have some excellently-managed choices in UMB Financial and Commerce Bancshares.
Prosperity Bancshares
The success of Houston’s Prosperity Bancshares calls to mind the old saying “an ounce of prevention is worth a pound of cure.” While many banks are staggering beneath the weight of non-performing loans that should never have been made in the first place, Prosperity quietly boasts the best NPL as a percentage of total loans rate in the industry. Prosperity also has more reserves as a percentage of NPL’s than any of the 100 largest banks in the country, according to Forbes. Like UMB, Prosperity Bancshares also declined to participate in TARP, maintaining that it was “considered well capitalized under regulatory guidelines and should be able to continue building its business and take advantage of opportunities” according to MarketWatch.
SVB Financial
SVB Financial did accept $235 million in TARP money (and promptly repaid it, according to MSN), but nonetheless benefited greatly from its long-standing relationships with prominent venture capitalists. The Santa Clara bank also reportedly “played an important role in the early days of companies including Cisco Systems, Electronic Arts and Intuit”, as Forbes writes. The bank has also evidently kept itself going strong by playing a part in new technologies, including clean tech. SVB’s website notes that it was recently honored for working with “approximately half of all venture capital-backed cleantech companies and holds deposits for nearly 200 cleantech companies nationwide.” Perhaps the best lesson to extract from SVB’s success (to include a 1.6% NPLs/loans ratio) is to remain focused on the customers you are best suited to serve — tech companies and VCs, in this case — rather than expanding haphazardly for expansion’s sake.
Community Bank System
Finally, we round out the six best banks with Dewitt, NY’s Community Bank System, whose reserves as a percentage of non-performing loans are second best among the 100 largest banks in the U.S. With branches in Chautauqua, Cattaraugus, Allegany and Wyoming counties, Community Bank System did not make the fatal error of trying to operate beyond where it had proven itself stable. As has been seen so far, a major key to bank stability and success amidst the recession has been adherence to modest, manageable, even “boring” management practices, even when that meant bucking the trend of the larger banking industry. The numbers don’t lie however, as CBS has continued to thrive irrespective of the larger industry’s woes.
The Worst Banks
Flagstar Bancorp
Being named the worst bank in America (among large banks) by Forbes isn’t much to brag about, but the facts are unavoidable. After “racking up huge losses for three straight years”, Flagstar has slipped into the decidedly unenviable position of having one of the lowest net interest margins (1.6%) while simultaneously having among the highest amount of non-performing loans. In fact, NPL’s comprise almost 10% of all of Flagstar’s outstanding loans. Unsurprisingly, Flagstar Bancorp is located in Michigan, which is rapidly acquiring a stigma as an economic wasteland.
R&G Financial
When you have the highest ratio of non-performing assets, the highest ratio of non-performing loans and the lowest capital loan ratios, it’s tough to imagine being anywhere but among the worst banks in America. Puerto Rico’s R&G Financial finds itself precisely in this lamentable state, with non-performing loans comprising a mind-blowing 20% of its overall loans outstanding. Perhaps now is a good time for R&G’s management to re-assess the operating practices that landed it here and take some lessons from the six best banks discussed earlier!
Sterling Financial
Spokane-based Sterling Financial had about as good a year on the NASDAQ as it did when compared to its peers, which is to say, a terrible year. Besides being among the industry’s worse capital ratios at the end of 2009, Sterling was also the third worst performing stock on NASDAQ of 2009, falling 93% in value according to USA Today. But the trouble just keeps coming for Sterling, whose parent company was recently slapped with an employee lawsuit stemming from “heavy imprudent investment of employees’ retirement plan assets into Sterling stock, despite the bank’s foray into risky commercial real estate loans” according to the Pudget Sound Business Journal. Reportedly, the plan held over $13 million in Sterling common stock, good for roughly 20% of the plan’s overall assets. Here again we are reminded of the virtues of time-tested, old-fashioned bank management!
Capitol Bancorp
Lansing, Michigan’s Capital Bancorp has fallen upon such hard times that it is actually in the process of divesting assets in six of the seventeen states it serves simply to stay alive. IStockAnalyst reported in December 2009 that Capital Bancorp was indeed “planning to sell its e-filing financial services division” as part of an “ongoing effort to strengthen its capital ratios”, which are scraping pavement in comparison to its comparably sized competitors. Even this, however, was evidently done with an eye toward becoming more like the regionally-focused banks at the top of this list. CEO George Leis remarked that he hoped the sell-off would “help return Pacific Capital Bancorp to its roots of being a pure community bank serving the central coast of California.”
Banco Popular
The biggest of any bank on the bottom 10 of Forbes rankings, Banco Popular also holds the dubious distinction of being fifth-worst among comparably sized banks in terms of reserves as a percentage of non-performing loans. Despite being more than a century old, Banco Popular apparently needed to fall this far before officially renouncing its ties to the subprime mortgage market in 2007, according to Reuters. It’s been three years since Banco Popular vowed to renew its “focus on profitable businesses”, but the bottom line numbers are still pretty dismal thus far!
Central Pacific Financial
Hard as it may be to imagine Hawaiian banks at the top and bottom of this list, it simply reinforces how crucial a bank’s own operating practices are to its success or failure. While Bank of Hawaii is the toast of the banking sector, Central Pacific Financial (also headquartered in Honolulu) is a laughingstock. The bank holds an appalling 48% of reserves to NPLs, and accordingly, its stock price – hovering below $10 – is down an alarming 86% from 2008. In striving to understand why two seemingly similar banks produced such wildly different results, NationalPost.com pointed to the way in which Central Pacific “got deeply involved with subprime lending in California.” This contrasts, of course, with Bank of Hawaii’s admittedly “boring” management style, which has equated to bottom-line financial performance that is anything but boring.
You have details about Capitol Bancorp and Pacific Capital Bancorp mixed. They are two different banks. Capitol Bancorp is in Lansing while Pacific Capital is in Santa Barbara, CA.
Comment by westsidedawg — January 26, 2010 @ 12:34 pm
All the Canadian banks are fine:
http://www.gfmag.com/tools/best-banks/2341-worlds-50-safest-banks-2009.html
Comment by Mark — January 26, 2010 @ 3:48 pm
WORST BANK
AppleBank for savings
especially online service.
Comment by linda — February 27, 2010 @ 12:38 pm
WELLS FARGO! WELLS FARGO! WELLS FARGO! By far the worst bank EVER! If you’ve got your money at WF, move it now before these crooks steal it!
Comment by kindercold — March 3, 2010 @ 4:18 pm
Chase Bank is the worst. I refinanced with them and they had huge fees which they did not explain and did not have the paperwork ready at the closing so we had to extend my lock and they charged $500 to do that even though it was their mistake!
Comment by mad customer — March 4, 2010 @ 5:38 pm
By far, the worst bank is Bank of America. They charge you a fee (if you don’t have an account with them) for cashing check of your employer who does have an account with them. No other bank that I know of does this.
Comment by Alice — March 10, 2010 @ 10:44 am
Chase/jp morgan/emc are all affiliated. Absolute worst. Had similar experience to previous poster regarding Chase. They are trying every kind of way to steal from their customers!! Added fees, late closings, adding terms at closing they caused to be 5 days late ( I am sure part of their design to add stress to their clients). All kinds of scams perpetrated under duress onto their customers!
Comment by fed up — March 10, 2010 @ 10:50 am
Worst bank: Chase, for the cavalier way it treats its long-time, good customers who handle their accounts perfectly!
Comment by Jack — March 10, 2010 @ 11:12 am
I like BankOfInternet.com Free checking (actually they pay YOU to have an account), free withdrawals at other banks’ atm’s – even in foreign countries – and very nice customer service.
I don’t know why it wasn’t in the Top 10 Best.
Comment by Mike — March 10, 2010 @ 11:19 am
Oh, and the WORST banks:
Bank of America
Wells Fargo
Chase
Comment by Mike — March 10, 2010 @ 11:20 am
We’re with you on Chase Bank! Traveling thru Canada-
suddenly cancelled-No Warning of any kind! And we
are talking Buisness Card! Result:We are done with
them and telling others about them!
Comment by Barbara — March 10, 2010 @ 11:30 am
I have found that Wachovia is by FAR the WORST bank I have EVER done business with! I had over $5,000 in Disputed charges, which the Fraud Dept Promised 4 times to refund to me; however, they closed my account instead!
Comment by Karen — March 10, 2010 @ 11:32 am
“By far, the worst bank is Bank of America. They charge you a fee (if you don’t have an account with them) for cashing check of your employer who does have an account with them. No other bank that I know of does this.”
Actually, most banks do this. Check fraud is very high and even if the business has an account, simply presenting your ID to cash a check does not mean your ID is valid or that you are who you say you are. If the bank cashes that check, then the bank is responsible to the business for any losses they incur. The fee is a way to offset that risk and the inevitable loss that will occur.
Comment by Michael — March 10, 2010 @ 11:58 am
On Guam, my friend wrote me a check and because i did not have an account there. I was charged $5.00 just to cash it. Now that’s ridiculous. My friend had the money in her account and i was there to cash the check. So ridiculous, what happened to fingerprinting.
Comment by Non-Customer @BankPacific Guam — March 10, 2010 @ 12:16 pm
you forgot Chase!
Comment by maria molina — March 10, 2010 @ 1:26 pm
CHASE CHASE CHASE CHASE
Comment by BERNADINE — March 10, 2010 @ 4:05 pm
By far there is nothing worst that Bank of America. I am trying to buy a house, and they told me how much they want for the house. I got the loan right away and never got the house. I think that they get insurance money for every empty house, and they put it for sale with no intention of selling it. I can go on and on with examples of how bad of a bank Bank of America is
Comment by CONNIE DESAI — March 10, 2010 @ 4:07 pm
Several people have criticized Wells Fargo, but we’ve always been happy banking there. They hold our mortgage and did a good re-finance job. They’ve cleared up several pin fraud and disputed charges cases very quickly. We have automatic deposit, plus savings, plus home loan. If they raise our interest rate, I call them and they lower it back down. Yes, if you go into a branch (i.e. money store), they try to sell you something, but the staff are agreeable and knowledgable on the whole.
Comment by JL Hewes — March 10, 2010 @ 4:17 pm
Best Bank: VIRGINIA COMMERCE BANK
Worst Bank: BANK OF AMERICA
Comment by Anonymous — March 10, 2010 @ 10:13 pm
WORST BANK; BANK OF AMERICA…………..
I BEEN WITH BANK OF AMERICA FOR ALOT OF YEARS NOW.ITS A LONG STORY BUT THEY CHARGED ME $700 DOLLARS ON FEES FOR NOT HAVING FUNDS IN MY ACCOUNT WHICH I DID AND WONT HELP ME OUT WITH THIS FEES.THIS FEES ARE ALL IN ONE MONTH….BANK OF AMERICA IS THE WORST OUT THERE, THE ONLY THING THEY ARE INTERESTED IS ON FINDING PEOPLE TO CHARGE FEES ON..I HAVE A CREDIT CARD ALSO AND THEY CHARGED ME $90 DOLLARS PER YEAR,FIRST YEAR I HAD IT AND LAST YEAR I WILL HAVE IT….IF YOUR LOOKING FOR A BANK DONT CHOOSE THEM,TRUST ME IT WILL AVOID YOU ALOT OF PROBLEMS THAT THEY DONT HELP YOU OUT ON…THIS ARE JUST A FEW EXAMPLES…GOOD LUCK IF YOU DO DECIDE TO GO WITH THEM BECAUSE YOU WILL NEED IT…
Comment by daly C. — March 12, 2010 @ 9:09 pm
WORST BANK…..BANK OF AMERICA
Comment by MIREYA — March 12, 2010 @ 9:11 pm
BANK OF AMERICA THE WORST OUT THERE….
Comment by QUAN C. — March 12, 2010 @ 9:12 pm
Wachovia should be added to Websters Dictionary as Wachovia – Walk-all-over-you!
Comment by M. Taylor — March 13, 2010 @ 10:00 am
Banks are like boyfriends
My 16 year old daughter got her first real job. Wanting some financial independence she opened her first checking and savings account ,this came with a debit card, she was thrilled. Out of all the banks, she decided on Wachovia Bank in West Haven, because she said “they are so nice at that bank”. She even purchased a little notebook to keep tract of her purchases.
She opened a “way 2 save account. This savings account is linked to her checking account. Every time she makes a purchase – they deduct a dollar and put it in her savings account. This account made sense for a 16 year old student, plus it was the only savings account that was “free”. All the others you had to keep a high minimum balance in order not to get charged.
She also discovered the joy of e-Bay. Finding little beads for her bracelet and purchasing them though pay pal.
To make a long and agonizing story short, she mistaking linked her debit card to her “way 2 save “saving account in pay pal. Because of this error, the purchases came out of her checking and savings. By the time we discovered this error- it was too late. She had a negative balance of $267.00 dollars in her savings account. Her checking account that her paycheck was directly deposited into had a plus balance of 159.00.
On my lunch, we went to the bank to figure this mess out. The purchase coming out of her savings ranged from 1.00 to 2.00 each, yet she was charged 7, yes 7- $35.00 overdraft fees and one $22.00 overdraft fee all within a two day period! I could tell the girl that I initially spoke with was sympathetic, truly felt bad, but informed me there was nothing she could do. So I pleaded my daughter’s case to the manger of Wachovia. I mention her age, the fact this is her first offense, the fact that she did have money to cover these charges- in her checking account. It was an honest mistake. Ok yes, it was her mistake, but the amount of charges was astronomically. He had as much sympathy for my 16 year old daughter, as Henry the 8th did for the people of England. Cold, short and frankly- rude. However, the outrageous part of this story is that even if it was caught at a $1.00 overdrawn, there was nothing we could have done to stop this madness. The way this “way 2 save” account is set up is through automatic deductions from purchases or if you want to save more- through an extra deduction from your paycheck that has to be previously set up when you open the account. You can’t deposit money directly into this account and you can’t transfer money from you’re checking into your savings ! My daughter was doomed after the first transaction.
I looked over at my daughter, her had hanging down in despair. She said “but they seemed so nice”. I said to her “Deanna, banks are like boyfriends. They are always nice in the beginning, when they are trying to “win you over”. The real test comes when you need them. That’s when their real character shows. This bank falls short. So I did what any good parent would do, I broke up with the bank. It took her paycheck (what she had in her checking account) plus a little help from me and we closed out her account, and because of the way the bank manager looked at me, with such distain, I closed out my account with this bank. We as tax payers bailed out these banks and this is the way they treat us. Yes banks are like boyfriends and sometimes you have to kiss a few frogs or close a few accounts until you find a good one.
Comment by Margi — March 15, 2010 @ 7:11 am
Wachovia- Hands Down, See the article “Banks are like Boyfriends,” That will explain it all.
Comment by Margi — March 15, 2010 @ 7:13 am
Chase – My folks had their mortgage with them, (portfolio purchase, not origination), and when we looked at the escrow accounts, noticed they did not roll forward. (i.e. December has $1358 balance, January has $0, but nothing was paid) Mistakes happen, but this took literally months of calling daily to get it fixed.
Bank of America – Has sadly sped up to truly pace Chase for fees and deception. Did you know that a payment made after one due date but before a posting date counts as a payment in neither? So, when I paid my October bill and it posted on 10/5 (I like to pay early in the month, and my prior due date was 9/30 paid on 9/8) it was counted in the 9/30 bill. My next payment on 11/2 was counted as a late payment for October. So, despite having 30 days in each cycle, my 3 payments each made within 28 days of each other were counted as 1 on-time payment only. Two lates were posted and my interest moved from 10.99% (earlier was 8.99% fixed when I first took the $43K advance) to 24.99%.
I’ve had this account for 13 years, never had this issue despite always paying the same, have spent hundreds of thousands of dollars around the world for work with the card and always pay them back without an issue. Then they do this, and I can’t get past the first round CS agents with snotty attitudes.
Comment by Chris — March 15, 2010 @ 11:35 pm