Banking's Top Performers 2003. (Top 50 Part I: The Large Banks)

The zeitgeist of 2002 was schizophrenic, impacted by the monumental and the frivolous. Iraq and the Osbournes, snipers, layoffs and Anna Nicole dominated our headlines, our television screens, and our thoughts. Good or bad, many of the events of 2002, impacted the industry--international issues like those in Latin America, corporate scandals like WorldCom, and substantial downturns in local market economies kept some financial executives up at night. But as trends, scandals, and conflicts come and go, banks remain. You can even say banking is boring, and, it seems, the boring-er, the better. In 2002 it wasn't flashy big-business deals or a haywire stock market that fueled the industry's profitability; it was retail banking -- mortgage loans and checking accounts. And the industry reported record earnings in the face of a weak economy, credit losses, and a slew of legal and public relations nightmares. In part one of the 11th annual ABA Banking Journal performance rankings, we review the financial results and strategies of the nation's largest banks, thrifts, and specialty lenders. Part two, which will appear next month, will highlight the top performing community banks and thrifts in 2002. Selection criteria Our study ranks the performance of domestic institutions with assets over $1 billion as of Dec. 31, 2002. Three groups were included in our analysis: publicly held depository institutions (banks, thrifts, and bank or financial holding companies), private depositories, and specialty lenders. A total of 297 public banks, thrifts, and holding companies and 139 private institutions qualified under our selection criteria. They were ranked by return on average equity for 2002. In instances where the reported ROE was identical for two or more institutions, 2002 return on average assets was used as a secondary ranking criterion. The same methodology was used for specialty lenders, of whom 23 qualified for ranking in 2002. Government sponsored enterprises Fannie Mae, Freddie Mac, and the Federal Agricultural Mortgage Corp. (Farmer Mac) were excluded from the specialty lender ranking. We have added to the tables this year a calculation of core ROE to reflect the performance of the ongoing operations of the companies listed. Data was provided by SNL Financial LC as of December 2002 from Securities and Exchange Commission filings. The cut above The Top Performers club has become more exclusive. Over the years as the industry has consolidated, the number of institutions in the public bank pool has dropped. So we decided to raise the bar. To make the cut, a bank must be among the top 50 performers in the industry instead of the top 100, our cutoff in previous years. A comparison to last year's top 50 turns up 15 new names, including number one ranked WSFS Financial Corp., Wilmington, Del., and fifth-ranked GreenPoint Financial Corp., New York City. Puerto Rico-based Oriental Financial Group made a comeback to the top 10 after a two-year hiatus; before it fell off of the chart, Oriental ranked as high as second for its performance during 1999. Six of last year's first-string banks and thrifts remained in the top 10. Fourth ranked Westamerica Bancorp., San Rafael, Calif., retained its top 10 ranking for the fourth year in a row, maintaining an ROE above 20% each year since 1999. Michigan thrift Flagstar Bancorp was first runner-up again, while Mellon Financial Corp. dropped to 27th in this year's ranking after a brief stint in the top spot. Also managing to stay in the top 50 despite a slide in its ROE was Washington Mutual, Seattle, Wash., which fell from the number six slot to 35th. For the second year in a row, the number one position was claimed by an institution that benefited from the sale of part of its business during the year. While WSFS performed well during 2002, earning a core ROE near 17% (before extraordinary and non-recurring items), it was the sale of its internet banking division, reverse mortgage portfolio, nonconforming mortgage subsidiary, and segment-targeted United Asian Bank division that put the small Delaware thrift over the top in terms of total ROE for the year. …