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Banking industry

Northeast Ohio's Small Banks and Thrifts Thrive Despite Industry Consolidation

Strategic Insights

— 1 min read

Northeast Ohio's small banks and thrifts have maintained their financial performance despite the rapid consolidation in the banking industry. According to a recent study by KPMG LLP, these community banks have outperformed national averages on key measures of bank financial performance. The study analyzed 40 banks and thrifts in the 10-county region near Cleveland, with assets under $2 billion, and found that they have managed to stay competitive in a market dominated by larger banks.

Key Takeaways:

  • Community banks in Northeast Ohio earned an average of 3.6% in net interest income for the fiscal year ended June 30, 1998, compared to 3.46% for similar-size banks nationwide over the same period.
  • The region's small banks and thrifts operated more efficiently than most of their counterparts across the country, with an average efficiency ratio of 57.84% as of June 30, 1998, compared to 58.06% nationwide.
  • Area banks generated a 1.33% return on assets for the year ended June 30, 1998, slightly trailing the national average of 1.34% over the same period.
  • Charles Fuller, a partner with KPMG's Cleveland office, noted that the region's community banks have figured out how to get a better return than most banks this size, outperforming the industry average by 14 basis points.
  • Judy Adam, chief financial officer at Metropolitan Financial Corp., stated that the presence of small banks and thrifts in Northeast Ohio has prevented the region from becoming complacent and has kept margins stable.

Statistics:

  • 40 banks and thrifts in Northeast Ohio with assets under $2 billion were included in the study.
  • The region's community banks outperformed national averages on three key measures of bank financial performance for the fiscal year ended June 30, 1998.
  • Basis points: 1 basis point is one-hundredth of a percentage point.
  • Net interest income: the difference between the amount earned on loans vs. the amount paid on deposits.
  • Efficiency ratio: net interest expense as a percentage of total income.
  • Return on assets: net income divided by total assets.

Sources:

  • "KPMG LLP"
  • Charles Fuller, Partner, KPMG's Cleveland office
  • Judy Adam, Chief Financial Officer, Metropolitan Financial Corp.

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