ABA Banking Journal 5/08

25 big banks to businesses within specific industry sectors (including technology services, private equity, biotechnology, and premium wine) and private client services to the executives and officers of these businesses and other high net worth individuals. Noninterest income from services offered to these segments represented 29% of total revenues at SVB; the rest came from the return on the higher yield C&I loans that make up 72% of the bank’s loan portfolio. We expect more banks to develop a focus on the segments that they are already positioned to serve well. In particular, we expect to see an increased focus on high-end consumer segments, including the mass affluent. the top 3. A focus on efficiency All of this year’s top performers maintained better levels of efficiency than their counterparts. The average efficiency ratio among the top 25 was 53.23%, while among all institutions the average was 60.73%. Frontier Financial Corp., Everett, Wash. (#5), had the lowest efficiency ratio of the top 25 at 37.99%, despite incurring one-time costs from acquiring a bank in Oregon in June 2007. The efficiency ratio of Westamerica Bancorp., San Rafael, Calif. (#3), has not exceeded 40% since 2003. The bank instituted across-the-board expense cuts in 2007, resulting in a 2% reduction in operating expenses. Westamerica’s net interest Summary statistics public banks/thrifts with assets over $3 billion Top 25 2007 2006 Change 2007 All Institutions* 2006 Change Average ROAE Average ROAA Average Core ROAE Average Non-Interest Income/Total Rev Average Price/ Earnings Average Capital Ratio Average Efficiency Ratio Average Nonperforming Loans/Total Loans 17.08 1.54 16.33 32.19 15.15 12.29 53.23 0.52 20.71 1.74 18.83 40.78 14.59 13.68 54.67 0.40 -3.63 -0.20 -2.50 -8.59 0.55 -1.39 -1.44 0.11 8.24 0.81 8.76 28.01 19.73 12.87 60.73 1.11 12.36 1.15 12.41 30.16 18.70 13.42 58.46 0.46 -4.12 -0.34 -3.65 -2.15 1.03 -0.56 2.27 0.65 income has been declining for the past few years despite efforts to control interest expenses by focusing on low cost funding—DDAs represent 31% of total deposits, while MMDAs and savings accounts represent 33%. Recent growth in noninterest income has not been sufficient to counter this trend. Meanwhile, noninterest expenses have remained flat or declined since 2005. Without its determined focus on expense control, Westamerica would have seen much greater declines in its net income and may not have remained so highly ranked. U.S. Bancorp, Minneapolis (#4), maintained an efficiency ratio of 44.22%, despite making significant investments in the payment services that act as a major driver of noninterest income growth. The bank introduced new online payments systems for commercial and middle market business customers—which U.S. Bancorp was able to do because it controlled expenses in previous years. The bank has implemented 15 different revenue growth initiatives focused on building deeper consumer, small business, and wholesale relationships and created a new Enterprise Revenue Office, reporting directly to the CEO, to manage them. Plain, old-fashioned, cost cutting will continue to be a trend in 2008, as the revenue side of the business and credit quality continue to impose significant growth challenges on the industry. Average Loans/Deposits Average Interest Income/Avg Assets Average Interest Expense/Avg Assets Average Noninterest Income/Avg Assets Average Noninterest Expense/Avg Assets Average Net Interest Margin 97.59 6.31 2.69 1.89 3.06 4.05 84.10 5.84 2.77 2.85 3.49 3.46 13.50 0.47 -0.07 -0.96 -0.43 0.59 101.66 6.16 3.10 1.36 2.76 3.37 96.56 5.93 2.76 1.65 2.96 3.57 5.10 0.23 0.34 -0.28 -0.20 -0.20 Median Asset Growth Median Deposit Growth Median Net Income Growth Median EPS Growth Median Operating Revenue Growth Median Net Loan Growth 6.81 2.20 7.30 6.53 5.55 8.70 7.24 9.24 14.57 11.01 7.28 7.36 -0.43 -7.04 -7.27 -4.49 -1.73 1.34 6.73 5.25 -8.46 -7.21 4.58 7.93 8.43 7.94 5.79 4.43 7.04 11.04 -1.70 -2.69 -14.25 -11.64 -2.46 -3.11 *All institutions represents the total set of institutions with over $3 billion in assets in a given year. In 2007, there were 157 institutions that met this criteria; in 2006 there were 153. Source: CPG analysis of data from SNL Financial LC. Private and foreign-owned results This year’s group of top-ranked private or foreign-owned institutions contains only three new entrants. The pool used for this analysis includes nonpublicly traded banks, thrifts, and holding companies as well as wholly owned financial institution subsidiaries of both privatelyheld and publicly traded foreign financial services companies, where the company is not listed on a major U.S. exchange and the subsidiary’s results are broken out separately. Like the public list, the private and foreign-owned rankings consider only institutions with more than $3 billion in total assets. Wholly owned financial institution subsidiaries of publicly traded companies in other industries have been excluded from these rankings, as www.ababj.com/subscribe.html 38 MAY 2008/ABA BANKING JOURNAL http://www.westamerica.com http://www.westamerica.com http://www.usbank.com http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal 5/08

ABA Banking Journal 5/08 Contents Editor’s Column Online Lending Circles Hit Circuit Breaker Snapshot: Efficiency Ratios Take a Hit Letters: “Excessive Fees Make Us All Look Bad” 100th Anniversary: Then & Now ABA Resources ABA Chairman’s Position Handling People in a "Mixed Up" Office Strictly by the Book Banking's Top Performers B2B: “Paper-Free” Soon? Ever? Do DCNs Make a Difference? E-Project Management Mailbox Banker’s Mart To Advertise/Index of Advertisers The Economy

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