The stock market has performed well in 2017, and the financial sector has been one of the best-performing areas of the market, up 20% so far this year. However, some banks have performed significantly better than average. Here are 2017's four highest-performing U.S. bank stocks, and why each one of them has had such a great year.
Recent Stock Price
YTD Total Return
FB Financial Corp. (NYSE: FBK)
First Bancorp (NASDAQ: FBNC)
SVB Financial Group (NASDAQ: SIVB)
Bank of America (NYSE: BAC)
Data source: TD Ameritrade. Prices and YTD performance as of 12/7/17. Only banks based in the U.S. with a market cap of $1 billion or higher are included.
FB Financial is a bank holding company, known for its subsidiary FirstBank, which is based in Tennessee. The bank has roughly $4.6 billion in assets, and has done an excellent job in 2017, not just with growth, but with improving profitability and asset quality.
Image Source: Getty Images.
For starters, check out these numbers. FB Financial generates a return on assets of 1.62% and a return on equity of 13%, both of which handily surpass the industry's benchmarks of 1% and 10%, respectively. Not only are these numbers impressive, but they also have improved significantly in recent years.
In addition, because its loan portfolio is primarily made up of commercial loans, which tend to have higher interest rates than say, residential mortgages, it runs a remarkably high 4.5% net interest margin.
Over the past year, the bank has grown tremendously. In July, FB Financial acquired Clayton Banks, which added $1.2 billion in assets. Excluding the acquisition, the company grew its loan portfolio by 14.5%. So, there is a nice combination of organic growth and growth via acquisitions.
Finally, the bank has done a great job of improving its efficiency. Since the end of 2015, FB Financial's efficiency ratio has fallen from 73.1% to 68.8%. If all of these trends continue (growth, profitability, and efficiency), there could be more good times ahead for FB Financial shareholders.
First Bancorp is similar in size to FB Financial and operates in North and South Carolina. And the reason for the bank's strong 2017 performance is simple: Growth has been incredibly impressive.
Like FB Financial, First Bancorp is also growing through acquisitions, as well as organically. In the fourth quarter, the bank closed on the acquisition of Asheville, N.C.-based ASB Bancorp. Earlier in 2017, the bank acquired Carolina Bank Holdings. These acquisitions combined to add nearly 50% to the bank's assets.
Through the first nine months of 2017, First Bancorp's net interest income grew 26% year over year, which was the result of a few factors. First, the bank completed a major acquisition during the first quarter. Second, net interest margin has expanded at a rapid pace -- up 23 basis points from a year ago. And perhaps most impressively, the bank's loan portfolio has grown organically (non-acquisition) at a 11% annualized rate.
SVB Financial Group
SVB (which stands for Silicon Valley Bank) Financial Group takes the bronze medal, with a total return of nearly 34% for the year. With just under $50 billion in assets, the bank is roughly ten times the size of the first two on the list.
The bank describes itself as serving "the global innovation economy," providing financial services for entrepreneurs, venture capitalists, and other parties, with a focus on rapidly evolving industries such as technology, healthcare, and energy.
Over the past year, SVB's net interest income has grown by 9.2%, while non-interest income, which includes things like fee income and gains on the bank's held investment securities, is up by an impressive 23.5%. Loan balances are up by more than 5%, and total client funds grew by 6.7% to $97.3 billion.
Perhaps most impressively, SVB's 2018 outlook is even more impressive. The bank expects its loan portfolio to increase by a percentage "in the mid-teens" and its net interest income to rise in "the high teens to low 20s."
Bank of America
As far as the big banks go, Bank of America is arguably the most impressive post-crisis turnaround story.
For one thing, the bank has grown its deposit base and loan portfolio in a responsible manner, which has resulted in higher revenue and better overall asset quality. More importantly, the bank has become a far more efficient institution and continues to do so. The bank has closed 436 branches over the past three years, and has invested heavily in its mobile and online platforms. One-in-five of all Bank of America deposit transactions now originate through the bank's mobile app.
As a result, the bank has become consistently profitable, with its efficiency ratio rivaling that of "rock-solid" banks like JPMorgan Chase and Wells Fargo, and a return on assets that is rapidly approaching the 1% industry benchmark.
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SVB Financial provides credit and banking services to The Motley Fool. Matthew Frankel owns shares of Bank of America. The Motley Fool owns shares of and recommends SVB Financial Group. The Motley Fool has a disclosure policy.