There have been some humbling moments in Top 5 recognitions, with some award recipients failing and one voluntarily liquidating. Although we seek long-term performance in our 5-year lookback to mitigate the risk of banks that stoke performance with risky bets, we are reminded that banking is a long game. Business models built to endure do so over different economic cycles. And in today's world, economic cycles tend to last more than five years. We have had minimal failures since 2023 headline closures. Having said that, I am here to count numbers with minimal subjectivity (although there is some), and if they have the best five-year total return to shareholders within the criteria mentioned below, they are most likely on the list.
For the past fourteen years, I searched for the Top 5 financial institutions in five-year total return to shareholders because I support long-term strategic decision-making that may not benefit next quarter's or even next year's earnings. And I am weary of the persistent "get big or get out" mentality of many industry pundits. If their platitudes about scale are correct, then the largest FIs should logically demonstrate better shareholder returns, right?
Not so over the fourteen years I have been keeping track. The first bank to crack the Top 5 over $50 billion did so in 2020. As a reference, the best SIFI bank in five-year total return this year was Wells Fargo & Company at 10th overall, fresh off getting out of its regulatory penalty box that limited its growth.
My method was to search for the best banks based on total return to shareholders over the past five years. I chose five years because banks that focus on year-over-year returns tend to cut strategic investments come budget time, which hurts their market position, earnings power, and future relevance more than those that make those investments. I call this "pulling into the pits" in my book: Squared Away-How Can Bankers Succeed as Economic First Responders. Short-term focus is a common trait of banks that focus on shareholder primacy over stakeholder primacy. Total return includes two components: capital appreciation and dividends. However, to exclude trading inefficiencies associated with illiquidity, I filtered out those FIs that trade less than 1,000 shares per day. I changed this from 2,000 shares as it was pruning too many fine institutions. But the 1,000 shares/day minimum naturally eliminates many of the smaller, illiquid FIs. I also filtered for anomalies such as recent merger announcements as a seller, turnaround situations (losses suffered from 2018 forward), mutual-to-stock conversions, and penny stocks.
As a point of reference, the S&P 500 Bank Total Return Index for the five years ended December 12, 2025 was 137.08%.
Before we begin and for comparison purposes, here are last year's top five, as measured in December 2024: #1. The Bancorp, Inc. (Nasdaq: TBBK)
#2. Northeast Bank (NasdaqGM: NBN)
#3. Coastal Financial Corporation (Nasdaq: CCB)
#4. First Citizens BancShares, Inc. (Nasdaq.GS: FCNC.A)
#5. GBank Financial Holdings, Inc. (OTCQX: GBFH)
Here is this year's list:
Esquire Financial Holdings, Inc. is a financial holding company headquartered in Jericho, New York, with branch offices in Jericho, New York and Los Angeles, California, as well as an administrative office in Boca Raton, Florida. Esquire Bank, is a full-service commercial bank dedicated to serving the financial needs of the litigation industry and small businesses nationally, as well as commercial and retail customers in the New York metropolitan area. The Bank offers tailored financial and payment processing solutions to the litigation community and their clients as well as dynamic and flexible payment processing solutions to small business owners. Many banks speak of serving a niche or niches, this bank I would characterize as a niche bank. It's loan book is 67% C&I, net interest margin is 6% and has been over 5% since 2021, and has a 2.68% YTD ROA and 24% ROE. All these superlative numbers resulted in a 5-year total return of 456% and our top spot in JFB's Top 5. Well done!
Citizens Trust Bank is a Community Development Financial Institution [CDFI]. CDFIs share a common goal of expanding economic opportunity in low-income communities by providing access to financial products and services for local residents and businesses. There is nothing common about this bank and I thought to exclude them. But they are a $767 million in total assets bank. Although they are on the pinks, they trade about 3,400 shares per day, over the JFB 1,000 threshold. And their YTD ROA was 1.78% and ROE was 15.41%. If you invested $100 in CZPS five years ago you would have $445 today, a 445% total return and its debut in the JFB Top 5 at #2. Who says you can't combine good works with good returns?
Since 1997, Coastal Community Bank, the wholly owned bank subsidiary of Coastal Financial Corporation, has delivered a full range of banking services to small and medium-sized businesses, professionals, and individuals throughout the greater Puget Sound (Washington) area through a traditional community bank branch network in its three-county market. The bank consists of two segments: 1) the traditional community bank, and 2) CCBX, which is its Banking as a Service (BaaS) division started in 2018. Prior to starting CCBX and for the year ended 2017, the Company had $806 million in total assets and $5.4 million in net income for an ROA of 0.73%. As of or for the latest twelve months ended September 30, 2025, the Bank had $4.5 billion of total assets, $50.1 million net income and a 1.16% ROA. Their CCBX segment continues to evolve, particularly with enhanced regulatory scrutiny of BaaS banks. CCBX is focused on expanding products with existing partners rather than partner growth. What has this bifurcated business model delivered? A 414% five-year total return and place on the JFB Top 5 in three of the last four years! Well done!
Founded in 2000, this $8.6 billion financial institution remains one of the few banks in the U.S. that specializes in providing private-label banking and technology solutions for non-bank companies ranging from entrepreneurial start-ups to those in the Fortune 500. They provide white-label payments and depository services (think Paypal, Chime) and deploy that funding into specialized lending programs such as lending to wealth management firms, commercial fleet leasing, and real estate bridge lending. Note their asset size, because their value as the BaaS bank for Chime is that they are under $10 billion in total assets and not subject to the Durbin Amendment portion of the Dodd-Frank Act that fixes interchange income pricing. It has not been all sunshine and rainbows for TBBK. They were under an FDIC consent order from 2014 through 2020 relating to their BSA and OFAC compliance and their relationship with third parties seeking access to the banking system. So in 2020, when our 5-year measurement period began, they were emerging from that cloud. Having said that, they posted a 2.53% ROA and 29.24% ROE year-to-date and that surpassed their aspirational goal (which they disclosed) of having a >2% ROA and >20% ROE. They put it out there and got it done! And have delivered a 408% five-year total return to their shareholders and fourth straight Top 5 accolade!
Northeast Bank is a full-service bank headquartered in Portland, Maine that had $4.2 billion in total assets and seven branches and a cyber branch at September 30, 2025. It offers personal and business services to the Maine market, and sports a national lending platform which purchases and originates commercial loans, mostly secured by real estate, and SBA loans. It has a nationwide digital bank, ableBanking, that offers online savings products to consumers nationwide to assist in funding its nationwide lending program. Its national lending program represents all but a small percentage of its entire loan portfolio, which yields 8.61% YTD and has less than 1% non-performing loans/ loans ratio. Two thirds of its deposits are time deposits, resulting in a YTD (their fiscal year ends September 30th) cost of funds of 4.01%. This is because there are a lot of loans to fund! All this resulted in a 2.12% YTD ROA and 18.45% ROE and a 346% 5-year total return to shareholders and its second consecutive year on our Top 5 list. Well done!
There they are. Interesting there is no bank that I would deem a traditional community bank. Be it BaaS, nationwide lending, a CDFI and our top spot goes to one that focuses on a specific niche
The evolution of this august list tells me that having something other than "plain vanilla" is driving performance and shareholder returns.
~ Jeff
Note: I make no investment recommendations in this article or this blog.
CZBS is the ticker for Citizens :)
ReplyDeleteGot it! Thank you!
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