James R. Barth
Senior Fellow
Banking and Capital Markets and China and Europe and Financial Innovations and Global Economy and Public Policy and Real Estate and U.S. Economy
Dr. James R. Barth is the Lowder Eminent Scholar in Finance at Auburn University and a senior fellow at the Milken Institute. His research focuses on financial institutions and capital markets, both domestic and global, with special emphasis on regulatory issues.
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Where Is banking most profitable in the United States?
By: James R. Barth
July 09, 2012
The United States is emerging from one of the worst banking crises since the Great Depression. In response to this recent crisis, the U.S. Treasury Department injected $205 billion to boost the capital of more than 700 financial institutions under the Capital Purchase Program established in October 2008. Still, another 432 banks have failed since then. Most banks, however, survived the crisis. Indeed, today there are 7,300 institutions providing banking services nationwide. Against this background, we were interested in how the banks were performing across the country. Where are the most profitable banks?

It might surprise you to learn that the number one state is Utah, with a return on assets (ROA) of 2.49 percent. This means that for every $100 in assets, the banks in this state earned an average $2.49 in profits. Another surprise might be Nevada -- given all the recent real estate problems in Las Vegas -- which ranks a fairly close second with an ROA of 2.10 percent.

Banks in these two states are more than twice as profitable as the aggregate of all the banks in the United States, which have an ROA of 1.02 percent. The rankings of these two states may simply reflect the fact that both of them account for the vast majority industrial loan companies, some of which are owned by companies that engage in commercial activities (often in addition to financial activities). These banking institutions typically have been more profitable than all the other institutions over the past decade. (See the InstituteaEUR(TM)s report, aEURoeIndustrial Loan Companies: Supporting America's Financial System,aEUR? for an examination of these institutions, which as a category managed to thrive during the crisis.) The least profitable banking state is South Carolina with an ROA of 0.22 percent.

Of the 50 states and the District of Columbia, the banking profitability in 17 states exceeded the aggregate profitability for all banks in the United States, while in the other 34 states, profitability was lower than the aggregate figure. A complete ranking of the states is provided in the table below.