Making do with less: despite the low interest rates and a soft economy, financial institutions find ways to squeeze out profits.

• Author: Maley, Frank
• Position: Feature

There's a joke about a young banker getting a suit made. He notices that it has no pockets and says so to the tailor. "Didn't you tell me you were a banker?" the tailor says. "Who ever heard of a banker with his hands in his own pockets?"

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If they keep on the way they have, Tar Heel bankers and other lenders will destroy that stereotype. Their big problem hasn't been no-frills suits--or even smart-alecky tailors. It's been how to get their hands deep enough into other people's pockets to grow their businesses. Eight of the state's 10 biggest financial institutions made do with less revenue in 2002 than in 2001. Breaking into the top 100 was easier, too. It took just $4.4 million in revenue, versus $4.9 million in 2001. A soft economy curbed loan demand in 2002 and 2003. And low interest rates have shrunk the margins between interest income and what's paid on deposits.

Yet banks, thrifts and credit unions still found ways to make money in 2002. Lower interest rates spurred mortgage refinancings, which produced fee income. Institutions with a diverse mix of businesses, and plenty of noninterest income, typically did well. Charlotte-based Bank of America, the state's largest financial institution, was among the world's 10 most-profitable companies. The big nonprofits fared about the same as the for-profits: Revenue at four of the five biggest credit unions shrank in 2002, yet net income rose at three of the top five.

Last year was the first that BUSINESS NORTH CAROLINA included credit unions in our annual ranking of financial institutions. This year, we've made a change to take into account tax advantages that credit unions, as nonprofits, have over banks. Credit unions are separated from banks in rankings of after-tax categories such as net income (page 50). We also decided to raise the bar for inclusion on the main list by making the criterion a relative one. Instead of merely grossing $1 million, a bank, thrift or credit union must rank among the state's top 100 financial institutions. We call it The Financial 100. Maybe next year, the price of admission to that club will go up.

THE FINANCIAL 100 2002 Rank revenue* Assets** '03 '02 Headquarters (millions) (millions) 1 1 Bank of America Charlotte $45,805.0 $660,458.0 2 2 Wachovia Charlotte 23,404.0 341,839.0 3 3 BB & T Winston-Salem 5,956.4 80,216.8 4 4 First Citizens BancShares Raleigh 817.2 12,231.9 5 5 State Employees Raleigh 585.8 9,789.7 6 6 First Charter Charlotte 233.1 3,746.1 7 7 First Bancorp Troy 85.1 1,218.6 8 9 Coastal Federal Raleigh 70.6 1,154.4 9 8 Fidelity Bancshares Fuquay-Varina 66.2 1,012.7 10 10 LSB Bancshares (1) Lexington 64.9 851.8 11 -- First Carolina Corporate Greensboro 61.6 2,351.2 12 11 Truliant Federal Winston-Salem 60.4 870.4 13 12 Southern Bancshares Mount Olive 58.3 920.6 14 13 Bank of Granite Granite Falls 57.0 742.0 15 14 Allegacy Federal Winston-Salem 52.5 849.3 16 28 MountainBank Financial (2) Hendersonville 52.3 841.1 17 16 Piedmont Federal S & L Winston-Salem 49.6 840.5 18 15 FNB Financial Services (3) Reidsville 48.1 734.0 19 19 FNB (4) Asheboro 47.7 754.4 20 17 HomeTrust Bank (5) Asheville 46.8 723.1 21 20 First South Bancorp Washington 44.7 628.1 22 29 Capital Bank Raleigh 43.3 840.5 23 18 Peoples Bancorp of N.C. Newton 42.5 644.7 24 24 Marine Federal Jacksonville 39.5 396.1 25 21 First National Bank Shelby 38.8 607.7 26 22 High Point Bank High Point 37.3 592.5 27 25 Southern...