To grasp their reach.

• Author: McMillan, Alex Frew
• Position: Rating North Carolina's banks - Industry Overview

For the first time, BNC crosses state lines to rank Tar Heel-based banks and thrifts by total revenue.

To industry watchers, the returns on assets and equity that North Carolina-based banks have been posting must look like misprints. Where an ROA of 1% was once impressive, it's now routine. An institution has to hit 1.3% or so before it stands out. With ROE, the target has shifted from 12%-13% to 15%. NationsBank, Wachovia, BB&T and Yadkin Valley broke 17% last year. Bank ROEs are almost mimicking manufacturers'.

One reason for the increased profitability is low interest rates, which make for healthy spreads between savings and lending rates. Another is that banks are diversifying into investment banking and brokerage operations, which earn a lot of money but require few assets, says Tony Plath, director of the UNC Charlotte Center for Banking Studies, which compiled BUSINESS NORTH CAROLINA's ranking of the state's financial institutions.

In an industry that revolves around numbers, there are some interesting stories in the figures. First Citizens has the worst efficiency ratio of the five biggest banks, spending 70 cents in overhead to generate a dollar of revenue. Visit their Raleigh headquarters and one reason is strikingly obvious - expensive art, fancy furniture. Its branches also are more lavish than most.

Its ratio contrasts dramatically with the perennially profitable Bank of Granite Corp., which Forbes magazine speculates might be "the best little bank in America." It's certainly one of the most frugal banks in North Carolina. It spends 32 cents to bring in a dollar. "They basically have plywood for furniture," Plath quips.

This year marks several firsts for the list. For one, we ranked financial institutions by revenue rather than assets. For another, we looked at national holdings, not just state operations. Also, we've added savings banks and S&Ls to what had traditionally been a list of commercial banks.

Why the changes? Because the industry is changing. Holding companies used to charter separate subsidiaries in each state. [TABULAR DATA OMITTED] But subsidiaries increasingly operate across state lines, especially after the Riegle-Neal interstate-banking act, which took effect June 1, made it easier to consolidate operations. Wachovia merged its South Carolina and Georgia banks into its North Carolina-based subsidiary the very next day. It makes more sense to show banks in their entirety now that the biggest ones are well on...