KINGMAN - At a time when some of the largest investment banks in the world are crumbling under the pressures of subprime mortgages and a global credit crunch, it's nice to know there's at least one sane bank right in your own backyard.
Mohave State Bank, headquartered in Lake Havasu City, placed 20th on U.S. Banker magazine's list of the top 200 community banks, ranked by their three-year average return on equity.
The list, published in this month's edition of the trade publication, features those community banks that "maintained remarkably high returns on earnings, despite a financial-market tailspin in the second half of 2007."
Return on equity, or ROE, is a ratio that essentially measures how efficiently a bank uses its investments to generate profits. ROE equals a bank's net income for the year divided by it's total assets.
MSB posted a 16.34 percent ROE for fiscal year 2007, and an 18.51 percent average ROE over the past three years.
Ralph Tapscott is the President and CEO for MSB. He said he was proud to have made it on the list, attributing the company's success to a policy of sensible growth, community investment, and above all, sticking with what they know.
"I think a lot of it is sticking to what you know, and if you don't understand something, don't get involved in it," Tapscott said. "We stay in our backyard where we can keep our finger on the pulse of things. We do a very good job of controlling expenses as well."
Tapscott said banks tend to follow one of three primary drivers: profitability, safety and soundness, or growth. In MSB's case, he said, growth has taken a backseat to ensuring profits and the security of customers' deposits and loans.
"There's a lot of off-balancing risks that banks take," Tapscott said. "I think a lot of banks have lost money by expanding too quickly, going for growth, growth, growth. We're largely a small-business bank."
By keeping its business model simple, Tapscott said it becomes much easier to understand and manage risks. By keeping extra capital within the bank, Mohave State was able to weather the latest economic storms.
But Tapscott's conservative approach doesn't mean he's wholly unwilling to invest in new ventures. MSB's newest Kingman location, which opened in December 2007 at 2202 Hualapai Mountain Road, was built much larger than it needed to be for the current local market. Tapscott said that was the intention, because he believed Kingman has substantial growth in its near future.
"It makes a nice statement to the community that we believe in it," he said. "Kingman, from a growth perspective, is going to outstrip the other two cities (of Lake Havasu and Bullhead City)."