Why niche lending drove community bank returns in 2025

A tight lending focus – oil and gas, agriculture, hospitality – pushed some of the best-performing community banks in the $2 billion to $10 billion asset tier well ahead of their peers last year. The 20 top performers posted a mean net interest margin of 3.57 percent. Olney Bancshares of Texas, a first-time winner, nearly doubled that with 5.17 percent, a margin that reflects its concentration in energy and farmland loans through its InterBank subsidiary.

"2025 was a good year for these banks," said Ally Akins, a principal at Capital Performance Group, the consulting firm that analyzed the data for American Banker. "They were able to grow loans and grow deposits faster than they had in 2024."

The winners also carved out niches that raised their returns. Matthew Prince, a business analyst at the same firm, said specialty banks "seem to perform a little bit better, maybe because they're clearer on their niches."

Olney Bancshares, a Texas-based institution with $5.45 billion in assets, topped the list for the first time. Its three-year average return on equity hit 29.07 percent, compared with the cohort average of 21.64 percent. Net income more than doubled the group's mean. InterBank operates 40 branches and finances oil and gas and agriculture clients.

Southern BancShares, climbing two spots to second, grew loans 5 percent and core deposits 4 percent at its Southern Bank and Trust unit, which has 60 branches across North Carolina and Virginia. Its return on equity was 26.88 percent, though its net interest margin of 3.06 percent ranked among the lowest in the top 20. CEO Drew Covert said the company is building a new digital banking platform due in the second half of 2026, calling it a "significant investment in our future."

United Bank of Zebulon, Georgia, slipped to third after topping the 2024 list. The $2.3 billion-asset bank posted the highest net interest margin in the group at 5.34 percent. Core deposits accounted for 73.59 percent of total deposits, just below the cohort average, while revenue rose 15.84 percent.

INTRUST Financial Corporation of Wichita, Kansas, debuted at fourth. The $7 billion-asset bank posted an efficiency ratio of 64.77 percent and core deposit growth of 14.89 percent. State Bank of Texas in Irving dropped to fifth from third. Its 5.23 percent net interest margin was among the highest, and its return on equity was 24.86 percent. The bank is owned by the Patel family and focuses on hotel financing.

Fidelity BancShares, based in Fuquay-Varina, North Carolina, slipped to sixth. Its total risk-based capital ratio of 21.99 percent was the second highest in the cohort. Thomasville National Bank of Georgia, the smallest institution on the list at $2.08 billion in assets, debuted at seventh. CEO Stephen Cheney credited "significant loan growth, an expanding margin and continued excellent operating efficiency."

Community National Bank of Texas posted the strongest growth in both core deposits (58 percent) and net loans (94.85 percent). Its net interest margin was 5.22 percent. Noninterest expenses also jumped 65.7 percent, the highest in the cohort. Watford City Bancshares of North Dakota, which fell three spots to ninth, reported loan growth of 23.78 percent and the highest efficiency ratio in the group at 67.35 percent.

First Bancshares of Merrillville, Indiana, the largest company in the top 20 with $9.7 billion in assets, ranked 10th for a second straight year. Loans jumped 40.15 percent, core deposits rose 29.71 percent, and revenue climbed 43.07 percent. Net income increased to $157 million from $148 million.

Hometown Community Bancorp, operating as Morton Community Bank in Illinois, climbed from 13th to 11th. Despite a net interest margin of 3.02 percent that trailed the group average, revenue rose 11.22 percent and core deposits grew 12.93 percent. Texas Community Bank of Laredo jumped six spots to 12th with a 4.49 percent net interest margin and core deposit growth of 7.19 percent.

Preferred Bank of Los Angeles slipped to 13th. Loans increased 3.56 percent, and core deposits grew 14.4 percent. CEO Li Yu cited an uncertain rate environment: "Uncertainty surrounding the direction of interest rates also presents challenges in managing a banking operation." Noninterest expense growth was 1.56 percent, far below the cohort average.

CalPrivate Bank moved up to 14th with a net interest margin of 4.8 percent and a loans-to-deposits ratio of 96.29 percent. First Community Bancshares, headquartered in Killeen, Texas, fell from second to 15th. Its return on assets of 0.91 percent was among the lowest in the group; the company operates branches in Kroger, H-E-B, and Walmart stores.

Horizon Bank of Austin dropped to 16th after ranking eighth for three straight years. Loans grew 14 percent, and noninterest expense growth slowed to 6.08 percent from 11.57 percent. Builtwell Bank of Chattanooga, Tennessee, debuted at 17th with a net interest margin of 5.26 percent, among the highest, and loan growth of 14.76 percent.

Five Points Bank of Nebraska, the only Nebraska lender on the list, ranked 18th. Loans grew 22.73 percent and core deposits increased 25.74 percent. Heritage Bank of Kentucky debuted at 19th with an efficiency ratio of 62.53 percent. Northeast Bank of Portland, Maine, climbed three spots to 20th. CEO Rich Wayne said strong loan volume and high-yield assets were the "hallmark" of the firm. The bank's net interest margin of 4.71 percent exceeded the cohort average, and loan growth reached 12.57 percent.