With megabanks struggling to achieve profitability, the opportunity is ripe for savvy banking entrepreneurs to create nimble and modern community banks from the ground up. Unfortunately for banking customers around the country, the pace of bank start-ups has actually slowed down rather than ramped up. Several issues are to blame, but a significant obstacle is the challenge of finding and recruiting willing bank organizers. The same challenge can throw a wrench into an organization group’s plans to purchase an existing bank as well.
The team of organizers provides the de novo bank with insights, contacts, talent, direction and, of course, organization capital. The right team can turn the vision of a banking start-up, or a purchased bank, into a profitable and satisfying local community investment.
When the business plan is solid, the arguments for becoming a bank organizer are compelling: the experience can greatly enhance the organizer’s position in the community as it helps the community thrive and grow. The ability to become part of such a project at the ground level and, ultimately, create a powerful investment are often reason enough for the right personalities to jump on board.
In today’s world, however, potential organizers have been reluctant to commit. In general, they’re nervous about dedicating the time and resources to the project. That nervousness is likely rooted in a few different issues, including:
• Excessive media coverage about the supposedly unstable state of the banking industry
• The performance of the prospective organizer’s own business; organizers who are struggling to keep their own businesses afloat in this economy won’t want to dilute their focus by committing to a new bank project
Sweetening the pot To be successful in recruiting qualified organizers, the individuals spearheading the project must recognize these challenges and address them with prospects immediately. Some talking points that might be helpful in this regard include:
• The media’s coverage of the banking industry is over-simplified; the majority of community banks and balance sheet lenders are effectively managing through this current economic cycle.
• The new bank has the opportunity to operate at a significant competitive advantage, because it opens its doors with a clean balance sheet.
• Devoting time and capital to a new bank project is an investment and, as such, adds diversification to the organizer’s assets.
• The success of the new bank can add stability to the organizer’s existing business by solidifying that organizer’s position and visibility within the community.
Finally, while it is important to build an organization team quickly, it’s also crucial to select organizers who will be committed and involved throughout the process. Overselling the opportunity and understating the commitment when recruiting organizers is a strategy that’s likely to backfire.
Next week I’ll discuss the primary responsibilities of the organizer and what characteristics might qualify an individual to be an effective bank organizer.
Community banks are constantly looking for ways to improve their operations, manage risk, and save money, all the while looking for ways to gain and strengthen customer relationships. Community banks differentiate themselves through local and personalized service, but face common challenges when competing with larger rivals. Size, influence, and access to resources are challenges you already know come with the territory. Successfully navigating these challenges are what make you a great community banker.
It comes down to creativity and service execution. Community banks are not unlike the small business clients they covet. Both must be nimble and ready to respond to the dynamic needs of their clients. Technology accelerates this dialog and increases the demand on both sides of the relationship. Bringing smart solutions to the relationship is what a great banker does every day.
One area having a growing impact on small business is on-demand printing. Most of us are familiar with the common offerings when it comes to business printing. On one side you have a large commercial operation with sophisticated requirements and quantities - great for larger projects. And then you have the big box chains offering large quantity color copy services - great for quick, yet acceptable quality. On-demand printing is like a multi-purpose tool small businesses can use to execute highly customizable, commercial quality, print and direct mail campaigns from a web browser.
We really enjoy working with bankers who get excited about using a smart solution in a smart way. Working with a team of accomplished partners from the banking, print, and marketing industries we created an on-demand print solution for bankers simply called - ePrint.
ePrint is an on-demand print and direct mail solution giving you the ability produce, ship, or mail quality print materials when and where you need them. Printed items can be personalized by staff and sent directly to bank customers as approved by management. The solution gives you the ability to manage multiple direct mail campaigns - simply upload files, an address list, schedule fulfillment, and complete your order. The service it creates is convenient and the print is competitively priced.
Although you can upload your own print-ready files you can also leverage several marketing templates, such as:
* Birthday, Holiday, Thank You Cards
* Invitations
* Postcards
* Announcements
* Letterhead and Envelopes
* Business Cards
* Customer Welcome Kit
* Brochures, Flyers, and more
ePrint delivers the customization and personalization needed to control your branding, marketing, direct mail, and budget more efficiently… you get the big bank capability on a community bank budget.
Learn more about ePrint at
EmpoweredBanking.com.Andrew Anson
EmpoweredBanking.complanning + marketing + sales
The FDIC’s most recent Quarterly Banking Profile (QBP) confirms the continuation of problems for the banking industry, as several key metrics showed further deterioration in the fourth quarter. These are some highlights:
• Quarterly earnings declined, swinging industry profitability to a net loss.
• Loan loss provisions, net charge-offs, defaults and noncurrent loan balances increased.
• Aggregate outstanding loans and leases decreased.
• Total deposits increased.
• Average net interest margin generally improved for larger institutions, but declined for community banks that fund most of their assets with interest-bearing deposits.
Degradation of earnings performance For the first time since the fourth quarter of 1990, insured commercial banks and savings institutions reported a net quarterly loss. The aggregate loss, which exceeded $26 million, was fueled by a combination of loan loss provisions, trading losses and asset write-downs. Roughly half of the aggregate loss was driven by results at only four banks. But, 32 percent of all insured institutions reported a net loss. The industry’s quarterly return on assets (ROA) was a negative 0.77 percent, the worst quarterly ROA performance since 1987.
Full-year 2008 net income was slightly more than $16 billion, vs. $100 billion in the year earlier. The full-year ROA was a meager 0.12 percent. These figures were somewhat inflated due to the accounting entries related to failures and mergers; excluding those impacts, the industry would’ve reported a loss for the year.
Loan loss provisions, charge-offs and defaults Credit quality continued to be problematic. The industry’s loan loss provisions for the quarter were in excess of $69 billion, or more than half of aggregate net operating revenue. Net loan and lease charge-offs were nearly $38 billion, which is more than double the amount recorded in the year-earlier period. Charge-offs for real estate loans, both construction and development loans and residential mortgages, increased more than $10 billion on a combined basis.
At year-end, the industry was strapped with $230.7 billion in noncurrent loans. This compares to $186.6 billion at the end of the third quarter. The sharp increase does not bode well for a near-term lending or housing recovery, particularly since nearly 70 percent of that increase was related to mortgage loans—residential mortgages, C&I loans, home equity loans and other loans secured by real estate.
Trading losses, asset write-downs, declining equity capital Trading losses in the fourth quarter were large at $9.2 billion, but down from last year’s level of $11.2 billion. Charges associated with goodwill impairments and factors jumped more than $4 billion from last year, to $15.8 billion.
The disappearance of $39.4 billion in goodwill, along with a reduction in other comprehensive income, led to another consecutive reduction in total equity capital.
Total regulatory capital, however, notched an increase of 2.2 percent. At year-end, 97.6 percent of insured banks matched or beat the highest regulator capital standards.
Restructuring reduces loans outstanding Net loans and leases outstanding slipped by 1.7 percent. The decline was largely attributable to portfolio restructuring by several large institutions.
Mergers and failures shrink the industry During the fourth quarter, the number of insured institutions shrank by 79. There were 12 failures in the quarter and 15 new charters. The rest of the decline was related to merger activity and FDIC assistance transactions. For the year, 25 banks failed and 98 institutions were chartered.
As of December 31, the FDIC’s bad bank list contained 252 insured institutions, representing total assets of $159 billion.