Western Independent Banker - May/June 2009 - (Page 19)

By Chris Nichols Why Real, Live Bankers Still Matter BACK IN 1868, the Atchison, Topeka & Santa Fe Company started in the largest railway of its time. The Santa Fe railroad was to run from Topeka all the way to Santa Fe. After years of hard work, laying tracks across relatively f lat Kansas, the line came to La Bajada Hill, a steep, 800-ft.-elevation incline 20 miles outside of Santa Fe. Unfortunately, the construction engineers were not talking to the locomotive engineers and when the latter came out to inspect the track, it was determined that the Baldwin steam engines could never make it up the grade under full load. Seeing the mistake, the company did what any determined company would do – end the railway, save the budget and call it a success. As a result, the Santa Fe Railroad never actually made it to Santa Fe. In similar fashion, banks that set out to achieve a 15 percent ROE can come up short because they fail to properly plan and manage profitability. To help, we have gathered some interesting facts culled from 2007 profitability data (the latest available) for more than 135 banks. While the data may seem somewhat dated given the current market performance, the concepts still hold true. For starters, bankers should know the first question when it comes to producing superior performance – Just how important are people to the bottom line? The answer: Extremely important, particularly in today’s difficult operating environment. It Pays To Have Great Bankers That’s just not a nicety, but an empirical fact. Just compare the risk-adjusted contribution to the bottom line from a branch and a banker. According to an analysis by Banc Investment Group, the broker-dealer arm of PCBB, in 2007 the average branch contributes about $177,000 per year of risk-adjusted profit. By contrast, the average commercial real estate lending officer brings in about $380,000 of risk-adjusted profit. Top performers – those in the 10 percent – contribute an average of $1.2 million. Very few branches, can match the prolific earning capabilities of the average branch. When it comes to branches, the average, well-run, profitable retail branch has $130 million in loans, $190 million and in deposits, 9,000 accounts and 4,000 customers. The cross-sell ratio averages 2.8. Branches that can achieve this profile tend to produce a 23 percent ROE. When it comes to loan calling officers, the average top performing officer manages $45 million in loans and $8 million in deposits. ROE for this group averages 18 percent. When it comes For starters, bankers should know the first question when it comes to producing superior performance – Just how important are people to the bottom line? The answer: Extremely important, particularly in today’s difficult operating environment. Western Independent Banker May/June 2009 19

Table of Contents Feed for the Digital Edition of Western Independent Banker - May/June 2009

Western Independent Banker - May/June 2009 Contents A Message from the Chairman How to Keep Employees Happy … On a Shoestring Budget Keeping Good Employees in Today’s Marketplace Asset Appreciation: Front Line Employees Hold the Secret to Balancing Customer Loyalty and Profitability Great Places to Work – WIB Member Banks Why Real, Live Bankers Still Matter Getting the Best Results from an Executive Search Best Practices in Lender Incentive Programs The Enlightened Control Freak: How to Lead So Your Team Will Love, Follow and Work Like Crazy for You Even in These Wild and Tough Economic Times The Frightened Leader Don’t Train – Educate! WIB Service Corporation Report WIB Calendar New Members Advertiser.com Index of Advertisers

Western Independent Banker - May/June 2009

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