Western Independent Banker - November/December 2008 - (Page 23)

What Can More and more banks across the country are focusing on wealth management; it can be challenging to get these services up and running and it often takes longer to yield results, but they can create a consistent revenue stream that adds premium to your franchise value. Lastly, this group manages their margins well, focuses on niches and on doing a few things well versus trying to be everything to everybody, while generating strong, consistent revenue streams. By working on the right things, the region’s highest performers are achieving outstanding efficiency; these banks have a collective 43 percent efficiency ratio, which ranks them in the top 6 percent of all banks across the country. So, what can we learn from these institutions? High Performers Focus on the Fundamentals First and foremost, the statistics tell us that the Western region’s highest performers are focused on some key fundamentals, that if consistently executed well, can help banks not only survive, but thrive. High performing banks focus on maintaining diversified loan portfolios and strong asset quality, on ensuring they have the right staff on board to execute a strategic plan effectively, on utilizing technology to maximize their efficiency as they grow long term, and on managing their net interest margin for profitable growth. These fundamentals are what set apart the highest performers both in prosperous markets and during economic downturns. Common Metrics That Correlate to High Performance In examining the region’s great performers, we can deduce that four metrics have considerable influence on high performance: net interest margin, cost of funds, revenues per branch and revenues per FTE. Regarding revenues per FTE, today’s economic cycle is elevating the importance of this particular metric for all banks; the higher performing banks nationwide generally hire fewer people and pay them above industry average salaries. These banks build their teams with people who can handle multiple responsibilities, and they utilize technology to eliminate long-term staffi ng needs. Ultimately, FTE measurement boils down to efficiency, as personnel expenses typically represent about 60 percent of noninterest expense. Efficiency is a vitally important characteristic of high performing banks. For example, margins will likely continue to compress as competition grows for loans and deposits, both within the banking industry and by non-bank competition like credit unions and brokerage houses. The primary means of combating that compression is to reduce expenses in order to improve efficiency ratios. Again, technology is absolutely crucial to driving these efficiencies. Little Things Make a Big Impact If your bank would like to consistently achieve the highest levels of performance within its particular niche, then take a page from the region’s and country’s highest performers. There isn’t one big idea or silver bullet that differentiates high performing banks from others; rather, it’s their ability to move the needle a little bit more each day in a few key areas. Never underestimate the value of a few basis points—a few basis points in each of these key areas can have a significant impact on profitability. Focus on the core fundamentals, zero in on the right metrics and, lastly, consider the application of technology and methodologies for achieving operational efficiency throughout the organization. Notes 1. Revenue growth of business in the Western states is higher than the U.S. average. 2. These statistics are based on analysis of publicly available information as published by the FDIC at the end of June 30, 2008. Kevin Tweddle is COO of BancIntelligence in Atlanta. He will speak at the WIB Annual Conference for Bank Presidents, Senior Officers and Directors in March. He can be reached at (678) 323-3228 or ktweddle@bancintelligence.com. Do For You? Manage Risk! CONSTRUCTION LOANS require constant MONITORING, OVERSIGHT, DUE DILIGENCE and COMMUNICATIONS with the people involved. ECL Software addresses all these issues and more with its AWARD WINNING Solutions: FUND CONTROL (FC) and FCW! • Unlimited Risk Criteria Tracking • Portfolio Concentration Reports • Continuous budget analysis • Compliance with Regulatory & Examiner requirements • Automated State License and OFAC checking • Stress Testing FCW Fund Control On The Web 24/7 access to: • Loan budget information • Submission of draw and/or budget realocation requests • Upload inspection narratives, percent completes, and pictures For more information or to schedule an online demonstration, call ECL Software at: (800) 625-5972 ext 212 or visit our web site: www.JustDoItOnce.com Western Independent Banker November/December 2008 386129_ECL.indd 1 23 7/3/08 11:16:30 PM

Table of Contents Feed for the Digital Edition of Western Independent Banker - November/December 2008

Western Independent Banker - November/December 2008 Contents A Message from the President & CEO A Practical Approach to Director Evaluations Director Assessment: New Standards for a High Performing Director The Best of the West: Traits of High Performing Banks Best Practices Checklist for the Audit Committee The Real Performance Metric: It Takes a Balance of Profitability and Growth to Be Successful The Role of the Board in a Credit Crisis A Bank Director's Obligation to Be Aware of Regulatory Change Benefits Tied to Performance Receive Higher Approval Rating by�Board Members Increasing Shareholder Value: Key Profitability Drivers Board Portals Streamline Efficiency for 21st Century WIB Service Corporation Report WIB Calendar Welcome New Members Index to Advertisers advertiser.com

Western Independent Banker - November/December 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.