ABA Banking Journal - February 2008 - (Page 24)

Community Banking 16% over the last 12 months. How many of these credits were marginal? As a result, there is a new generation of directors, management teams, and loan officers who have never had to deal with a significant workout, not to mention multiple workouts. Some of them will be hit, if not already, with significant trouble for the first time. And, how many of these boards will ultimately decide that selling out is the easiest option? For your bank to take advantage of acquisitions, your strategic plan should have a list of all possible candidates that will build out the bank’s long-term footprint. These banks should be analyzed on a quarterly basis to determine if problems are arising. Using different indicators and ratio trends, you can detect deterioration in a bank’s condition. Use a Canary report as an indicator of a bank’s health. Developed by the Comptroller’s Office as an early warning sign of problems, these reports got their names from the canaries used to detect poison gas in mines. Analyzing total Canary indicators and trends in Canary indicators is a useful and straightforward way to determine risk. For example, a bank visit last March revealed that they had 10 Canary indicators (out of a possible 15). After advising the bank that they were operating with too much risk, they responded by saying they had everything under control. In the third quarter, they announced that loan problems would wipe out the year’s earnings. Every bank should monitor their Canary report and present it quarterly to the board for review and discussion. Consider opportunities to invest on the cheap. The reality is, just about every publicly traded financial business associated with the word “bank” has seen enormous declines in its stock price—whether it is having problems or not. But not every community bank will have problems. And, we’ve not seen the volume of banks trading at book or below since the perils of the 1980’s. This is an opportunity. Many banks in the 1980s bought bank stocks when they were out of favor, even 24 FEBRUARY 2008/ABA BANKING JOURNAL more illiquid bank stocks. Over time, these banks had enormous returns. Who is better at understanding community banks than community bankers? This could be the time to invest. The same tools for recognizing local acquisitions can be used to analyze banks in other regions. Investing in bank stocks could be viewed as an acquisition strategy, minus the hassles of acquisition. One could also look at this as a strategy to diversify the bank’s footprint. Consider today an opportunity to invest in the bank’s future. This is the type of environment where banks should strategically spend some money to invest in the future. Since the bank stock market is depressed, does anyone care about your earnings as long as they are stable? Does it make more sense to take any earnings increase and spend it on initiatives that will build a stronger future? This could be the time to hire. Depending on merger activity in your area or problem banks, there may be qualified bankers looking for a stable bank. Senior lenders, experienced management, and top-notch customer service representatives may be looking for a change. The bank’s strategic plan should define what positions the bank needs over time. Boards and senior management should think like the bank they will be in ten years. Most likely you will at least double your size. You will need people that can operate a much larger bank. Now may be the perfect time to have them join your team. And whether you acquire new people or retain the same, remember to invest in proper training to help your employee base become more effective. Just about every community bank should make core deposit growth an essential of its strategic plan. When you analyze every item on your balance sheet, core deposits have the highest market value. This is the basic premise of economic value of equity (EVE). Core deposits generally carry a 10% to 18% premium value, while loans can have between -4% and positive 4% premium. So ask yourself, “What do go stale or find themselves out of style.” I am planning on rereading it soon as it is a great and simple reminder of who I want to be. I have shared it with others on my staff as well. Remedy 5 John A. Tyson, senior vicepresident and COO, Darby Bank & Trust Co., $711.9 millionassets, Vidalia, Ga. The Three Signs of a Miserable Job: A Fable for Managers (And Their Employees), Jossey-Bass, by Patrick Lencioni. I’d recommend Patrick Lencioni’s latest book, the sixth of his “fable” books. He tackles the question of why so many people are unhappy at work. The issue is a popular subject with so many companies, all citing high employee turnover as one of their biggest problems. Many consulting firms argue that higher worker motivation, among other things, improves productivity, staff retention and, ultimately, results. The root cause of job dissatisfaction, the author states, is that the basic social needs of employees are not being met. People don’t go to work merely to perform a function or get paid. They go to “get a sense of accomplishment, self-esteem, sanity, and community.” Workers are unhappy if they feel that their bosses don’t know or care who they are; if they can’t figure out why their job matters to others; and if they have no way of measuring that effect of their work. He calls these problems “anonymity,” “irrelevance,” and “immeasurability.” We’ve been using this topic of employee engagement or job satisfaction to better understand the levels of productivity of our bank employees. And more importantly, to try and improve the work environment to improve their level of engagement with the work. We spend more time at work than we do at home, so we need to be happy with the work. We also know that only by engaging the employee can we expect to engage our customers. https://www.darbybank.com https://www.darbybank.com http://www.amazon.com/gp/product/0787995312?ie=UTF8&tag=ababankingjou-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0787995312 http://www.amazon.com/gp/product/0787995312?ie=UTF8&tag=ababankingjou-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0787995312 http://www.amazon.com/gp/product/0787995312?ie=UTF8&tag=ababankingjou-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0787995312

Table of Contents Feed for the Digital Edition of ABA Banking Journal - February 2008

ABA Banking Journal - February 2008 Contents On ABABJ.COM: Have You Visited Our Brand-New Website? Editor's Column "That's Edutainment" Snapshot: Tier 1 Ratios Stable so Far 100th Anniversary: Then and Now ABA Resources ABA Chairman's Position Don't Despair Pass the Aspirin Cover Story: Socially Responsible Banking Profitably - Incoming America's Community Bankers Council Chairwoman, Dorothy Bridges Demonstrates the Way A True "Rags-to-Banker" Story Retail Banking: On the Money Hunt Community Bank Management: The Ugly Truth About Board Relations Does Core Really Matter? Security 2.0: Not Just a New Kettle of Phish A Personal Case of Mal-Serendipity DOD Credit Regs Demand Attention Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - February 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.