ABA Banking Journal 5/08 - (Page 39) these institutions are not truly comparable to other private financial institutions. A total of 43 institutions were included in this year’s analysis. Private or foreign-owned banks appear to have fared as well as their public counterparts—the average ROAE among the top ten was 19.76%, compared to 19.97% for the top ten public institutions. However, they seem to have followed different strategies. Noninterest income represented an average of 26.4% of total revenues at the top ten institutions, compared to 36.9% at the top ten public institutions. At 52.67%, the average efficiency ratio among the top ten was slightly higher than the average ratio for the top ten public companies, or 51.65%. The niche focus of these institutions, however, was on a region or industry, rather than a particular set of individuals. The top-ranked private or foreignowned institution, Intrust Financial Corp., Wichita, Kan., is primarily a commercial lender. The bank was helped by its location—it operates primarily in the Plains States, which have remained relatively unaffected by the slowdown in the housing market. Also, Intrust converted to a Subchapter S Corporation at the end of 2006. Together, these factors helped Intrust move from twelfth on last year’s list to the top spot for 2007. Other newcomers include Great Western Bancorp., Inc. of Omaha, Neb. (#8) and Riverside Banking Company of Fort Pierce, Fla. (#10). Great Western focuses on the agribusiness sector—a focus that not only gave it access to a sector of the economy that did very well last year, but also brought it to the attention of a buyer. National Australia Bank, Melbourne, announced in November that it will be acquiring Great Western. Deals to come? Events in early 2008 suggest the banking industry will continue to face challenges related to capital adequacy and earnings performance. The strategies used by top performers in 2007—diversification of income sources, increased focus on specific segments of the consumer and business markets, and efficiency programs that demonstrate an ability to control costs—will remain important for achieving performance goals in 2008. New strategies will also emerge to generate new top performers. For example, bank valuations are at levels not seen since 1994. Those banks in a position to make acquisitions will find better prices than seen in many years. BJ COVER STORY STRICTLY BY THE BOOK continued from page 33 morning with 17 people walking out of your insurance business in one group, it’s very humbling,” Evans explains. At one point, those employees, who had joined the organization through an acquisition of an insurance firm, decided to pull up stakes. For a company that takes pride in its people skills, it was a bad mark, one that bugs Evans. “We hadn’t really built a relationship,” he says. “But at the end of the day we learned a lot. I’m sure they’re better off, and we’re better off.” Frost first got into the insurance business nine years ago. Among the course adjustments made in recent years is an emphasis, in the company’s marketing, on its triple-tier offerings, to better publicize how much Cullen/Frost can bring to its customers. Nowadays signage and other corporate identity is being amended, where it makes sense, to shift from a “Frost Bank” motif to one of “Frost: Banking: Investments: Insurance.” At the end of 2007, insurance commissions and fees represented about 11.5% of total Cullen/Frost noninterest income. Of that slice, 62% came from commercial lines, 25% from employee benefits, and 13% from personal lines. www.ababj.com/subscribe.htm A key element here, Evans says, is a reasonable expectation for referrals. “Somebody in executive management could say, ‘We’re in the insurance business, so refer all insurance leads to our agency, or we’re going to kill you’,” Evans says. “So they send it all over and 80% is not what your agency is interested in.” Cullen/Frost takes a different tack, and, says the CEO, “I’m proud to say we now close better than 60% of the referrals from the bank.” Like its banking business, about 80% of the insurance clientele are businesses (including both commercial accounts and employee benefit accounts). The operation does a big volume in commercial property and casualty coverage. Date before marrying Besides organic growth, Cullen/Frost grew through a steady stream of acquisitions over the years. Since 1993 the company has been through 19 banking combinations and eight insurance combinations, contributing to an increase in office locations over that period of nearly 290%, and a rise of 322% in asset size. Cultural fit is key, says Evans. “I do what I call a lot of ‘dating’ with those organizations that I think would fit us culturally.” Frost Bank’s correspondent program helps build some familiarity. Over time, he says, “if it looks like we’re together philosophically, then we’ll sit down and start working out numbers.” For Cullen Frost itself, the word “independence” seems against Evans’ grain. “I don’t know how to tell our people to go out and be ‘independent’,” he explains. “But I do know how to help coach our group to build value and take care of customers. If we give our customers more value every day, in the long run, we’ll be rewarded.” He adds: “You know, having a market cap of over $2 billion with no one owning over 5%, we have to perform. And it’s been in the best interests of our shareholders that we continue to do what we’re doing.” So, Cullen/Frost continues to strive to bring the best of the big and the best of the small to the customers of the middle. Will there come a time that the organization can no longer keep one foot in each of the two worlds? Evans says that’s a possibility. “But I think it’s a long way away for us.” BJ ABA BANKING JOURNAL/MAY 2008 39 http://www.intrustbank.com http://www.intrustbank.com http://gwbmortgage.com http://gwbmortgage.com http://www.riversidenb.com http://www.ababj.com/subscribe.html
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