Banking's Total Return Top 5: 2013 Edition

Jeff For Banks

For the past two years I searched for the Top 5 financial institutions in five-year total return to shareholders because I grew weary of the "get big or get out" mentality of many bankers and industry pundits. If their platitudes about scale and all that goes with it are correct, then the largest FIs should logically demonstrate better shareholder returns. Right? Not so over the three years I have been keeping track.

The Dangers of Regulatory Overreach and Those Who Exploit It

Finer Points

In case you missed it, American Banker this week launched a series that sheds some light on the unintended consequences that can result from the aggressive application of regulations. The series explores National Fair Housing Alliance allegations that several large banks have failed to adequately maintain foreclosed properties in predominately minority neighborhoods, which they say […]. Regulatory Relief

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To Branch or Not To Branch: Here Is The Answer

Jeff For Banks

During periods of uncertainty lies opportunity. Vernon Hill, legendary leader of the former Commerce Bank in Cherry Hill, New Jersey, took advantage of the last time bankers were contemplating the future of branching by beating them over the head with his high profile and rapidly expanding branches. Can another Commerce Bank eat our lunch this time around? Only if you develop a decade long strategic plan that maps the decline in branch prominence.

Banks Versus Credit Unions: Much Ado About Nothing

Jeff For Banks

Credit Unions don''t pay taxes! They''re trying to steal our business customers! I often quote Sun Tzu from his over 2,000 year old book, The Art of War. One of my favorites: "If you know the enemy and know yourself, you need not fear the result of a hundred battles." The frequent and resource sapping waling about credit unions tells me that banks don''t know their enemies, umm, competition. Last year I attended the CUNA Government Affairs Conference (GAC).

Lessons Learned: Banks that thrived during crisis grew loans slower prior to it.

Jeff For Banks

The St. Louis Fed recently performed a study to uncover the characteristics of community banks that thrived during the financial crisis. Thriving banks were defined as under $10 billion in assets, and maintained a composite CAMELS 1 rating in each exam cycle from 2006-11, an impressive accomplishment. As with most government driven academic studies, there were numerous answers. But one struck me as particularly instructive. Former legendary Fed Chairman William McChesney Martin, Jr.

Does fee income hedge banks and credit unions from spread swings?

Jeff For Banks

The drum is starting to beat again for fee income in the minds of banking executives and in financial institution strategy sessions. This week I heard "hedge" against interest rate fluctuations, a comment more common in the late 1990''s to mid 2000''s. So I ran some numbers, and the answer to the post title is: it depends. Fee income comes in many sources.

Community Banks and Our Retirement Problem

Jeff For Banks

How can your financial institution stand out in a crowded marketplace? Why don''t we play a critical role in solving the nation''s retirement problem? I recently read a report by the US Senate Committee on Health, Education, Labor and Pensions titled The Retirement Crisis and a Plan to Solve It , led by Senator Tom Harkin (D: Iowa).

Should Banks Jettison Unprofitable Customers?

Jeff For Banks

I will tell you why in a moment, but first why I thought of this question. Alan Weiss of Summit Consulting penned a book called The Consulting Bible (see my bookshelf if interested in the book). In it, Weiss suggests you jettison the lower end of your client list when you win new clients. His reasons: The client is no longer profitable. You are bored with the work. The client is troublesome. The work is unpleasant. Financial institutions rarely go through such an exercise.

Bankers: Are We Accountable?

Jeff For Banks

Twenty years ago there were 14,000 FDIC-insured financial institutions. Today that number is cut in half. The reasons are many. And yes, some are beyond our control such as population mobility, technology, and the need for some scale to invest enough to remain relevant. But, as my one-time Division Officer, Lieutenant Proper, once told me: "Be careful pointing your finger, because the other three are pointing at you."

Banking and Social Media. Guest Post: If Everyone Told You to Jump Off a Bridge.

Jeff For Banks

By: Shannon Marsico My sister is still in high school, and she claims she is deprived of everything. A tactic my sister often uses with my mother when she wants something is stating how “everyone” else is doing it - everyone is going to the mall after school, everyone owns an iPhone, everyone is allowed to stay out past 10PM, and so on. To teens, keeping up with their friends and looking trendy are of the utmost importance.

The Danger Within: Banking Conferences

Jeff For Banks

The boss goes to a banking conference and senior management worries what new idea he or she will come back to implement. Sound familiar? I''m currently at a banking conference in Florida at a swanky hotel that I would not go to if not for work. Too pricey, too reserved, and too old. But I can''t complain. I''m waiting for room service as I type. The accompanying picture was my work view yesterday. Most conferences I attend the breakout sessions to learn from colleagues and other bankers.

Five Ideas on How to Consolidate a Bank Branch

Jeff For Banks

During the second quarter 2013, bank branches generated a relatively low 2.04% total revenue as a percent of average deposits. Fellow blogger Jim Marous asked me what I thought were hot stove issues for banking in 2014. Top of my list, branch consolidation. Average deposits per branch were approximately $53 million. This is according to my firm''s profitability measurement peer group.

What will our depositors do when rates rise?

Jeff For Banks

The subject has been on the minds of bankers for years now. The continued extension of the Fed''s easing policy through possibly 2016 has given us a sense of security. But this pro-longed period of low rates, burgeoning core deposits, and uncertainty about what our depositors will do next should keep us restless. For those that rely on yield for returns, it has been a tough time. Retirees, insurance companies, and bank treasurers have found it difficult to earn money in fixed income.

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Much Maligned Banking Business Model: Lean and Mean

Jeff For Banks

Does your financial institution pursue a relationship driven strategy? If so, you would be in the majority for community FIs. If not, you are much maligned. In my last post I identified five things I don''t understand. One was "Our Money Is No Different Than the Bank Down the Street". I discussed my confusion as to how bankers could believe this and still pursue a more expensive relationship driven strategy. Instead, why don''t you get lean and mean?

Bar Rescue: Bankers Edition

Jeff For Banks

Jeff FYI: Dave Gerbino and I will be speaking more on this subject at the ABA Marketing Conference on Monday, September 23, 2013 at 11am in San Antonio. My buddy Dave Gerbino and I are speaking about product profitability at the ABA Marketing Conference in San Antonio next week (Monday, September 23rd, 11am if you''re in town). While developing our presentation, Dave drops Bar Rescue on me. Never heard of it, I said.

Bankers: What Is Your High Definition Destination?

Jeff For Banks

Future Picture: "A high-definition picture that shows in great detail the future as you want it to be." Future Picture and its definition are from James D. Murphy''s ("Murph") 2006 tome, Flawless Execution. I liked it so much, I e-mailed Murph at his consulting firm, Afterburner , for permission to quote from it. Murph and his colleague, Will Duke, called me back. Since the 2006 book, their thought process has evolved.

Banker Quotes: As Told To Me v6

Jeff For Banks

I learn a lot from bankers and industry experts as I visit their offices, speak to them on the phone or at industry events. Occasionally they will offer an insight that I think my Twitter followers would find interesting. Since I estimate my Twitter community only reads about 10% of their tweet stream, and so many of my blog readers do not follow Twitter, below are selected quotes that I tweeted since version 5.

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Too Small to Succeed in Banking

Jeff For Banks

Conventional wisdom : The onslaught of new banking laws, regulations, and regulatory activism requires scale to absorb costs. Or, the rapid pace of technological change and the sophistication of hackers requires resources not found in small community banks. There is truth to conventional wisdom. But with all generalities, there are exceptions. And in banking, lots of exceptions.

Bankers: What is the value of your strategy?

Jeff For Banks

A colleague and I recently had a healthy discussion about what agenda items to include at strategic planning retreats. He was strongly in favor of showing summary level financial projections for "business as usual" at the financial institution. Showing value creation, or erosion, from doing the same things you have been doing will highlight the need for staying the course or strategic change, in his opinion. He is right.

Banking Is Not Small Business Saturday

Jeff For Banks

The holidays are upon us and the public relations blitz is on so we patronize small businesses for Christmas shopping. Do small businesses have a unique value proposition that larger stores do not? Or are we relying on nostalgia and some David versus Goliath goodwill to drive us into the arms of local shops? I have news for you. The latter is a failed business idea. For example, in my town, we have two relatively small lumber yards only because the NIMBY''s kept Lowes out.

Bank M&A: The Concept of Relative Valuation

Jeff For Banks

It depends. How often do advisers such as doctors, lawyers, accountants, and yes, investment bankers say that? Asking if an offer to buy your bank is a good one depends on numerous factors, as investment bankers'' fairness opinions state in excruciating detail. What value a buyer ascribes to your institution does depend on many things. One key factor, though, is the buyer''s currency. More specifically, where the buyer''s stock is trading on a price/book or price/earnings basis.

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Bank Shareholders Are Only One Seventh of the Equation

Jeff For Banks

I am guilty. Guilty of elevating increasing shareholder value to Napoleonic heights. I annually rank the top five financial institutions by total return to shareholders. I write about developing a strategic plan that results in financial returns that satisfy shareholders. I confess, I contributed to the notion that the shareholder matters above all else. But many, if not most state business corporation laws don''t agree.

Five Things I Don't Understand

Jeff For Banks

Some people see far more gray areas than I do. When common sense, reason, and facts support one direction, I am confused why we don''t move in that direction. If I listed everything I don''t understand, you would be reading a long, long time. So I will limit myself to five things that recently confused me, and are relevant to banking. Vision Doesn''t Matter I hear this a lot and a recent quote from General Colin Powell convinced me to put this on top.

Deposit Fees: Here Comes the Judge

Jeff For Banks

This week, a US District Judge issued a snarky rebuke of the Federal Reserve''s 24 cents per debit card transaction cap, sometimes known in the common sense world as price fixing. Judge Richard Leon opined that a seven to twelve cent cap would be more in line with Dodd-Frank''s Durbin Amendment. How do I feel about the Durbin Amendment in general and how it likely came about can be discerned from a previous post.

Are Your Customers & Prospects Lovers, Haters, or Swingers?

Jeff For Banks

I recently attended the Pacific Coast Bankers’ School at the University of Washington as an observer. Instead of observing, I went to learn from the many quality industry professionals and college professors that make up the faculty. One was Michael Swenson , a Ford Professor of Marketing at Brigham Young University.

Guest Post: 2nd Qtr Economic Review by Dorothy Jaworski

Jeff For Banks

Shell Shocked If you are a fixed income investor, you have seen the worst that the markets have to offer in the second quarter of 2013. In this 2013 selloff, we have sub-par GDP growth of less than 2%, rising home prices that are still 20%+ on average below their former highs, core inflation that is very low with inflationary expectations declining, falling commodity prices (except for oil), Fed easing, and a relatively stable dollar.

Three ways banks can support innovation in their markets.

Jeff For Banks

Why did Willie Sutton, famous bank robber from the 1920''s to 1950''s, rob banks? Because that''s where the money is." Sutton, by the way, denied the quote. But we can''t deny it''s true. Financial institutions remain the place to go for money. So why do FIs opt for the sideline in participating more fully in innovation?

Guest Post: 3rd Quarter Economic Review by Dorothy Jaworski

Jeff For Banks

Throughout the summer, the great bond market selloff of 2013 continued on. Jamie Dimon We were hoping that there would be a savior to the great bond market selloff of 2013, a voice of reason able to reassure the markets. QE3 Taper—Never Mind If you are a fixed income investor, you are still shell shocked.

Sea Story: Anti-Submarine Warfare During Operation Desert Shield

Jeff For Banks

This week somebody asked me for a sea story from my Navy days. Although many colleagues and bankers know I was in the Navy, I can''t recall anybody asking me for a story. So I told the one below. They seemed interested, and I thought you might be too. If you were looking for banking insights, you''ll have to forgive me for this post.

Banking Billboard Strategies v2: Nordstrom or Wal*Mart?

Jeff For Banks

Welcome to the second installment of Banking Billboard Strategies. In this episode, we have a bank that can''t decide what it wants to be when it grows up. Does it want to be best price? Or best service? Undecided? No worries. Go for both! There is nothing like draining the treasury by investing in top notch personnel, systems, and processes, and charge little for the effort. I can''t think of a business that has succeeded with this model, but maybe one will come to me.

You Can't Buy a Customer's Love?

Jeff For Banks

I recently attended the ABA Marketing Conference in San Antonio where a speaker from USAA said something similar to this post''s title. Really? How do I explain the branding study by a client that identified Ally Bank as the most recognizable brand in their market? As most readers know, Ally is the former bank-finance arm of General Motors (GMAC). They required a substantial capital infusion from Uncle Sam to keep them solvent during the financial crisis.

Lead Like Lincoln

Jeff For Banks

Historically low interest rates and the recent poor economy highlighted the importance of leadership in community banking. History has provided us great leaders to emulate and Abraham Lincoln is perhaps without equal. In my opinion, he demonstrated three critical qualities of leadership. Vision - Burt Nanus in his book Visionary Leadership contends that vision is inherently idealistic and represents a "mental model of a future state of the. organization." George H.W.

Banking Strategies: Should We Look to Utah?

Jeff For Banks

If you could build a bank that delivered a 2.49% ROA, twenty three percent deposit growth that is 100% core, and zero non-performing loans, would you do it? That is exactly what Salt Lake City''s Optum Bank delivered. Over four years ago I penned an American Banker article encouraging financial institutions to specialize to develop a competitive advantage over large financial institutions that dominate our industry.

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More Random Stuff About Me

Jeff For Banks

Last year, a tweep of mine, Ken Mueller (@kmueller62), posted an interesting bio-post titled " Random Stuff You Should Know About Me " on his Inkling Media blog. I saw his reference to it on Twitter, I read it, I enjoyed it, so I decided to copy it. with Ken''s blessing of course. But there is more to me than what can be documented in that short blog post, so I thought on the day prior to Mother''s Day, I should open up my proverbial tent about my upbringing and my Mom.

Job Description: EVP of Distribution and Service Excellence

Jeff For Banks

Figures don''t lie. Financial Institution (FI) customers interface with us online far more frequently than in person. Has our organizational structure evolved to meet this challenge? I think not. This post is geared toward drafting a job description of an FI EVP of Distribution and Service Excellence. Flowery name, I know. I also look at names such as Chief Experience Officer with extreme skepticism. But this position is different. And it''s not my idea.