Historically, economies of scale have provided larger financial institutions with the ability to generate lower efficiency ratios and, often, higher returns on assets than community banks. Despite the disadvantages of their smaller size, some community banks outperform larger banks as well as their community bank peers during both good and bad times. This research brief focuses on the financial metrics of high-performing community banks to determine the characteristics that differentiate the elite performers from the rest of the pack.
The less transparent, often misunderstood high yield municipal bond sector offers not only unusually high tax exempt income, but a mostly unrecognized source of long run diversification with the taxable high grade (re what the Fed says and does) bond market.
Shadow Banking and the Global Financial Crisis: The Regulatory Response (Oxfo...J.P. Reimann
This paper studies the shadow banking system and its regulation since the global financial crisis of 2008. The shadow banking system is a newly coined term, that is not yet (or only very scarcely) regulated or defined. It has been remarked that the shadow banking sector played a major part in the leading up to the crisis. While regulators have been quick to introduce stricter rules for banks and insurance companies, the shadow banks have been left largely untouched by new regulations.
A.T. Kearney Consolidation of the US Banking IndustryKearney
More and more banked consumers are migrating from small to large banks, flagging the accelerated consolidation of the retail banking industry in the years to come.
The less transparent, often misunderstood high yield municipal bond sector offers not only unusually high tax exempt income, but a mostly unrecognized source of long run diversification with the taxable high grade (re what the Fed says and does) bond market.
Shadow Banking and the Global Financial Crisis: The Regulatory Response (Oxfo...J.P. Reimann
This paper studies the shadow banking system and its regulation since the global financial crisis of 2008. The shadow banking system is a newly coined term, that is not yet (or only very scarcely) regulated or defined. It has been remarked that the shadow banking sector played a major part in the leading up to the crisis. While regulators have been quick to introduce stricter rules for banks and insurance companies, the shadow banks have been left largely untouched by new regulations.
A.T. Kearney Consolidation of the US Banking IndustryKearney
More and more banked consumers are migrating from small to large banks, flagging the accelerated consolidation of the retail banking industry in the years to come.
Dr. Charles Calomiris "An Incentive-Robust Program for Financial Reform"Nataly Nikitina
KSE Open Lecture with Dr. Charles Calomiris (Columbia University Graduate School of Business) on "An Incentive-Robust Program for Financial Reform" was held on April 12, 2011.
Tracking money and fund flows from one financial entity to another will lead to a long chain or network of entities spread all over the world. Along with the funds financial risks also flow across the network. They can have a devastating cascading effect when one entity collapses. The financial melt down of global markets in 2007-08 was precipitated by failure in such networks. We present the dimensions and complexity in modelling fund flows in these networks.
Are Collateralized Loan Obligations the ticking time bomb that could trigger ...Kaan Sapanatan, CFA, CAIA
After my recent trip to New York, where I met with investment advisors from various Investment Banks and Large Alternative Investment Shops, 3 letters really resonated in my ears on my flight back home.
And those 3 letters were C… L… O…
As I got back home I started digging more into it.
One thing that really stood out for me was that; the Investment Banks never mentioned a word on Collateralized Loan Obligations, whereas without an exception every Alternative Investment shop talked about CLOs with great passion, and would elaborate “How much value they see in them and how great the returns are”
Coincidently recently there have been some concerns raised on “Leverage Loans and CLOs” by some powerful voices such as; former Federal Reserve Chair Janet Yellen, IMF, Moody’s and so on.
In fact, I had read some of the comments as part of my daily news screening, but at the time it didn’t catch my attention enough to further look into it.
The more research I did, the more clear it became that “Ten years after the global financial crisis, investors are once again showing increasingly risky behavior as they search for sources of high yield in response to a decade of low-interest rates”.
Please find my research in the presentation. I would be very happy to discuss and share some thought regarding the topic.
Kaan Sapanatan
GBRW Consulting has been analysing the major Multilateral Development Banks - International Bank for Reconstruction & Development, or World Bank; International Finance Corporation; Inter-American Development Bank; African Development Bank; Asian Development Bank and European Bank for Reconstruction and Development- since the late 1990s.
This is the second of two presentations available on SlideShare. It illustrates some of the main characteristics of the financial statements of this very specialised group of institutions, which we refer to as MDBs.
If you are a commercial realtor and you have clients that have been turned down by a bank you should check out this presentation. If you are interested in having your deal funded by private money please contact Megan Krache at mkrache@sensiblelendingsolutions.com. We are actively lending to people the banks have turned down and are able to lend to people/businesses that have losses on their tax returns.
Us Banking Industry PowerPoint Presentation Slides SlideTeam
Presenting this set of slides with name - US Banking Industry Powerpoint Presentation Slides. This aptly crafted editable PPT deck contains fourty slides. Our topic specific US Banking Industry Powerpoint Presentation Slides presentation deck helps devise the topic with a clear approach. We offer a wide range of custom made slides with all sorts of relevant charts and graphs, overviews, topics subtopics templates, and analysis templates. Speculate, discuss, design or demonstrate all the underlying aspects with zero difficulty. This deck also consists creative and professional looking slides of all sorts to achieve the target of a presentation effectively. You can present it individually or as a team working in any company organization.
Dr. Charles Calomiris "An Incentive-Robust Program for Financial Reform"Nataly Nikitina
KSE Open Lecture with Dr. Charles Calomiris (Columbia University Graduate School of Business) on "An Incentive-Robust Program for Financial Reform" was held on April 12, 2011.
Tracking money and fund flows from one financial entity to another will lead to a long chain or network of entities spread all over the world. Along with the funds financial risks also flow across the network. They can have a devastating cascading effect when one entity collapses. The financial melt down of global markets in 2007-08 was precipitated by failure in such networks. We present the dimensions and complexity in modelling fund flows in these networks.
Are Collateralized Loan Obligations the ticking time bomb that could trigger ...Kaan Sapanatan, CFA, CAIA
After my recent trip to New York, where I met with investment advisors from various Investment Banks and Large Alternative Investment Shops, 3 letters really resonated in my ears on my flight back home.
And those 3 letters were C… L… O…
As I got back home I started digging more into it.
One thing that really stood out for me was that; the Investment Banks never mentioned a word on Collateralized Loan Obligations, whereas without an exception every Alternative Investment shop talked about CLOs with great passion, and would elaborate “How much value they see in them and how great the returns are”
Coincidently recently there have been some concerns raised on “Leverage Loans and CLOs” by some powerful voices such as; former Federal Reserve Chair Janet Yellen, IMF, Moody’s and so on.
In fact, I had read some of the comments as part of my daily news screening, but at the time it didn’t catch my attention enough to further look into it.
The more research I did, the more clear it became that “Ten years after the global financial crisis, investors are once again showing increasingly risky behavior as they search for sources of high yield in response to a decade of low-interest rates”.
Please find my research in the presentation. I would be very happy to discuss and share some thought regarding the topic.
Kaan Sapanatan
GBRW Consulting has been analysing the major Multilateral Development Banks - International Bank for Reconstruction & Development, or World Bank; International Finance Corporation; Inter-American Development Bank; African Development Bank; Asian Development Bank and European Bank for Reconstruction and Development- since the late 1990s.
This is the second of two presentations available on SlideShare. It illustrates some of the main characteristics of the financial statements of this very specialised group of institutions, which we refer to as MDBs.
If you are a commercial realtor and you have clients that have been turned down by a bank you should check out this presentation. If you are interested in having your deal funded by private money please contact Megan Krache at mkrache@sensiblelendingsolutions.com. We are actively lending to people the banks have turned down and are able to lend to people/businesses that have losses on their tax returns.
Us Banking Industry PowerPoint Presentation Slides SlideTeam
Presenting this set of slides with name - US Banking Industry Powerpoint Presentation Slides. This aptly crafted editable PPT deck contains fourty slides. Our topic specific US Banking Industry Powerpoint Presentation Slides presentation deck helps devise the topic with a clear approach. We offer a wide range of custom made slides with all sorts of relevant charts and graphs, overviews, topics subtopics templates, and analysis templates. Speculate, discuss, design or demonstrate all the underlying aspects with zero difficulty. This deck also consists creative and professional looking slides of all sorts to achieve the target of a presentation effectively. You can present it individually or as a team working in any company organization.
The National Wildlife Federation helps you green your Halloween with cool, wildlife-inspired DIY costume ideas. Although we combed through last year’s article for ideas, sustainable Halloween ideas are always on trend. Channel your love of birding with this creative bird and habitat costume.
Excellence in mechanical engineering, a profile of CV Wirajasa Teknik IndustriSuhardiyoto Haryadi
CV Wirajasa Teknik Industri delivers the finest quality processing systems, machinery, equipment and other facilities widely needed by by the industrial, mining and community sectors. This publication lists some examples of our technological expertise in the processing, handling and storage systems.
Speech Analytics: Increase collections while reducing compliance riskCallMiner Inc.
Debt collectors are challenged to maximize revenue collection while remaining compliant, and treating consumers fairly and with respect. Speech Analytics can help ensure agents are effective and compliant and that consumer data is protected.
1 FIN 4303 – Commercial Banking Assignment – Part 1 VannaJoy20
1
FIN 4303 – Commercial Banking Assignment – Part 1
Return on equity equals the product of the equity multiplier and return on assets. It measures the
net income produced for each dollar of equity capital. The equity multiplier reflects the amount of
leverage the bank uses to finance its assets. As the equity multiplier increases, the firm’s solvency risk
increases. Return on assets measures net income produced for each dollar of total assets. Return on
assets is the product of asset turnover and profit margin. Profit margin represents the firm’s ability to
control expenses. Asset turnover measures the ability to produce net income from assets. These ratios are
most useful when used as relative valuations against other firms in the commercial banking industry or
over time1.
1 Saunders, Anthony. Financial Markets and Institutions
Return on Assets
.5%
Asset Turnover
3%
Equity Multiplier
12.1 times
Return on Equity
6.3%
Profit Margin
17.3%
2
Figure 1:
JPMorgan Chase & Co. 15
Figure 2:
Industry 15
Figure 3:
Ratio Analysis 15
15 http://www.fdic.gov
3
Interpreting the Trends
From 2000 to 2001, JPMorgan Chase & Co.’s (JPM) ROE decreased resulting from a decline in
net income, and thus profit margin. The recession had a large impact on JPM in 2001. Net income
dropped due to unfavorable spreads, reductions in asset values, and less liquidity in equity markets2.
Losses on private equity investments and lower investment banking fees caused revenues to decline3. The
investment banking segment’s operating revenue shrank in reaction to reduced demand for M&A and
equity underwriting in the market4. The firm also incurred higher non-interest expenses, namely merger
and restructuring costs, related to the JP Morgan and Chase merger. JPM recognized higher than
expected charge-offs in consumer and loan portfolios, forcing them to increase their provisions for loan
losses5.
Over the next years, from 2002 to 2003, JPM was able to significantly increase its profit margin as
a result of a 64% decrease in the provisions for loan losses that had been increased the previous year.
This decrease reflects improvement in JPM’s previously troubled commercial loan portfolio, as well as a
higher volume of credit card securitizations. The higher profit margin caused ROE to increase from 1.6%
to 11.5%, and also resulted in an increased ROA. JPM’s total assets declined relative to equity, and they
had to turn to outside, more costly debt financing due to reduced demand for their loans; these actions
were at the root of the decreasing equity multiplier6.
From 2003 to 2004, JPM’s previously inflated ROE decreased from 11.5% to 2.9% as a result of a
large increase in equity capital, primarily the result of JPM’s merger with Bank One. Also as a result of
this merger, noninterest ...
The Case for Promoting Debit Cards: Why They Are Still a Growth ProductPaul McAdam
While debit cards have been commonly used to make consumer retail purchases for more than a decade, many financial institutions may have placed less priority on their debit card business in wake of regulatory changes. After rapid annual growth over the past decade, growth appears to have plateaued for many institutions in the last year or two. However, debit cards remain a profitable product to promote for smaller financial institutions as demonstrated by FIS research findings and supporting case studies with a community bank and credit union outlined in this research brief.
FIS Research - Accelerating Paper Check MigrationPaul McAdam
Recent research conducted by FIS with 3,205 consumers reveals that migration away from paper checks to debit card, credit card, automated clearing house and other electronic payment services could be accelerated through a combination of motivators and removal of barriers especially for consumer-to-consumer payments. The demise of paper checks would represent a substantial expense reduction for financial institutions as well as revenue enhancement opportunity through shifting check volume to card payments, which generate interchange revenue. However, checks won’t disappear overnight and likely won’t decline much at all among some consumers without significant intervention.
FIS 2011 Consumer Loyalty and Profitability ReportPaul McAdam
Measuring customer loyalty to financial institutions (FIs) differs from measuring customer loyalty to most other institutions, products or services. Banks sometimes keep customers because of the perceived hassle factor associated with switching to a new FI. Slightly more than two-thirds (68 percent) of FI customers agree that “switching my primary checking account to a different financial institution is more hassle than it’s worth.” But our research with 3,000 consumers shows that customers who merely stick with their FIs due to inertia aren’t loyal and don’t keep a large share of their deposits and/or loans with their primary checking account provider. A long-term customer doesn’t necessarily equal a loyal customer. And, a loyal customer is not necessarily a profitable one.
Overcoming the Demographic Disadvantages of Community Banking (jan 2012)Paul McAdam
Community banks are at a disadvantage in terms of customer relationship expansion, mostly because the community bank customer base has less income and future earnings potential. The affluence gap between the community bank customer and the average bank customer results in community bank customers holding lower-than-average investable assets and loans overall, with correspondingly less opportunity. This article examines the degree to which customer demographics and geographic location influence both the composition and the financial behaviors of community bank customers and points out where community banks are really missing out.
By Paul McAdam
SVP, Research & Thought Leadership
Fidelity National Information Services
Mobile Banking & Payments: Consumer Behavior in 2011Paul McAdam
Better technologies for mobile devices, proliferation of banking apps and increased consumer appetite for staying connected are converging to propel mobile banking penetration. On the technology device front, recent double-digit growth in smartphone adoption has enabled consumers to expand the activities they can perform via mobile phone connections — including banking online. One-half of smartphone owners have banked online with their mobile phones within the past 30 days vs. only 13 percent of those with conventional mobile phones with Internet access.
More than one-quarter of U.S. smartphone owners indicate they would be “extremely likely” or “very likely” to use mobile payment during the next year if new technology was available that enabled payment through a contactless reader at point-of-sale. That translates into an estimated 17 million plus consumers who are prepared to exchange their cash-and-card-laden wallets for a different payment method. Smartphone owners who are likely adopters of mobile payments differ in significant ways the general population of smartphone owners.
Creating Customer Value Through Social MediaPaul McAdam
As the most-popular online activity, social media represents a fundamental shift in the way people communicate with each other and with businesses. The gateway into social media conversations via corporate social responsibility (CSR) initiatives represents a relatively low-risk usage of social media by financial institutions. However, financial institutions are now borrowing from the pages of companies in other industries, as well as leveraging their core competencies, to accomplish objectives beyond gaining attention and brand-building that CSR initiatives address.
Developing and Deploying a Social Media Strategy for Financial InstitutionsPaul McAdam
Social media has made it to the big leagues though financial institutions do not yet place a high level of importance on social media compared with other points of contact with customers. Launching and maintaining a financial institution’s social media presence is daunting but it has become imperative to converse with consumers on their terms, which increasingly include social media conversations. Building a strategic plan for developing and deploying a financial institution’s social media presence can be divided into four steps: 1) planning, 2) monitoring, 3) contributing, and 4) measuring.
Relationship Banking 2.0: Sustained Profitability in a Time of TurmoilPaul McAdam
The retail banking industry is undergoing a dramatic transformation. Originally built on a business model valuing proximity, rigid product selection and face-to-face interactions, it is rapidly evolving to a customer-centric model in which consumers can get personalized information and services on demand with a few chocks of a mouse or, increasingly, a few taps on a smartphone screen. The shift to this consumer-centric perspective is the cornerstone of the profitable relationship-driven model.
Mobile Remote Deposit: Capturing the Early AdoptersPaul McAdam
Mobile Remote Deposit Capture (Mobile RDC) received widespread attention over the past year with high-profile launches from J.P. Morgan Chase, U.S. Bank, USAA and others. Despite attention-getting publicity surrounding mobile RDC launches, apps had only penetrated 3 percent of the mobile phone owner population as of February 2011. Mobile RDC is in the initial part of the early adoption stage of market penetration and will require continued push from the supply side to drive widespread consumer adoption.
A Value Proposition for U.S Mobile Payment AdoptersPaul McAdam
More than one-quarter of U.S. smartphone owners indicate they would be “extremely likely” or “very likely” to use mobile payment during the next year if new technology was available that enabled payment through a contactless reader at point-of-sale. That translates into an estimated 17 million plus consumers who are prepared to exchange their cash-and-card-laden wallets for a different payment method. Smartphone owners who are likely adopters of mobile payments differ in significant ways the general population of smartphone owners.
Buy Verified PayPal Account | Buy Google 5 Star Reviewsusawebmarket
Buy Verified PayPal Account
Looking to buy verified PayPal accounts? Discover 7 expert tips for safely purchasing a verified PayPal account in 2024. Ensure security and reliability for your transactions.
PayPal Services Features-
🟢 Email Access
🟢 Bank Added
🟢 Card Verified
🟢 Full SSN Provided
🟢 Phone Number Access
🟢 Driving License Copy
🟢 Fasted Delivery
Client Satisfaction is Our First priority. Our services is very appropriate to buy. We assume that the first-rate way to purchase our offerings is to order on the website. If you have any worry in our cooperation usually You can order us on Skype or Telegram.
24/7 Hours Reply/Please Contact
usawebmarketEmail: support@usawebmarket.com
Skype: usawebmarket
Telegram: @usawebmarket
WhatsApp: +1(218) 203-5951
USA WEB MARKET is the Best Verified PayPal, Payoneer, Cash App, Skrill, Neteller, Stripe Account and SEO, SMM Service provider.100%Satisfection granted.100% replacement Granted.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
The key differences between the MDR and IVDR in the EUAllensmith572606
In the European Union (EU), two significant regulations have been introduced to enhance the safety and effectiveness of medical devices – the In Vitro Diagnostic Regulation (IVDR) and the Medical Device Regulation (MDR).
https://mavenprofserv.com/comparison-and-highlighting-of-the-key-differences-between-the-mdr-and-ivdr-in-the-eu/
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website – www.pmday.org
Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
3. Financial Profiles of High-performing
Community Banks
Industry Profitability Rebounding, but Not as Much for Smaller Banks
After a couple of very tough years, banking industry profitability rebounded nicely in 2010 and 2011 (Figure 1).
The positive upward trend continued in 2012 as the FDIC recently announced that first quarter commercial bank
profits topped $35 billion. If this momentum holds, the industry will generate full-year 2012 profits of
approximately $140 billion – nearly on par with record industry profits attained in 2006.
But a thorough examination of this industry data reveals that a swelling portion of post-recession profits has
been generated by the largest U.S. banks. Pre-recession, the top 10 banks generated an increasing share of
industry profits peaking at 53 percent in 2007. In 2008 and 2009, the top 10 banks remained profitable as a
group – albeit barely – while the banks below the top-10 collectively lost money. As the economy improved the
share of industry profits generated by the top 10 accelerated to 70 percent in 2010, but then moderated to 63
percent in 2011. Conversely, from 2004 − 2007, banks with assets of less than $1 billion generated 11 percent of
industry profits on average. By 2011, they generated only 6 percent.
3
4. Financial Profiles of High-performing
Community Banks
While the profitability of community banks as a whole certainly improved post-recession, the average ROA has
not rebounded as significantly as that of larger banks with assets exceeding $1 billion (Figure 2). In contrast, the
average ROA of community banks fell just short of larger banks’ average ROA pre-recession and slightly
exceeded it during the downturn from 2007 – 2009. So, industry profit dynamics have clearly shifted. The
question is whether the shift will be permanent.
We see a similar pattern for efficiency ratios. The gap between community and larger banks was fairly constant
through 2007 at 7 − 9 percentage points (Figure 2). The efficiency ratio gap widened during the recession to 20
percentage points in 2009 as the revenue-generating efficiency of community banks declined while that of the
larger banks actually improved for a couple years. Post-recession, the efficiency ratio gap between community
and large banks remains wider than it was pre-recession though it narrowed to 11 percent in 2011.
4
5. Financial Profiles of High-performing
Community Banks
High-performance Community Banks
While the financial rebound of the community bank market has lagged, it is absolutely possible for smaller banks
to outperform the market as shown through extensive analysis of an FIS database derived from eight years of
bank Call Report data compiled by SNL Financial. The FIS database includes 4,380 banks with assets less than $1
billion.
We divided community banks into three tiers of performance – high, mid and low performing – based on ROA.
The high performers comprise the top 10 percent of community banks based on ROA, the mid performers
represent the middle 80 percent, and the low performers represent the bottom 10 percent.
On average, the high performers have consistently achieved an ROA above 2 percent though the average
dropped during the recession. The mid performers’ average has been in the 1 percent range, falling below 1
percent during the recession and still short of 1 percent. The low performers were generating a sub-standard
average ROA before the recession, which has continued in negative territory since 2008 (Figure 3).
Our analysis examined statistical relationships between roughly two dozen bank financial metrics and ROA
during the eight-year period to determine the metrics that are most strongly associated with ROA and did the
best job of differentiating high from low performers. Of no surprise, metrics associated with credit quality were
most predictive of bank performance. Credit quality can make or break a bank – particularly in the economic
environment of the past few years. But in addition to credit quality, we uncovered several other metrics that
deserve special attention.
5
6. Financial Profiles of High-performing
Community Banks
Yield on loans is a key differentiator of performance among the three bank segments (Figure 3). On average, all
community banks’ loan yields plummeted during the recession, but high performers did a better job of
managing their loan portfolios. Analysis revealed several key actions taken by the high performers to preserve
loan yield.
They had more diversified loan portfolios. Higher performers tended to have fewer commercial real
estate and construction and land development loans. However, they had consistently higher
concentrations in commercial and industrial loans, farm real estate and farm productions loans, and
consumer loans. And the high performers were not over-weighted in residential real estate.
High performers were more effective in shifting and rebalancing their loan portfolios as the recession hit
– for example, shifting out of commercial real estate and into agricultural loans.
These actions enabled them to consistently maintain higher loan pricing.
As a result of more effective loan management, higher performers incurred lower net loan charge offs – only
about one-quarter of 1 percent during the recession in contrast to more than 2 percent for low performers
(Figure 4). Also, loan loss provision expense remained below 1 percent for the high-performing banks even at its
peak in 2010 while the low-performing banks incurred more than double the percentage of loan loss provision
expense.
6
7. Financial Profiles of High-performing
Community Banks
Because of higher loan yields (and numerous positive effects of having clean loan portfolios), the higher-
performing community banks were able to maintain net interest margins 50 − 100 basis points higher than
lower-performing community bank peers (Figure 5).
How community banks managed their deposit portfolios was also a key differentiator between high performers
and others. As the recession hit, high performers more quickly shifted their mix of deposits into core deposits
and demand deposit account (DDA) balances. This effective management of deposit interest expense helped
them maintain an impressive NIM in the face of declining loan yields.
As you can see in the Operating Expense Ratio (operating expenses divided by average earning assets) chart on
the right side of Figure 5, high performers did a much better job countering the downward trend in net interest
margin and fee income by managing operating expenses. As the recession took hold in 2008, they did an
exemplary job of moving quickly to keep expenses under control. In contrast, the operating expense ratios of the
low performers climbed as the economy declined.
7
8. Financial Profiles of High-performing
Community Banks
Examination of the 2011 operating expense ratios of the three bank segments shows the high performers
surpassing their peers across the board in managing expenses (Figure 6). While the differences in the Salary &
Benefits and Occupancy & Fixed Assets expenses of the three segments seem modest at first glance, basis points
matter significantly in banking. The typical community bank in our analysis had earning assets of approximately
$200 million. At this asset level, the 16-basis-point difference between the high- and mid-performing banks in
Salary & Benefits and Occupancy & Fixed Assets amounts to a $320,000 expense advantage for the high-
performing banks.
The category of Other Operating Expenses is where high-performing banks gained their clearest advantage. This
category includes items such as data processing, telecommunications, marketing and consulting and advisory
expenses. The high-performing banks excelled in managing all of them. But expenses associated with loan
collections and real estate owned account for the biggest difference between the segments in this “Other”
category. Because high-performing banks maintained significantly lower loan delinquencies and charge offs,
they gained additional operating expense advantages.
What’s becomes clear in examining a variety of metrics that separate high performers from their peers is that
high-performing banks managed the bank for growth and did not simply try to save their way to prosperity. For
example, from 2004 − 2011 high-performing banks experienced an average annual increase in operating
expenses of 3.9 percent while operating expense of the mid-performing banks grew by an average of 3.1
percent.
8
9. Financial Profiles of High-performing
Community Banks
A Culture of Performance
How did high-performing community banks consistently accomplish these impressive results? Clearly these
companies didn’t perform this well by accident because they performed well across all of the key financial
metrics we analyzed. We can assume they have strong leadership and performance-based cultures. But the
opportunity we’ve had in recent months to speak with executives from high-performing community banks
within the FIS client base provides additional insights into key drivers of high performance. Such banks are very
good at:
Focusing the entire organization on a highly visible and easy-to-understand strategy
Driving accountability throughout the organization
Simultaneously managing multiple challenges
Formulating timely reactions to changes in customers and competition
Introducing innovation in response to market demand
Managing operations that are flexible and able to respond to change quickly
Maintaining high levels of quality control with less variability in processes.
They leveraged these skill sets to overcome persistent challenges facing community banking organizations
during the past several years. We can all learn from these institutions.
In Summary: The Metrics that Matter
Our analysis revealed that there is not just one “secret ingredient” to success, but instead, a whole host of
actions that differentiate high-performing community banks from the rest of the pack (see Figure 7).
9
10. Financial Profiles of High-performing
Community Banks
Metrics associated with credit quality, loan portfolio composition and loan yield were the most predictive of a
community bank’s overall profitability (as measured by ROA). While certainly not a surprise given the pressures
on the U.S. economy and real estate markets, high-performing banks were not over-weighted in real estate-
secured loans during the past eight years and, instead, tended to have higher concentrations in commercial and
industrial, agriculture and consumer loans. And critically, the overall greater diversity of their loan portfolios
helped them to maintain higher loan pricing.
Our analysis repeatedly revealed that high-performing banks were also more nimble and flexible than the
competition. As it relates to loans, they moved quickly to shift and rebalance their loan portfolios out of riskier
loans as recession hit. We saw repeated evidence that this capability of forming timely reactions to changes in
market conditions extended to other parts of their operations as well.
Metrics associated with operating efficiency were also predictive of community bank performance. High-
performing community banks were able to strike a balance between revenue/profit generation and expense
management. The high performers did not operate to save their way to prosperity, yet demonstrated consistent
advantages in Salary & Benefit and Occupancy & Fixed Assets expenses and separated themselves from the pack
tremendously through lower Other Operating Expenses due to their superior credit quality.
Fee income generation has been a significant industry challenge, and this was very evident in our analysis.
Nearly all of the community banks in our analysis experienced either declining fee income, or at a minimum
declining fee income growth rates. In the early years of our analysis (2004 – 2006), the data revealed that a
bank’s strength in fee income generation was highly predictive of profitability. But this predictive power
dropped off significantly as the recession and new regulations took hold and community banks with a greater
reliance on revenue from net interest margin over fees tended to perform better. However, fee income
generation was and will always remain essential. Relative to their peers, the high-performing community banks
had higher concentrations of fee income in not only service charges on deposit accounts but also fees from
insurance-related businesses.
Interest expense is the final category of metric where we saw some, albeit lower, predictive power. The high-
performing community banks consistently demonstrated slightly lower interest expense than their peers. Thus
yield on loans, rather than interest expense, was the key factor that enabled the high performers to generate
superior net interest margins. But in terms of interest expense, the real differences emerged as we dug deeper
into the mix of deposit funding. High-performing banks not only had a higher mix of core and transactional
deposits and a lower mix of time, jumbo and brokered deposits, they also moved more quickly and shifted their
mix of deposits into core and DDA balances noticeably as the recession hit.
This research brief was written to focus on the financial metrics of high-performing banks pre- and post-
recession to determine the levers that differentiate the elite performers and to uncover lessons that can be
applied to other community banks. Please feel free to contact me if you have any questions regarding this
analysis or how it applies to your institution.
10
11. Financial Profiles of High-performing
Community Banks
About the Research
Financial Profiles of High-performing Community Banks is based on analysis of FIS database derived from eight
years of bank Call Report data compiled by SNL Financial. The FIS database includes records for 4,380 banks with
assets less than $1 billion. We divided community banks into three tiers of performance – high, mid and low
performing – based on return on assets. The high performers comprise approximately the top 10 percent of
community banks based on their ROA, the mid performers represent about the middle 80 percent and the low
performers represent about the bottom 10 percent. Divisions were made based on the distances of individual
banks’ ROAs from the average ROA.
The study’s primary objective was to determine the characteristics of and commonalties among high-performing
community banks and if and how those characteristics changed among the time periods prior to the recession,
during the recession and post-recession.
About FIS
FIS delivers banking and payments technologies to more than 14,000 financial institutions and businesses in
over 100 countries worldwide. FIS provides financial institution core processing, and card issuer and transaction
processing services, including the NYCE® Payments Network. FIS maintains processing and technology
relationships with 40 of the top 50 global banks, including nine of the top 10. FIS is a member of Standard &
Poor's (S&P) 500® Index and is currently ranked No. 1 in the annual FinTech 100 rankings. Headquartered in
Jacksonville, Fla., FIS employs more than 32,000 on a global basis. FIS is listed on the New York Stock Exchange
under the “FIS” ticker symbol. For more information about FIS see www.fisglobal.com.
Financial Profiles of High-performing Community Banks was authored by Paul McAdam, SVP of Research and
Thought Leadership at FIS.
Please contact the author if you have questions about the research or how the results apply to your financial
institution.
Paul McAdam
Ph: 708.449.7743
paul.mcadam@fisglobal.com
11