Title: Revenue Ideas for the Real World: Could Your Best "New" Idea Already Be Somewhere on Your Bank's Menu?
Abstract: [ILLUSTRATION OMITTED] Many bankers find insights in reading this or that account of Apple, and how Steve Jobs and company found a way to make America crave gadgets it never knew it needed, until they were there to be had. If you are reading this on an iPad, you know well what mean. What sets banking and technology apart is that societies have needed funds storage and transfer, credit, investment, and trade finance just about forever. The how evolves, but the what, not as much. As with so much of banking, the key is how a bank applies, and promotes, the basics. Take Greene County Bancorp in upstate New York. In its annual report, Uncovering Hidden Opportunities, the company recounts how municipal banking is one of its mainstays--sufficiently so that the company formed a subsidiary devoted solely to municipal services. One of the company's muni banking officers is a third-generation volunteer firefighter. Working first with local fire districts, that officer developed the bank's financing program for fire departments into a statewide business. While serving the public interest, this community bank generates tax-free income. The five banks featured in our second annual revenue ideas report share one characteristic. They have faced the challenge of skinny spreads and other profit drains with a reemphasis on basics--sometimes by reinvigorating or reinventing activities they were already involved in, or sometimes by adapting to market opportunities. What hidden opportunities can be found under your own roof? IDEA #1: Making and selling Small Business Administration loans State Bank of Countryside, $600 million-assets, Countryside, Ill. As a Chicago-area commercial real estate lender (CRE), State Bank pretty much had our lunch handed to us in 2008-2009, says Tom Boyle, vice-chairman. As things stabilized and the bank moved further away from cleanup mode, management sought greater diversification. One successful effort over the past 18 months has been making SB A guaranteed loans, and selling the 75% guaranteed portion to investors through the SBA broker network. The bank realized this type of lending requires experienced specialists, rather than traditional bankers. It began with a single lender, who knew the business and had family ties to the SBA brokerage world. Bank and lender had some cultural adjustments to make. Some deals brought to the loan committee initially didn't fly, for example. Boyle says that while the SBA guarantee is there to give lenders confidence, we are still holding 25% of the credit. The bank, acting conservatively, prefers these loans to be subject to its mainstream credit standards. An understanding developed, and some $10 million in new credit has been brought in. During most of the time the bank has been selling guaranteed pieces, they have commanded a premium of around 15%, says Boyle. Though that's fallen somewhat, it's still profitable. In addition, nearly every deal has been a new customer. The bank requires SBA borrowers to bring all their operating accounts to Countryside, so it benefits from new deposits. The bank's relationship bankers, in turn, call on these new customers to develop even more connections. A second experienced SBA lender was hired recently, and Boyle says the new line of business has given the bank a nice return, comparable to the good days of CRE. Many deals have involved smaller hotel chains in the metro Chicago area, which gives the bank a bit of familiarity. A benefit of the SBA effort: While the bank is booking new business and building new customer relationships, it need only hold capital against the unsold portion of the loans. IDEA #2: Doubling down on home loans First State Bank of St. Charles, Mo., $263.5 million-assets. With Dodd-Frank taking shape, Executive Vice-President Luanne Cundiff says her bank stood at a crossroads. …
Publication Year: 2014
Publication Date: 2014-03-01
Language: en
Type: article
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Cited By Count: 2
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