Reduce liability for losses on commercial accounts by adhering to four requirements.
Help for Today, Hope for Tomorrow
With a theme of “Bank on the Future,” the Missouri Bankers Association set an optimistic tone for its annual convention, which was June 6–8 at The Lodge of Four Seasons. In his overview of state-chartered banks, Rich Weaver, commissioner of finance at the Missouri Division of Finance, said things are getting better. Forty-three percent of state-chartered banks enlarged their loan portfolios last year. The largest growth was in C&I at 36 percent and the second largest was commercial real estate at 23 percent, which Weaver said surprised him given the current economic environment.
Weaver said other real estate is still high and continues to be a struggle for state-chartered banks, but earnings are coming back with a return on assets at 0.98 percent compared to 0.73 percent in 2011. Problem banks in Missouri are also down considerably, with 58 banks on the list today from a peak of 77 banks in August 2011.
In a session on repackaging deposit accounts, Lynn David, president of Community Bank Consulting Services in St. Louis, offered suggestions on how to save money and increase fee income. He told attendees to encourage debit use so customers do not use checks, which are more expensive to process. To do this, he suggested charging people a debit card fee when they do not use it a certain number of times in a month — as opposed to the failed Bank of America approach of charging for just having a debit card at all.
Similarly, David said if a bank has not been charging ATM fees, start by charging $1 for using a different ATM after so many withdrawals. “It will change behaviors,” David said.
To reduce expenses, David also said to examine postage. “What do you mail that you don’t need to?” he asked. “Envelopes are one of the most expensive expenses.”
He suggested combining quarterly savings statements with checking statements instead of mailing them separately.
Another potential savings spot is Internet bill pay. David said most banks offer this service for free, but what does it cost the bank? “How many customers actually use it?” he asked. “If a customer has not used it for 90 days, turn it off.” He also said most banks have about 50 percent of their customers using Internet banking, but the goal should be 70 percent.
David also provided examples of how banks might want to structure and price their various account options. For personal accounts, such as free checking, he believes e-statements should be a requirement. If the customer wants a paper statement, it should cost $2 and if the customer wants a paper statement with check images, it should cost $3. For personal interest checking accounts, he suggested a $2,500 minimum balance to avoid a $7.50 monthly service charge. Again, he said e-statements should be a requirement. A paper statement with check images should cost $2 and he also suggested charging 25 cents per check written over 20 per month.
For a free business checking account, David said charge $2 for a paper statement, $3 for a paper statement with check images and 25 cents per item over 100 total debits, credits and deposited items.
“Examine your personal checking accounts,” David said, “because a lot of small businesses are using personal checking accounts for business purposes.” For example, if someone has 86 deposits in a month, it might be a business and needs to moved into the correct type of account.
During the convention, the MBA announced it has created an additional compliance service. Besides its traditional compliance education, in-bank training, reviews and publications, MBA Compliance Services is expanding to help its members meet the compliance challenges with the introduction of MBA Compliance Force packages. Two new packages are available that let MBA members bundle some of the new compliance services offerings and receive discounts on other publications, reviews and education. The annual subscription fees are per bank charter.
Kari English is senior editor of BankNews.
Copyright (c) July 2012 by BankNews Media