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ABA Conference Report: Finding Ways to Cut Costs and Retool for Growth

By: Bill Poquette

In more than a dozen special interest sessions at the American Bankers Association’s National Conference for Community Bankers in Phoenix recently, bankers and consultants drilled down on subjects, including cost control to offset shrinking margins and rebranding for enhanced relevance, among others.

A strong case for cost improvements was made in one session by Dave Keever, a principal with Crowe Horwath in Indianapolis. His reasons: shrinking loan and deposit margins stemming from the low-rate environment and rate competition; portfolio growth slowed by cautious customers, careful lending and a slow-growth economy; changing customers in terms of product usage, channel usage and loyalty; security and mobile technology imperatives; and rising compliance costs.

Following up with sources of operational efficiency, he advised exiting low-profit markets or businesses; channel optimization by realigning branches and ATMs and leveraging online and mobile; get more done with less work for process efficiency; get more done with fewer people; spend on technology that really helps; and review vendor relationships for potential better pricing and service.

However, Keever warned, cost savings can’t be the only strategy. It is also essential to provide customers with value and service, maintain the capacity and capability to grow and be prepared for the future, he advised.

Timothy Reimink, senior manager for Crowe Horwath in Grand Rapids, Mich., elaborated on the subject of channel optimization. Focusing on branches, he said they are evolving into places where customers can go to solve a complex financial problem, such as how to deal with an inheritance. Management should question whether the bank needs as many branches, where they should be and whether an ATM would suffice, he believes. These decisions, he suggested, should be driven by customer preference and need, and focus on deployment and location, functions and customer benefits, and staff productivity.

Reimink thinks branches will begin looking more like Edward D. Jones brokerage offices or those of independent insurance agents. Beware of new competitors, too, he warned. Wal-Mart and the U.S. Postal Service have a presence in a lot of places, he pointed out.

In another special interest session during the ABA conference, the community bankers learned that branches played a leading role at a pair of banks that elected to rebrand themselves recently. One did it to bounce back from big losses during the Great Recession; the other saw a need to generate more customers and income “to support the weight of regulation,” as the board of directors put it.

Premier Bank in Dubuque, Iowa, a de novo launched in 1998, needed to make tough decisions 10 years later in the face of declining asset quality, security and loan losses, OREO write-downs, a written agreement with regulators and a poor economic environment, explained Jeff Mozena, president and CEO.

Faced with a choice to hide or invest, Premier Bank decided to invest in brand, with a new logo, marketing plan, website, signage and ATM design. At a projected cost of $250,000, the effort generated excitement and purpose during a time of stress and uncertainty, according to Mozena. With an additional investment of $625,000, all branch lobbies were “refreshed” to enhance sales space and add digital signage. Exterior signage was redesigned to establish greater brand identity, and the facades of all branch locations were renovated.

“It was important to send a message to the community that ‘we’re OK at a bad time,” Mozena said.

Over in Connecticut, The Cooperative Bank of Cape Cod was “a respectable community bank plugging along,” in the words of John F. Fulone, chief planning and operations officer. In 2008, its world changed, and in 2010 it changed again.

This bank chose to invest, as well, in marketing to put it back on the map, in distribution to expand its footprint, and in facilities including renovating branches. As described by Fulone, it was an admired community bank with deep roots on Cape Cod, chartered in 1921, with an impeccable reputation for sound, smart business practices, measured growth and solid, consistent earnings. Research showed the bank was beloved by customers — but unknown to everyone else, according to Fulone. Hence, the need for rebranding.

Starting with the branches, the list of “must haves” included comfortable and inviting, contemporary but not modern, plenty of teller windows and Internet stations, customer seating areas similar to living rooms, adaptable to evolving banking habits and elements that are portable (i.e., teller stations convertible to Internet stations).

The rebranding also had product “must haves,” Fulone explained. These included easy to understand, easy to use online and mobile, remote deposit capture and person-to-person payments. Channel management came to mean “not either or, but all.”

The result of the rebranding, which is ongoing, is the bank positioned for growth, with a strategy to operate from a position of strength, a brand it can own and grow into, a promise that resonates with everyone and a platform it can take on the road to new locations, Fulone explained.

Next year’s ABA National Conference for Community Bankers will be Feb. 8-11 at the Boca Raton Resort and Club, Boca Raton, Fla. 

Bill Poquette is editor-in-chief of BankNews magazine.

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