Can Banking Be Right-Sized?

Size matters?
Size matters?

Although its been said many times, many ways, I can’t tell you what size really matters in banking today. Pick a number…  $500M in asset size?  $1Bn?  $9.9Bn?  Over $50Bn?  7,000 institutions?  6,000?  3,000? Less?  As a follow-up to last week’s guest post by Bank Director magazine’s editor, I spent some extra time thinking about where we are heading as an industry — and the size and types of banks + bankers leading the way.  What follows are three things I’m thinking about to wrap up the week that shows that size matters; albeit, in different ways.

(1) Not a single de novo institution has been approved in more than two years (astonishing considering 144 were chartered in 2007 alone) and the banking industry is consolidating.  Indeed, the number of federally insured institutions nationwide shrank to 6,891 in the third quarter after this summer — falling below 7,000 for the first time since federal regulators began keeping track in 1934, according to the FDIC.  Per the Wall Street Journal, the decline in bank numbers, from a peak of more than 18,000, has come almost entirely in the form of exits by banks with less than $100 million in assets, with the bulk occurring between 1984 and 2011.   I’ve written about how we are “over-capacity;” however, an article on Slate.com takes things to an entirely different level.  In America’s Microbank Problem, Matthew Yglesias posits America has “far far far too many banks…. (that) are poorly managed… can’t be regulated… can’t compete.”  He says we should want the US Bankcorps and PNCs and Fifth Thirds and BancWests of America to swallow up local franchises and expand their geographical footprints.  He sees the ideal being “effective competition in which dozens rather than thousands of banks exist, and they all actually compete with each other on a national or regional basis rather than carving up turf.”  While I have no problem with fewer banks, limiting competition to just the super regional and megabanks is a terrible thought.  Heck, the CEO of Wells Fargo & Co. wrote in the American Banker this August how vital community banks are to the economy.  So let me cite a rebuttal to Slate’s piece by American Banker’s Washington bureau chief Rob Blackwell.  Rob, I’m 100% with you when you write “small banks’ alleged demise is something to resist, not cheer on” and feel compelled to re-share Mr. Stumpf’s opinion:

…we need well-managed, well-regulated banks of all sizes—large and small—to meet our nation’s diverse financial needs, and we need public policies that don’t unintentionally damage the very financial ecosystem they should keep healthy.

(2) To the consolidation side of things, a recent Bank Director M&A survey found 76% of respondents expect to see more bank deals in 2014.  Within this merger mix exists strategic affiliations.  While the term “merger of equals” is a misnomer, there are real benefits of a strategic partnership when two like-sized banks join forces.  Case-in-point, the recent merger between Rockville Bank and United Bank (which will take the United name).  Once completed, the institution will have about $5 billion in assets and be the 4th largest bank in the Springfield, MA and Hartford, CT metropolitan area.  According to a piece authored by  Jim Kinney in The Republican, United Bank’s $369 million merger with the parent of Connecticut’s Rockville Bank “is a ticket to the big leagues for both banks.”  In my opinion, banks today have a responsibility to invest in their businesses so that they can offer the latest products and services while at the same time keep expenses in check to better weather this low interest rate environment.  United Bank’s president-to-be echoed this sentiment.  He shared their “dual mandate in the banking industry these days is to become more efficient, because it is a tough interest rate environment, and continue to grow… But it is hard to grow and save money because you have to spend money to make money.”   Putting together two banks of similar financial size gives the combined entity a better chance to this end.

(3) In terms of growth — and by extension, innovation — I see new mobile offerings, like those from MoneyDesktop, adding real value to community banks nationwide.  This Utah-based tech firm provides banks and credit unions with a personal financial management solution that integrates directly with online banking platforms.  As they share, “account holders are changing. There is an ongoing shift away from traditional brick & mortar banking. Technology is providing better ways for account holders to interact with their money, and with financial institutions.”  By working directly with online banking, core and payment platforms, MoneyDesktop positions institutions and payment providers as financial hubs and offers marketing tools that dramatically impact loan volume, user acquisition and wallet-share.  As technology levels the playing field upon which institutions compete, banks that leverage account holder banking information to solidify relationships bodes well for bank and customer alike.

Aloha Friday!

Too Big to Care?

HSBC_4C83In case you missed it… Brett King — the author of Bank 3.0, CEO of Moven and speaker at this year’s Growth Conference — shared some pretty head-turning stuff this weekend in the Huffington Post.  When HSBC Closes Your Bank Account Without Telling You provides his blow-by-blow after the bank inexplicably cancelled his small business account without notice, cause or remorse.  From where I sit, this is a stark reminder of the risks inherent to putting policy before people and taking the human side of banking out of “customer service.”  I’ll spare you further commentary and simply suggest a read of Brett’s piece that chronicles his misfortune.  

To Zig or Zag

While President Obama’s nomination of Federal Reserve Vice Chair Janet Yellen to lead the central bank garnered significant attention this week, the twittersphere was ablaze with news on emerging payments and financial services.  Personally, I focused a lot of my time on retail banking, advertising and marketing stories — a pleasant diversion from the political showdown here in Washington.  Accordingly, this week’s column highlights the creative side of building relationships and engaging with potential customers.  Please let me know what you think via Twitter (@aldominick) or by commenting below.

(1) How Do You Introduce a Mobile-Only Bank? With a Mobile Orchestra, Of Course.  Now, I realize most banks in the U.S. have nowhere near the budget needed for an advertisement like this. Still, BNP Paribas‘ “Hello Bank!” — which claims to be Europe’s first fully digital mobile bank — pulls off “a smart orchestra stunt.” According to AdAge, “the campaign brought together the talents from the musical and tech world for a one-of-a-kind performance by the orchestra that showed what you could do with just your mobile phone.”  Taped during a performance in Prague, the Czech National Symphony Orchestra’s 60 musicians put aside their instruments for a special performance of “Carmen.”  Take a look:

(2) From your ears to your eyes, a test of your social media savvy: #PACYOURBAGS. Do you get the hashtag?  Here’s a hint: this is a promotion run by Bank of the West (a wholly owned subsidiary of BNP Paribas).  Still confused?  While many still wrestle with a social media strategy, the San Francisco-based bank has taken to Instagram and Facebook to offer exclusive Pac-12 content — including news, events and videos — to better engage with current and potential customers under this hashtag.

Bank of the West hashtag

Visit their Facebook page and you’ll be invited to “capture any great moments from this week’s college football games… Tag them with #PACYOURBAGS on Instagram to enter and you could win $250 and a trip for two to the Rose Bowl Stadium on 1/1/14!”  Dare I say, #Cool.

(3) From Prague to the Pac-12, we’ve covered a lot in a short amount of time.  To wrap things up, let me share a story closer to home.  This one involves a few plucky upstarts taking on the biggest of the big.  No, this isn’t a tale of a community bank competing head on with Bank of America; rather, a link to an article that shows multiple startups trying to disrupt various sectors within the consumer goods industry.  Much like their BofA and Wells Fargo brethren, P&G and Unilever “have scale but are under constant assault from savvy upstarts.”  Yes, I’m drawing a parallel between the razor blades you might find in your bathroom to the battle for bank customers vis-a-vis “How Tiny Startups Like Hello and 800Razors Are Stealing Share From CPG Giants.” The premise: “smaller brands’ ability to break through goes to digital disruption in media and retailing.”  An interesting parallel, especially for those bankers willing “to zig away from the strategic and creative zags of category titans.”

Aloha Friday!

Caveat emptor (with a banking spin)

Kelsey, Jake, Mika and Katy outside our D.C. offices
Kelsey, Jake, Mika and Katy outside our D.C. offices

I had the pleasure of welcoming two new members to Bank Director earlier this week… Jake Massey and Katy Prejeant joined our team and both have set up shop in our Nashville offices.  As you can see, we invited them east to spend some time in D.C. with our Associate Publisher (Kelsey Weaver), SVP (Mika Moser) and me.  With the five of us huddled around a table on Monday and Tuesday, my focus was admittedly more internally focused then normal.  What follows, however, are three things I subsequently heard, discussed and find myself thinking about as the week wraps up.

(1) Politico shared the opinions of Chris Dodd (Connecticut’s former senator) and Barney Frank (a former congressman from Massachusetts) in an op-ed entitled “Pulling the Plug on Failed Financial Institutions.” In it, the two contend that their infamous financial reform legislation ends forever the ability of the U.S. government to provide support to failing financial companies.  “The Dodd-Frank Act is clear: Not only is there no legal authority to use public money to keep a failing entity in business, the law forbids it,” they write.  While there are parts of their bill that are potentially helpful, “on the bigger picture – whether too-big-to-fail financial institutions still benefit from implicit government subsidies and a high probability of explicit bailouts,” the former Chief Economist of the IMF respectfully disagrees with duo.  Indeed, on the NY Times Economix blog, Simon Johnson writes he feels this way — and is not alone.  Case-in-point, he highlights a point Fed Chairman Bernanke made in response to recent questioning from Senator Elizabeth Warren.  Essentially, Bernanke “confirmed that credit markets still believed the government stands behind big banks.” A fascinating juxtaposition of perspectives courtesy of Politico and the NY Times on our biggest financial institutions.

(2) Last week, Davis and Henderson (D+H) announced it was buying Harland Financial Solutions.  American Banker subsequently ran an interesting article appropriately named “Your Tech Vendor’s Been Sold — What Do You Do Now?” (*subscription required).  While not so much a blueprint as an overview, take note that “regulators are pressing banks to complete thorough due diligence on third-party vendors. But things can get complicated by consolidation of technology firms.”  I wrote about this after our annual Bank Audit Committee conference; albeit, with an eye towards evaluating your external auditor.  The same principles apply here, and a separate article on AB identifies several key components of IT contracts that need extra attention.  Having worked for an IT company from ’05 to ’10, I do understand the challenges they have as services and tools providers in terms of pricing and structuring mutually beneficial contracts.  I do wonder how thoroughly bank executives consider strategic and risky technology plans.  Sure, the expense side can be calculated.  However, this second piece makes clear that “many smaller banks fail to think about exit strategies when negotiating technology contracts.”  Caveat emptor…

(3) Leaving the Latin, but not learning, aside, my final point goes to a new training program spearheaded by our very talented Editor, Jack Milligan.  Now, its been said that you rarely see a strong board with a weak bank — or a strong bank with a weak board.  So as part of our commitment to building stronger banks by building stronger boards, we introduced the Board Training Program yesterday afternoon.

This is a comprehensive and board-focused educational platform developed by a faculty of industry experts.  Take a look and listen to Jack as he explains how we will cover such important topics as the role of the board, risk management, key audit, compensation and governance issues, and advice on growing the bank. 

Aloha Friday!

What you learn at a puppet show

Hank Williams "walking" the red carpet in Nashville

I wrapped up a fairly intense period of travel with a day trip to NYC on Monday and a subsequent overnight in Nashville on Tuesday & Wednesday. While in the Music City, our Chairman invited me to join him at a puppet festival (yes, you read that right). The show, a musical chronicle of the history of country music, benefitted the Nashville Public Library Foundation and the Country Music Hall of Fame. Laugh if you will, but I will tell you, it was amazingly creative. As I mingled with various benefactors of both institutions, I found myself engaged in conversation with the former managing partner at Bass, Berry & Sims. Having led one of the preeminent law firms in the Southeast, his perspective on how dramatically the legal profession has changed in the last fifteen years struck a nerve. The parallels between his profession and the banking space were immediately apparent. So with Patsy Cline playing in the background, we talked about the future of banking, professional services firms and relationship building in general. As we did, I made a mental note to share three thoughts from this week that underscore how things continue to change in our classically conservative industry.

(1) First Republic’s founder and CEO, Jim Herbert, shared some of his Monday morning with me while I was in NYC. Jim founded the San Francisco-based bank in 1985, sold it to Merrill Lynch in 2007, took it private through a management-led buyout in July 2010 after Merrill was acquired by Bank of America, then took it public again this past December through an IPO. For those in the know, First Republic is one of this country’s great banking stories. Not only is it solely focused on organic growth, it’s also solely focused on private banking. While my conversation with Jim was off-the-record, I left his office convinced its the smarts within, not the size of, a bank that will separate the have’s from the have not’s in the years ahead. Clearly, as new regulations and slim profit margins challenge the banking industry, the skills and backgrounds of the employees who work in banking must change.

(2) Speaking of successful banks that have successfully navigated recent challenges… KeyCorp’s Chief Risk Officer, Bill Hartman, joined us last week for Bank Director’s annual Bank Audit Committee Conference in Chicago. Bill is responsible for the bank’s risk management functions, including credit, market, compliance and operational risk, as well as portfolio management, quantitative analytics and asset recovery activities. While I shared some thoughts about that program last week, I thought to elaborate on how KeyCorp divides the roles and responsibilities of its Audit and Risk Committees. Some still think you “retire” to the board; as he showed, that is definitely not the case – especially not at an institution that counts 2 million customers, 15,000 employees and assets of $89 Bn. In terms of Key’s Audit Committee, members oversee Internal Audit, appoint independent auditors and meet with the Chief Risk Officer, Chief Risk Review Officer, and of course, for financial reporting, the CFO. I thought it was interesting to note their Audit Committee met 14 times in 2012 — twice as often as the institution’s Risk Committee convened. With many smaller banks considering the creation of such a committee, let me share the focus of their Risk Committee. Strategically, it is responsible for:

  • Stress testing policy;
  • Dividend and share repurchases;
  • Modeling risk policy;
  • Asset and liability management; and
  • Setting tolerances, key risk indicators and early warning indicators

For those thinking about introducing a Risk Committee into their bank, take a look at what some of our speakers shared leading up to last week’s Audit Committee conference for inspiration.  For a recap of the event, our editor shares his thoughts in today’s Postcard from the Bank Audit Committee Conference.

(3) Yesterday, I was pleased to learn that ConnectOne’s CEO, Frank Sorrentino, agreed to participate in our annual Bank Executive & Board Compensation Conference in November. In addition to being one of the more active bankers I follow on Twitter, I’ve written about his bank going public in a previous post. Today, it’s a WSJ piece that shows U.S. regulators grilling banks over lending standards and “warning them about mounting risks in business loans” that has me citing the NJ-based bank. This particular article quotes the CEO of the Englewood Cliffs, N.J. bank in terms of lending standards (yes, a subscription is required). He reveals that regulators recently asked what he is doing to ensure he isn’t endangering the bank by making risky loans. His response: “the bank is trying to offset the lower revenue from low-interest-rate commercial loans by cutting expenses.” While I get the need for oversight, I do wonder how far the regulatory pendulum will continue to swing left before sanity/reality sets in at the CFPB, FDIC, OCC, etc. I’ll stop before I say something I regret, but do want to at least encourage a Twitter follow of Frank and his “Banking on Main Street” blog.

Aloha Friday!

Swimming without a bathing suit?

A full house in Chicago
A full house in Chicago

A busy week in Chicago… one highlighted by Bank Director’s annual Bank Audit Committee at the JW Marriott that kicked off on Wednesday morning and wrapped up about a few hours ago. For those that missed the event, today’s title comes from a conversation I had with the CEO of Fifth Third before he took the stage as our keynote speaker. Without going into too much detail, it refers to a line favored by our former publisher (and head of the FDIC) Bill Seidman. At conferences like this one, Bill was fond of saying when times are good, no one sees what is happening under water. But when things get tough and the tide goes out, well, you see who has been swimming without a bathing suit. In that spirit, what follows are three things I heard while hosting 350+ men and women, an audience representing 150 banks from 38 states.

(1) To kick off the conference, we invited the head of Hovde Financial to present on “Navigating Complex Financial, Strategic and Regulatory Challenges.” While we welcomed attendees from institutions as large as SunTrust, Fifth Third and KeyCorp, Steve Hovde’s presentation made clear that while larger banks like these continue to increase in size, many smaller community banks are fighting for survival in today’s regulatory and low-interest rate environment. Case-in-point, mobile banking technology is already in place at larger banks, fewer options are available to smaller banks to replace declining fee revenue (which could offset declines in net interest margins) and increased regulatory burdens favor large banks with economies of scale.

All of this suggests M&A should be hot and heavy. However, Steve pointed out that 2013 has not started out strong from a deal volume standpoint. In fact, only 59 deals were announced through April; annualized, this will result in significantly less deals than in 2012. Naturally, this leads many to think about building through more organic means.  To this end, he suggests that bank boards and management teams focus on questions like:

  • Is adequate organic growth even available today?
  • Are branches in urban markets more important than rural markets?
  • How much expense base would need to be added to fund the growth compared to the revenue generated by new loans?
  • Are we better off deepening penetration of existing markets or expanding physical premises into neighboring markets or both?
  • What steps can we take to enhance web and mobile platforms?

(2) In the spirit of asking questions like these, it strikes me that everyone has something to learn as we come through one of the deepest recessions in history. As businesses and regulatory agencies debate what could have been done differently, everyone is looking for an answer to avoid the next one, or at least, minimize its impact. Clearly, as directors and officers search for ways to manage future risks, they need to understand how to work together without impeding the organizations’ efficiency of operations while preparing for unexpected events.

Accordingly, we opened this morning with a session to explore this unique balance of corporate governance. The session included Bill Knibloe, a Partner at Crowe Horwath, Bill Hartmann, the Chief Risk Officer at KeyCorp and Ray Underwood, the Bank Risk Committee Chairman at Union Savings Bank. Together, they emphasized the need for both management and the board to understand current initiatives, future initiatives and various risks embedded in each to design plans for various oversight roles. For me, “plan to manage, not eliminate” stuck out in their comments.  If you were with us in Chicago, I wonder what was yours?

(3) Think about this: ­­­­­­­­­­­­­­it might be easier and safer today to rob banks with a computer than with a gun. While banks design their internal controls to help mitigate risk, our final session of the day looked at how an audit committee needs to properly address cyber risk as more and more attempt to attack an institution through the web. Here’s a link to a piece authored by our Managing Editor, Naomi Snyder, entitled Five questions to ask about cyber security; short, sweet and to the point. I hope to have more on this topic early next week as it kept the room full (I took the picture above just a few minutes before the close). Until next week…

Aloha Friday!

A grown up swinging town

San Francisco, CA

I spent the last few days in San Francisco meeting with various companies (think BlackRock, Fortress, Raymond James, Pillsbury, Manatt Phelps, etc.).  Those conversations caught me up on various trends impacting banks on our west coast. As I do each Friday, what follows are three things I heard, read and learned this week — with a big nod towards the bear republic.  Oh yes, thanks to old blue eyes for inspiring today’s title.  Sinatra certainly knew what he was talking about when it came to the bay area.

(1) Every bank has a story, and the old Farmers National Gold Bank (aka the Bank of the West) certainly has a rich one.  Begun in 1874, it was one of just ten banks nationwide authorized to issue paper currency backed by gold reserves.  Long a favorite of mine thanks to an academic / St Louis connection with their CEO, I had the opportunity to sit down with one of their board members on Tuesday and hear more about the $60Bn+ subsidiary of BNP Paribas.  As I reflect on that conversation, it strikes me that the bank’s growth reflects smart credit underwriting, a diversified loan portfolio and careful risk management. Yes, there have been strategic acquisitions (for example, United California Bank in ‘02, Community First Bank in Fargo in ’04 and Commercial Federal Bank in Omaha in ’05); however, their growth has been more organic of late — fitting for a “community bank” that has grown to more than 700 branch banking and commercial office locations in 19 Western and Midwestern states.  While their geographic footprint continues to grow, take a look at their social media presence. In my opinion, it’s one of the best in the banking space.

(2) From Bank of the West to US Bancorp, First Republic to BofA, bank branches dominate the streets of San Francisco.  As competition for business intensifies, I thought back to an article written by Robin Sidel (Regulatory Move Inhibits Bank Deals) that ran in last week’s Wall Street Journal.  I’m a big fan of her writing, and found myself re-reading her piece on a move by regulators “that put the biggest bank merger of 2012 on ice (and) is sending a chill through midsize financial institutions.”  Her story focuses on M&T, the nation’s 16th-largest bank (and like Bank of the West, operates more than 700 branches) and its $3.8 billion purchase of Hudson City Bancorp.  According to Robin, the deal that was announced last August is on hold after the Federal Reserve raised concerns about M&T’s anti-money-laundering program.  The fallout? Since the Fed’s decision, CEOs of other regional banks “have shelved internal discussions about potential transactions.”  For those interested in bank M&A, this article comes highly recommended.

(3) So if certain deals aren’t going to be considered (let alone closed), it naturally begs the question about how how and where banks can add new customers and increase “share of wallet” to improve profitability.  I brought this up in a conversation with Microsoft on Wednesday and found myself nodding in agreement that financial institutions should “audit their customer knowledge capabilities” to provide an optimal experience.  “Customer centricity” is a big focus for the tech giant, and it is interesting to consider how things like marketing, credit management and compliance might benefit from a well-designed strategy for managing customer knowledge.  I know some smaller banks are doing this (Avenue Bank in Nashville comes to mind) and I’m curious to hear how others might be taking advantage of tools and techniques to out-smart the BofA’s of the world.  If you know of some interesting stories, please feel free to weigh in below.

Aloha Friday!

Before I pack my bags

DC food trucks got some business...
By staying local, a few DC food trucks picked up extra business this week…

For the first time in nearly two months, I did not leave the friendly confines of Washington, D.C. for work.  Next week, AA gets my business back with a trip to San Francisco — followed by one the following week to Chicago and the next, to New York and Nashville.  Yes, I anticipate sharing a number of stories in the weeks ahead, but these three had me excited to post today.  As always, my #FridayFollow-inspired post on things I heard, learned or discussed that relate to financial organizations.

(1) File this one under “things that make you go hmmm.”  Earlier this week, the American Banker published an interesting piece entitled “Fed Reveals Secret Lessons of Successful Small Banks.”  As I’ve written in multiple M&A-focused posts, many investment banks  predicted a wave of consolidation among community banks after the financial crisis hit while positing that financial institutions need at least $1 billion of assets to compete/remain relevant.  This piece, however, cites recent St. Louis Fed research that shows the asset range with the most “thrivers” — the term the StL Fed used to describe remarkable banks — was $100 million to $300 million.  As the American Banker notes, much of the research stemming from the crisis focused on the mistakes banks had made, so the St. Louis Fed decided to take the opposite approach.  If you have a subscription to AB, their recap is worth a read.

(2) Disruptive technologies were front & center a few weeks ago in New Orleans at our annual Growth Conference.  Yesterday afternoon, McKinsey put out “Disruptive technologies: Advances that will transform life, business, and the global economy.”  While not specific to our industry, the fact that the “mobile internet” placed first should reinforce the conversations taking place in bank boardrooms today.  According to the authors, 4.3 billion people are yet to be connected to the Internet, with many expected to first engage through mobile devices.  Considering the six-fold growth in sales of smartphones and tablets since launch of iPhone in 2007, well, you can see why I’m bullish on banks getting social and enhancing their mobile offerings ASAP.

(3) Finally, for those quants looking for a good, non-Krugman economics piece, look no further than the NY Times’s “Economix” blog.  The most recent post: How a Big-Bank Failure Could Unfold.  In the piece, the authors consider what could happen if there were a hypothetical problem at a major international financial conglomerate such as Deutsche Bank or Citigroup.  As they note, “defenders of big banks are adamant that we have fixed the problem of too big to fail.”  This entry considers the alternative.  So for those with a desire to stay up late during this Memorial Day three-day weekend?  This might be a read for you.

Aloha Friday!

Do we have enough banks in the U.S.?

Pirates-baseballAs I do each Friday morning, what follows are three things I’ve learned this week that apply to the financial community.  Let me start with the inspiration for today’s title and end with that for the picture of Pittsburgh’s PNC Park above.

(1) I’ve shared ideas from KBW’s Fred Cannon in the past; let me do so again based on a note he put out this Monday (FSW No New Bank Charters) that I strongly encourage you to read.  In my opinion, Fred is at the top of his field, so when he looks at the decline in new bank charters during the last two years (to zero) and wonders if we have enough banks in place today, its a thought provoking question.  To wit:

U.S. banking is being squeezed from the top, with high levels of concentration, and from the bottom, with no new banks, creating a less dynamic financial sector.  While regulators and legislators worry about the size and concentration of the largest banks, there is an equally concerning trend on the opposite side of the bank size spectrum. There have been no new bank or thrift charters issued during the past two years. This trend stands in sharp contrast to history, with dozens to hundreds of new banks starting each year, including during years of deep recessions. The lack of new bank startups may be causing limited competition for loans for small regional businesses and builders and pushing lending outside the banking system, essentially meaning that there aren’t enough banks in the country to promote maximum economic growth. Concentration and limits on size at the top end, and the dearth of new banks at the small end, will push greater market share of banking into mid-sized banks, in our view. This is good news for profitable mid-sized banks that can take advantage of both trends.

(2) t_1368782681Switching gears to the biggest of the big, we might have to honor Jamie Dimon by making it “his” week if the amount of media coverage continues for the man.  From American Banker to Bloomberg’s Businessweek to the WSJ, not a day went by without some mention of Wall Street’s “Indispensable Man.”  With JPMorgan Chase & Co.’s annual meeting in Tampa next week, our own editor thinks it should be a doozy for Chairman and CEO Jamie Dimon and the company’s 11-member board. The country’s largest bank has come in for some withering criticism ever since it lost a reported $6 billion last year on a disastrous credit derivatives trading strategy.  Ah, trading credit derivatives… I wonder if they will soon replace collateralized debt obligations as the scorn of the American public.

(3) Finally, a tip of the cap to Mars National Bank near Pittsburgh for “tapping a native son’s ties to America’s pastime to raise its local profile.”  According to a piece in the American Banker, the $351 million-asset institution in Mars, Pa., has formed a marketing campaign around pitchman Neil Walker, 27, a second baseman for the Pittsburgh Pirates who grew up seven miles away from the bank’s headquarters.  Mars National is “among several banks that have recently turned to sports stars to build business and spur goodwill;” for those interested in examples of how smaller banks are working to build brand loyalty in their community, this is an easy read that might inspire.

Aloha Friday!

#FF with a dose of #FI

Sunset in Kona, HI
Three thoughts before the sun sets on the week…

Following the welcome of Pope Francis last week, I’m tempted to call this a slower news cycle and shorten today’s column from three points to two.  But as the sun sets on this week, who am I to short-change the spirit of this #FridayFollow-inspired post?  Especially as I heard/read/saw some pretty darn interesting things since last checking in!

  • Last week, I admitted to a bit of M&A “fatigue.”  Not so seven days later.  With the Koelmel announcement fresh in my head (it should be noted that he led the bank through a period of rapid growth beginning in ’05), I started to think about how history will judge their acquisition of HSBC’s entire upstate New York branch network.  At the time, some thought it would spark what is now a cliché: a “wave of bank consolidation.” So why think back when the purpose of this column is meant to be fresh?  From what I’ve heard (and read), branch acquisitions can present an attractive alternative to traditional M&A.  Case-in-point, a research report put out by Raymond James called Bank M&A: Activity Should Gain Steam in 2013.  While a few months old, their messages remain clear: with the “mega and super regional banks focused on expense control, many are taking a fresh look at reducing their branch networks. In turn, well positioned regional and community banks can look to branch acquisitions, which provide a low risk and cost-effective way to enter a new market or bolster an existing market.”  Not necessarily a new idea, but just as I gave props to Fred Cannon from KBW last week for perspectives like these, let me give a shout out to Anthony Polini and his equity research colleagues for consistently delivering valuable insight and information like this on a regular basis.
  • Turning from M&A to truly organic growth, I was really impressed with a piece Tom Bennett, the Chairman of the three-year old First Oklahoma Bank in Tulsa, Oklahoma, authored for BankDirector.com.  Tom’s piece, The Hidden Capital of Social Networks, introduces the idea of addressing “your equity capital needs and other performance items in your bank… (vis-a-vis) the social capital that exists in your investor group and how it can be utilized as a valuable source of strength.”  With so many CEOs and Chairmen of community banks hoping and wanting their outside directors to generate business for the bank, this piece is definitely worth a read.

Finally, a special thanks to @GilaMonster for providing her input on today’s post… I am very grateful.

Aloha Friday to all!

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