Category: Loan Growth

Today’s title, inspired by my uncle who founded and continues to run Computech, a very successful technology firm here in the D.C. area, is both simple and profound.  I believe the three points shared below reflect the same spirit of craftsmanship and professionalism he built his firm on.  Working smarter, building better, doing it right the first time… themes I picked up this week and thought to share below.  And yes, #LetsGoBruins!

(1) One of the work questions most frequently asked of me at conference cocktail parties and in social settings concerns the future of banks. So the fact that the St. Louis Fed published a study that examines banks that thrived during the recent financial crisis proved irresistible.  After all, “those who cannot remember the past are condemned to repeat it.”  I’ve alluded to this research in a previous post; for me, it is interesting to note that some of the most profitable banks, in the short-term, are not necessarily the best banks.  Instead, the so-called “best banks,” in my opinion, get creative in offering new products. They watch closely what is working for other banks in and out of their own market. They watch what products and services are being brought to market by vendors to our industry.  This survey, in a broad sense, backs this up.

(2) In the St. Louis Fed’s survey, the authors conclude that there is a strong future for well-run community banks.  In their estimation, banks that prosper will be the ones with strong commitments to maintaining risk control standards in all economic environment.  This aligns neatly with most discussions about a board’s role and responsibilities. Indeed, one of the critical functions of any bank’s board of directors is the regular assessment of their activities and those of the bank’s management in terms of driving value. As C.K. Lee from Commerce Street Capital explains, this may be defined as value for shareholders, value for the community and the perception of strength among the bank’s customers and regulators. Over the last few months on BankDirector.com, he’s explored the concept of tangible book value (TBV) and its relationship with bank valuation. He also looked at internal steps, such as promoting efficiency and growing loans, which boards could take to drive more revenue to the bottom line and drive bank value.  The “final installment” of his series is up — and if you are interested in two additional factors that drive value in both earnings production and market perception, a good read.

(3) Over the last few weeks, I have shared my take on a few issues near and dear to audit committee members.  These committee members have direct responsibility to oversee the integrity of a company’s financial statements and to hire, compensate and oversee the bank’s external auditor.  So on the heels of Deloitte’s trouble with New York’s Department of Financial Services comes this week’s final point.  In case you missed it, the state’s regulator cracked down on Deloitte’s financial-consulting business, essentially banning them from consulting with state-regulated banks for the next year.  Big enough news that the American Banker opined “it will send waves through its bank customers, competitors and federal regulators.  Banks will have to scrutinize their relationships with consultants, brace for the possibility of a wave of regulation of consulting practices and have backup plans in case a key advisor ever receives a punishment like the one New York state dealt Deloitte.”  As many begin to re-examine the relationships they have with outside vendors, here is a helpful evaluation assessment tool offered by the Center for Audit Quality, a nonpartisan, nonprofit group based here in Washington, D.C.  While specific to an audit committees needs, the sample questions highlight some of the more important areas for consideration.  As with CK Lee’s articles on building value, this form is worth a look if you’re considering the strength of your vendor relationships.

Aloha Friday!