Beyond Paperclips – Five Bank Efficiency
Priorities for 2011
Date:
Wednesday, October 27
Time:
2:00 - 3:00 pm EDT
Presenters:
•
Terence Roche, Principal
•
Eric Weikart, Senior Director
Cornerstone Advisors
Contact Us:
7272 E. Indian School Road, Suite 400
Scottsdale, AZ 85251
Tel
480.423.2030
http://ww.crnrstone.com/contact.php
Web
http://www.crnrstone.com
http://www.gonzobanker.com
Welcome to Webinar 2 of the GonzoBanker
Webinar Series. We are glad to have you with us!
The presentation will begin shortly.
For the audio portion of the program, dial
1-888-296-6500. Use Passcode 601499.
We will be recording today’s session, so to
minimize background noise,
your incoming lines
are muted.
Feel free to send comments or
questions during the session using the
chat box,
accessible from the shaded toolbox in the
bottom right corner of your screen.
Time
permitting, we will address your questions at the
end of the presentation. Questions we are unable
to get to today will receive an email response.
A link to the recording, including the PowerPoint
and audio, will be emailed to you within 48
Beyond Paperclips – Five Bank Efficiency
Priorities for 2011
Date:
Wednesday, October 27
Time:
2:00 - 3:00 pm EDT
Presenters:
•
Terence Roche, Principal
•
Eric Weikart, Senior Director
Cornerstone Advisors
Contact Us:
7272 E. Indian School Road, Suite 400
Scottsdale, AZ 85251
Tel
480.423.2030
http://ww.crnrstone.com/contact.php
Web
http://www.crnrstone.com
http://www.gonzobanker.com
Welcome to Webinar 2 of the GonzoBanker
Webinar Series. We are glad to have you with us!
The presentation will begin shortly.
For the audio portion of the program, dial
1-888-296-6500. Use Passcode 601499.
We will be recording today’s session, so to
minimize background noise,
your incoming lines
are muted.
Feel free to send comments or
questions during the session using the
chat box,
accessible from the shaded toolbox in the
bottom right corner of your screen.
Time
permitting, we will address your questions at the
end of the presentation. Questions we are unable
to get to today will receive an email response.
A link to the recording, including the PowerPoint
and audio, will be emailed to you within 48
Welcome GonzoBankers
– Today’s Topics
The importance of measurement tools and
some suggested “aim points”
How to get credibility in target efficiency goals
Where we look for efficiency – sometimes it’s
about process and systems but sometimes…….
Welcome GonzoBankers
Margin and non-interest income pressures are
placing a renewed and “non-negotiable” look at
operating expenses
To this point, new channels have added to
spending. The promised “lower cost of delivery”
hasn’t translated to the bottom line.
Branch costs have reduced only slightly (tellers)
Non-interest expense and efficiency ratios have
stayed relatively flat
How will lost non-interest income be augmented?
How will we position our bank or credit union vs.
“However beautiful
the strategy,
you should
occasionally look
at the results.”
--
Winston Churchill
The 5-Year Earnings Story at Banks
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2006
2007
2008
2009
2010
The 5-Year Earnings Story at Banks
56.10%
56.93%
57.23%
54.68%
55.18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006
2007
2008
2009
2010
Efficiency Ratio
Why Non-interest Expense is a Key
Margin is not likely to come back
Asset mix can change it somewhat
The deposit rate environment isn’t likely to get better
Non-interest income growth is cloudy
OD/NSF legislation will have a negative impact
Debit revenue may not get hit, but breakout growth is hard to
see
Some new opportunities might exist but will take a lot of focus
(e.g. wealth management)
Most banks believe charge-offs will get back to normal
levels eventually, but that won’t make up the entire ROA
loss
Most CEOs think 3% or below is the new “survive” NIE
It’s Time to Get Disciplined About Efficiency
Branches are an asset and a liability in the new
world – profitability and performance data are critical
Closing branches is not always the answer
More sales and other activities are moving to new channels
“Branch optimization” is the new goal
Focus on profitable customers vs. mere growth
Every department should be working with simple
benchmarks and KPIs
Since you asked, we’ll provide a few later
Process improvement is not a big bang, home run
project. You win bit by bit by making it a daily job of
mid-management and setting performance goals
It’s time to leverage ECM (imaging), intranet,
It Isn’t Always About Systems and Process
Generally, NIE opportunities fall into four categories
There are usually low performers within a group but the group
performs well overall
–Branches
–
Loan originators (Mortgage/Commercial)
–
Brokers
There are just too many people unless you grow production
–
Scale!
There is a third party expense that can be lowered
–
Contract review/purging
Sometimes there is a real need to change process and systems
in order to improve performance
–Lending
–
Sales
Each Business Group Needs an Efficiency
Component to its Scorecard
Branches/Call Center
Transactions per teller/month
New accounts opened per platform FTE/month
Total accounts serviced per branch platform FTE/month
Calls per call center agent/day
Lending
Mortgages funded per mortgage FTE/month
Consumer loans funded per consumer FTE/month
Small business loans funded per small business FTE/month
Commercial
Assets and/or accounts per commercial banker
Support staff per commercial banker
Analysts per commercial banker
Wealth Management
Assets/accounts managed per trust FTE (by group)
Operations/IT
Deposit accounts supported per deposit ops FTE
Wires per wire FTE/day
Loans supported per loan ops FTE (by loan type)
Cases per collector (by loan type)
Assets employees supported per IT FTE
Risk Management
Assets/employees per audit/compliance FTE
Assets/cases per fraud/BSA FTE
Admin – Assets/FTE per:
Finance FTE
Marketing FTE
HR FTE
Efficiency Targets Must Be Part of Balanced Goals
Efficiency/Profit
Competitive
Pricing
Risk Tolerance
Service/
Convenience
Value
Management
Top 5 Efficiency/Cost Improvements
1.
Commercial Process Reengineering with ECM/workflow
Many new commercial loan and renewal processes are paper-intensive with
multiple passes between lenders, support staff and underwriters
Small credits can get the same process and servicing focus as smaller, simpler
loans – look for smaller deals in the portfolios
Documents can be integrated into workflow at the beginning – if you standardize
Bookings and uploads are often manual and take too much time
Renewals can have the same level of process as new loans and may not need
to
What to measure:
Assets/accounts managed per loan officer (look at the bottom 1/3)
We see $42 million and 142 accounts as our median
Expect different goals/objectives based upon mix (C&I vs. CRE)
Analysts/support staff per lender
We see 1 analyst per 3.5 lenders
Assistants per lender
Top 5 Efficiency/Cost Improvements
2.
Small/Rural Branch Utilization
Any branch has to have 3-4 employees, but small volumes can’t keep them busy
(and you probably can’t shutter them)
Banks have started to give 1-2 repetitive jobs to smaller branches to save the
staff in admin/ops
– CIF maintenance/renewals
– Onboarding processes for busier branches
– Overflow call center calls (if telecom systems allow)
Some institutions are rotating managers between smaller branches
Hours are being curtailed if it can help staffing models
This doesn’t apply to small branches with proven growth potential/history
And, while we’re at it, our latest survey numbers show that for every 112
accounts branches open, they close 100. Getting to the bottom of that may be
the biggest retail efficiency opportunity out there.
What to measure:
Teller transactions and new accounts opened per FTE to set a base
We see 2,181 and 36 per month, respectively
Top 5 Efficiency/Cost Improvements
3.
Risk management
There has been heavy people investments in the risk area(fraud, BSA,
compliance) – this has often been in response to regulator comments
It is surprising how many people you can find spending at least some of their
time doing one of these activities if you ask
– Fraud/BSA policy, procedures
– Activity monitoring, reporting
– Customer follow-up
– Reporting
– Training
Fraud and BSA automation systems have become more affordable, especially
with ASP delivery
– Much of the work listed above is being done manually
– These systems can help banks focus on true exceptions/questions
You need to look at what you do in-house and what you outsource (audit)
What to measure:
Assets/employees per Audit FTE
Top 5 Efficiency/Cost Improvements
4.
ECM for the back office
ECM is growing in scope
– Data
– Documents
– Files
– E-mails
For all the talk about the value of this for the front line, the back office
might get the bigger pick-up
– Research is a growing issue – e-discovery can be a nightmare
– The time spent just finding images/documents can be half of the entire research/resolution job
Many of you already own the systems (or parts of them) to do this
Standard indexing, management approach is crucial
If you have it for yourselves, you have it for customer self-service too
What to measure:
Accounts per ops FTE (deposits, consumer loans, mortgage loans)
We see 4,615, 1,661 and 734, respectively
Top 5 Efficiency/Cost Improvements
5.
Contract reviews
This is not an efficiency opportunity, but it can be a money saver
–
Vendor management groups are beginning to focus on this
You have to manage automatic renewals and not let them happen
without a cost talk with the vendor – letting contract renew
automatically almost always leaves money on the table
Prices are commoditizing or already have
–
Core per account costs
–
Internet banking
–
Bill pay
–
Debit/credit processing
–
Item Processing
You may not need to wait until the end of a contract – vendors can be
willing to negotiate renewals early
What to measure:
Reduction in unit pricing
Quick Hits if You Have not Already Done Them
Branch capture – it will pay for itself in less than 18
months
Those that haven’t installed yet may want to look at going straight to
teller capture – scanner costs continue to decrease
Combining voice, data, cell contracts to one
Track fee waivers religiously and hold employees
accountable
Purging inactive Internet banking, bill pay and business
banking users you may be paying for
100% electronic statements – or charge for paper
IVR calls to 80% of all incoming (automated/live) or
higher
Believe it or not, people still call for directions and to see if the social
security check came in. What’s next? Cookies in the branches?
Keep Process Assessments Simple and Focused – It’s Not
Rocket Science
Key Process System Utilized Process Owner Process
Assessment Comments
Officer calling/
sales SalesWhiz Kevin Dubrow
New officer pipeline report being modified in SalesWhiz; pipeline reporting not consistent across the company
Credit analysis FloGo Nikki Sixx
Good usage of scanning documents at the point of receipt; no formal service level agreements from credit analysts produces differing views in the organization concerning turnaround speed Loan approval Loan
Workbook Lars Ulrich
Loan workbook is a nice stop-gap, but some info collected is redundant and/or excessive for small loans. Process needs to be migrated to a Web work flow over time.
Loan processing Loan Workbook
Randy Rhodes
The usage of the workbook has helped
coordinate loan assistant and credit activity Loan closing Lightning Pro
(interface)
Discussions seem to indicate that response time is good on doc packages. No Lightening Pro to Gold Pond interface today.
Post-close/QC No automation Trailing items are tracked via Henry Jack Credit line
access
Henry Jack
(Gold Pond) Joe Elliot
Over time, better enhancements to online draw
and payment for commercial is needed from Henry Jack
Credit/collateral Henry Jack
Flow Chart to get to Issues, Then Fix Them
Primary Needs Assessment • Introduction and Probing • Cust Info Form
• Obtain Drivers License
ChexSystems From Drivers License: • Name, SSN
• Address/phone #
New CIF Setup • ReenterName, Address • Phone, SSN, D/L Info • Risk rating, Privacy Act
Review Brochure/Collateral • Product features/benefits • Balance requirements • Rates, fees, services
Product Determination • Agree on Product(s) • Answer questions
Forwarding to Central Ops • New Cust Info Form • Signature Card(s) • Maint Form (if needed) Initial Transaction Entry
• Obtain Starter Checks • Enter acct # from checks • Enter opening deposit $
Account Agreement • Verify customer/acct info • Enter Signature Card info • Print agreement/sig cards
Finalize Documents • Review Agreements • Get customer signatures • Collateral and disclosures
Wrap Up • Process transaction • Get customer gift • Thanks customer
Post Sales Follow-Up • Enter ATM Card Info • Enter name and acct #s • Finish Internet Bkg App
Stage 1 Ini tial Setup Stage 2 Product Sel ec tion Stage 3 Ac count Opening Stage 4 Sal e Compl et ion 4 -5 m inutes 5 – 6 m inutes 7 – 9 m inutes 9 – 11 m inutes ID Completion Complete
• Cust Info Form • BSA Profile
Issues
• Probing beforeChexSystems • Cust Info Form redundant withProfile Sheet
• Cust Info Form being used with existing customers
• CIF info same as info entered into ChexSystems
• Rate sheets printed during session, not at start of day • FSRs appear focused more on
processthan selling
• New Time Deposit requires • bothonline G/L interface and
POD tickets
• New Term on renewals results in close/open CD
• Signature cards printed for every account type opened
• Debit card and online banking not part of initial
account/customer setup • FSRs not using “Temp” sig