How to Be a Top-Five Bank
1994; American Bankers Association; Volume: 86; Issue: 7 Linguagem: Inglês
ISSN
0194-5947
Autores Tópico(s)Banking stability, regulation, efficiency
ResumoThe old adage, There's more than one way to skin a cat, applies to the banks that produce consistently stellar banking profits What's the secret to long-term profitability? Finding the right strategy for your bank market then--with periodic fine-tuning--sticking with that strategy no matter what the latest fad is. That's the lesson that comes through in conversations with representatives of banks placing in the top five positions in each of the three size categories featured in ABA Banking Journal's second-annual bank profitability rankings. (See previous article.) ABA BJ called top officers of nine of the top-ranking banks, asked, How do you do it? Their responses follow. Ohio's mortgage master A little more than a decade ago, Miami Valley Bank, an $88 million-assets independent based in rural Quincy, Ohio, was just one more country commercial bank, recounts T.J. Ossege, president. Then a change in ownership brought a major shift in strategy. The bank's new owner was a long-time mortgage banker who saw opportunities for a bank willing to specialize in the needs of mortgage banking firms. Today, more than half of the bank's employees are devoted to serving Miami Valley's mortgage banking clientele--and the bank has maintained a return on assets averaging 3.16% over the last five years. This makes Miami Valley the leader in the ranking among banks with less than $100 million in assets at year-end 1993. Miami Valley has six mortgage bank customers, based in Ohio, Michigan, Florida. The bank services about $2 billion for these clients as well as its own portfolio. Miami Valley handles everything to do with mortgages that clients have sold but nominally retained servicing on, from processing payments to monitoring maintaining escrow accounts to collecting delinquent payments. The fees for providing these services are the major contributor to a 6.05% total-noninterestincome-to-average-assets ratio. Miami Valley is an aggressive mortgage lender in its own right, with home loans accounting for more than 90% of its loan portfolio. (The bank had an 83.8% loan-to-deposit ratio, adjusted to discount the effect of public sector deposits.) The bank sells about three-quarters of the conventional government-guaranteed mortgages it makes. Generally, the portfolio loans are adjustable-rate mortgages or fail to conform in some way with secondary market standards. Even when it sells its own mortgages, Miami Valley typically retains the servicing. This gives the bank a plus over much of its chief local competitors. These consist of banks owned by statewide holding companies as well as other community banks, most of whom sell servicing along with the underlying mortgage. We always retain the servicing, says Ossege. People like to pay at their local institutions. The nationwide rise in mortgage interest rates will trim the number of originations made locally, Ossege says, but the servicing side will be more of a constant, bridging the period between peaks in originations. It's a nice, steady income stream, Ossege says. The bank's first quarter was strong, though not as strong as the first quarter of last year. Narman's tasty plain vanilla Basic doesn't mean boring. Republic Bank of Norman, Okla., believes in straightforward community banking, according to Chuck R. Thompson, president. The bank gathers local deposits makes loans in around this university town. We support our community very diligently, says Thompson, and our community supports us. Thompson notes that Republic, which is independent, is the only bank in Norman that is not owned by an out-of-town parent. This is a plus in competing with seven other banks, as well as with three savings institutions four credit unions. The $60 million-assets bank's five-year average ROA hit 2. …
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