Community Banking Strategies E-Book

Vince Boberski

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Bloomberg Professional
• Sprache: Englisch

Seitenzahl: 309

Veröffentlichungsjahr: 2010

Beschreibung

A guide for community banks to rebuild and strengthen their business

With Wall Street reeling and big banks under pressure, community banks have an opportunity to strengthen their position in the marketplace. By reconnecting with local businesses and consumers, increasing core deposits, and carefully managing their investments and balance sheets, community banks can attract underserved clients from larger competitors.

With Community Banking Strategies, author Vincent Boberski???a financial professional who has spent years working with senior management and the boards of directors at local banks???skillfully reveals how community banks can compete against bigger institutions in the wake of the most significant financial crisis since the 1930s.

Beginning with a novel analysis of community banks and their relationship to both national and global financial competitors, he insightfully places the meltdown of the financial markets and the resulting Great Recession into a historical context. With a bold look into the future, Boberski outlines the risks and trends that will shape both the industry and the economy as a whole. He sets clear strategic goals that will allow community bank managers, directors, and investors to profit from a broad localization of American finance.

Chapter by chapter, Boberski offers practical advice on many of the most important issues in this area, including portfolio management, balance sheet management, and dealing with interest rate and credit cycles. Along the way, Boberski also offers in-depth insights on establishing and encouraging the lasting client relationships that produce the most essential piece of the banking business: core deposits, the heart of any good local bank.

Engaging and informative, Community Banking Strategies will help you:

• Become familiar with the strategies, products, and tactics that will enable community banks to create opportunities out of market dislocations and effectively manage risk
• Capture consistently profitable growth at the expense of regional and national competitors
• Transform newfound market dynamics into customer relationships that touch both sides of the balance sheet
• And much more

Written in a straightforward and accessible style, this reliable resource is a must-read for community bank executives, directors, investors, and the brokers who work with them. If you want to gain a better understanding of the strategies that consistently lead to success in this field, this book is the best place to start.

Leseprobe

Table of Contents

Praise

Title Page

Copyright Page

Dedication

Preface

Acknowledgments

Chapter 1 - A New Era for Community Banking

A Five-Forces Analysis of the Competitive Position of Community Banks

Rivalry Within the Industry and New (Really Returning) Entrants

The Bargaining Power of Suppliers and Customers

The Threat of New Products

Has the Community Banking Model Changed?

Winners and Losers

The Revolution of 2008

A Look Forward

Where, Incidentally, Is the Next Bubble Going to Be If Not in Goods Prices?

Chapter 2 - Historical Credit Crises and What’s Different Now

The Derivatives Mess of 1994

The Russian and LTCM Crisis of 1998

The Commercial Real Estate and S&L Crisis of 1988 to 1992

How Bad Can Things Get?

Chapter 3 - Valuations and Lessons from the Equity Markets

What Drives Bank Valuations?

What Investors Look for in Different Parts of the Credit Cycle

Practical Implications

Chapter Note

Chapter 4 - Liabilities and Capital

Liabilities and Franchise Value

Chapter 5 - Managing the Balance Sheet Through Different Interest-Rate Cycles

What Brokers Will Ask You to Do and When You Should Do Them

Summary

Chapter 6 - Investments and the Wholesale Balance Sheet

The Cost of Liquidity

The Bond Portfolio and A/L Management

The Portfolio as an Earnings Driver

Appropriate Products for Bank Investment Portfolios

Portfolio Structures and Processes That Work

Chapter 7 - What Banks Should Ask of Their Brokers

Products and Services Your Broker Should Provide

Different Brokerage Models

Questions Your Broker Should Know the Answer to (or Should at Least Ask)

Summary

Chapter 8 - Tax Efficiency: As Important as Operational Efficiency

When Munis Make Sense

When to Put BOLI on the Balance Sheet

BOLI Specifics: The Case for Separate Account Versus General Account

Summary

Chapter 9 - Derivatives as a Way to Manage Balance Sheet, Earnings, and ...

Macro, One-Way, and Two-Way (or Client) Hedging Examples

One-Way Hedging

Summary

Afterword

Appendix

About the Author

Index

Praise for

Community Banking Strategies

SteadyGrowth,SafePortfolioManagement, andLasting Client Relationships by Vincent Boberski

“In Community Banking Strategies, Vince Boberski not only gives unique and penetrating insights into the triggering events that caused the ‘great recession’ of 2008-2010, but also outlines effective and powerful forward thinking strategies for community bankers to adopt as they cope with the new financial and market realities that lie ahead. This book is a must read for any community banker wanting to take advantage of a generational shift in the financial markets and position the bank to thrive in future years.”

—Camden R. Fine, President/CEO Independent Community Bankers of America

“Community Banking Strategies provides timely and sensible advice to the banking industry. Vince Boberski makes good use of historical perspective to provide credible evidence that the balance sheet, earnings, and risk management strategies he outlines do indeed work.”

—Kent Townsend, Executive Vice President and Chief Financial Officer, Capitol Federal Financial

“Vince provides a compelling case that relatively healthy community banks have an opportunity to take market share from weak super regionals (aka zombies), but the window will not remain open forever. It is a view I concur with. The book also provides a great overview for community bank managers, directors, and investors for perspective on how to evaluate bond portfolios, wholesale funding and derivative strategies in the context of managing the dynamics between the core bank and the wholesale bank as it relates to the bank’s overall objectives.”

—Jeff K. Davis, CFA, Managing Director, Guggenheim Securities, LLC

“This book contains critical information for a community bank manager at any level. It speaks in plain terms of the factors creating the global liquidity crisis in 2008 and 2009, explains how broker/dealers operate from an insider’s perspective, and has a bird’s eye view of the pros and cons of certain popular investment strategies. I highly recommend it.”

—Jim Reber, President and CEO ICBA Securities

Copyright © 2010 by Vincent Boberski. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at www.wiley.com/go/permissions.

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ISBN 978-157-660369-7 (cloth); 978-0-470-87920-7 (ebk)

For Anne

Preface

The bulk of this book was written in the winter of 2009—probably the low point of the current downturn and a time when any sort of optimism was difficult to come by. The viability of the financial system as we knew it was in question, and there was a good chance that the Great Recession would morph into a second Great Depression. Subsequent signs that the economy has begun to recover have emerged. Stocks have posted a massive recovery (although it remains to be seen whether those gains will hold in the face of Eurozone contagion) and economic growth has turned positive on the back of an astounding amount of fiscal stimulus. The principal macroeconomic risks that I talk about in this book, particularly in early chapters, have not changed even if the probability of their coming to pass has fallen.

The collapse of the housing market was the root cause of the Great Recession, and as much as people are inclined towards optimism—an admirable trait—real estate cycles take significantly longer than one or two years to play out. There will be no sustained economic recovery without a true recovery in housing. That is true even in light of normalization in the financial markets and limited steps towards restarting the securitization engine. The analysis and advice that this book offers will be valid well beyond this downturn and the inevitable recovery, even if some of the references to current conditions may seem overly dour to those who have to squint because the light at the end of the tunnel is so very bright.

The basic thesis that community banks have a strategic window to take business away from their competitors is timely regardless of how quickly and to what degree one thinks that the economy will improve. The only question is how long that window will be open. The strategic direction that managers and directors take right now and the tools that they decide to use will have profound consequences for their banks’ business for decades. Those who seize this opportunity will have taken disaster and, out of it, forged a true and lasting success.

Vincent Boberski Memphis, Tennessee April 2010

Acknowledgments

This book became possible only through the support and understanding of my wife, Anne; and our children, Vince and Margaret. Thanks and all my love to you. Sorry about the late nights and weekends spent away from my three favorite people in the world. I would also like to express my appreciation to the following professionals and experts for the time they put into reading the manuscript and for their unfailingly helpful suggestions and spot-on corrections. Any errors and omissions, of course, are mine alone. Thank you Dan Cardenas, John Crawford, Alison England, Bruce Floberg, Joe Jennings, Terri Mendelson, Mark Muth, Joel Oliver, Rick Redmond, James Taylor, Kent Townsend, and Jim Vining. Thanks also to FTN Financial for the gracious use of pieces that I wrote during my time there. Stacey Fischkelta and Bill Falloon could not have made the transition to Wiley any easier. Finally, no one would be reading this if not for the perseverance and help of my editor at Bloomberg Press, Evan Burton. Thanks, Evan!

Chapter 1

A New Era for Community Banking

SELDOM HAS THIS COUNTRY faced such uncertain times. The U.S. economy and, by extension, the global economy, has slogged through the first consumer-led recession in twenty-five years. This downturn has been the worst since the Great Depression despite massive fiscal and monetary stimulus. The repercussions from Paul Volcker’s battle with inflation, the consequences of the savings and loan (S&L) crisis, and the economic effects of the September 11 terrorist attacks are all likely to pale in comparison to what we will see over the next five to ten years. Why? Because the economic gains since the mid-1990s arguably were built upon a financial system awash in cheap credit and largely neglectful of fundamentals. The mortgage mess is only the latest manifestation of the same trend that brought the technology bubble and four-dollar-per-gallon gasoline.

The era of easy credit is over. Zero-percent financing may have come back as a marketing tool to move SUVs off the lot, but the Federal Reserve Board (Fed) will not be able to engineer a recovery simply by making it cheaper for homeowners to spend whatever equity is left in their homes. Gone, too, are the days when the largest financial institutions had essentially unlimited access to leverage through the combination of securitization and investors were willing to believe that the credit strength of a structured deal and the quality of the underlying assets were two different things.