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Painful consolidation is coming to community banks, and the biggest determinant of which companies will survive is the quality of senior management, particularly the chief executive.
June 8
Sam Erwin, CEO of $1.3 billion-assets Palmetto Bank in Greenville, S.C., has his work cut out for him as the bank emerges from the 2008 recession and girds for more economic weakness. Palmetto reported a net loss for the second quarter of $9.6 million, compared to $6.1 million in the first quarter — mostly due to writedowns from depressed real estate values.
On the positive side, pre-tax income increased to $2.4 million from $1.5 million in the previous quarter. The bank also improved loan production as loans held for investment increased $6.6 million, the first quarter since 2008 that the bank experienced positive loan growth. Erwin's turnaround strategy also helped it recently gain a $110 million investment from CapGen and Patriot Financial Partners.
Erwin believes community banks will face a tough slog going forward, and will have to account for every dime in terms of expense and revenue-and use technology to drill down to grab details for quick strategic decisions. Erwin-who became CEO of the bank about two years ago, spoke with BTN about how the dashboard, Deluxe's Banker's Dashboard, serves as a thermometer and diagnostic tool for the community bank, and how a volume-based pricing arrangement with Deluxe makes the tool affordable.
This business intelligence technology is allowing him to make decisions based on daily performance data on branches and sales reps, deposit activity and loan growth — and how much the bank has to spend on resources to achieve that growth.
BTN: How often do you log into the dashboard as part of your work?
Erwin: I access it everyday. Today, I'm looking at the August monthly report, and I'll compare it to last year, the previous month and the second month after the previous quarter. On other days, I'll look at loan growth and see what deposits are doing. You can look at loan growth every day and slice into that.
BTN: What's the biggest challenge your bank is facing right now that's being made easier because you're using this dashboard?
Erwin: Everybody in banking is trying to figure out what to do with the flat rate environment and declining revenues. How do you make that work? I have to have an understanding of our expense structure, so it helps to be able to easily access two or three years of data at a few clicks to see what it took, from an expense perspective, to make various parts of the bank work, and how that needs to change today to achieve the best financial results. All banks have shrunk, at least organically, so if you can see where you are spending money and where you have expense increases, it's a great starting point. If an IT expense has gone up, you can quickly look at comparison data. We're also looking at performance data, who and what is performing and what we can do to respond.
BTN: Do you use the dashboard as a way to communicate better with other executives, to solve problems faster?
Erwin: If I'm looking at a report and see a line item that looks high, I can drill down and see where that cost is coming from. Instead of calling the head of IT and trying to find out where the extra cost is coming from, I actually know. I can ask [the IT director] about why there's been extra expense from the use of a specific system and then find out why that system has been getting used more.
BTN: Do other executives use the dashboard?
Erwin: The retail [operation] uses the dashboard to assess branches on a daily basis in terms of deposits and how the branches are performing relative to the entire company. You can see deposit outflows, yields, etc. You have information that you might not have otherwise.
BTN: How are you using this to inform strategic decisions?
Erwin: We are working to build a performance culture. The information that I get allows me to see what areas and people are performing well, and that becomes part of the process as I think about where we are going to invest resources. If we need more loan growth, for example, in a certain area, we can find out quickly about where we should invest more marketing dollars. With a couple of keystrokes, you can find information that can inform that decision.
BTN: Other banks, particularly larger regional and national instituitons, have used dashboards for years. While the use case for dashboards is apparent, how has the expense case improved to allow your bank's recent adoption of dashboard technology?
Erwin: We pay a monthly fee [based on the bank's asset size] to outsource the management and hosting of the dashboard, and we don't have to hire programmers to do work for a defined period of time. [Paying for technology] that way makes it an easier decision of whether or not you can afford the technology.
