As 22nd State Bank enters new lines of business, its CEO hopes a cutting-edge analytics dashboard will help executives make decisions such as where and how to allocate capital.
The $208 million-asset bank — which is named after its home state of Alabama, the 22nd to join the Union — is co-developing an enterprise-performance dashboard with the consulting and software company Quantalytix. Other companies that provide analytics to community banks include Baker Hill and KlariVis.
"With us building a business that has different verticals and different subsidiaries, for me as an executive of the company to be able to go into a dashboard [and] look at a breakdown of our assets" will be useful, said Steve Smith, the CEO of Mobile-based 22nd.
"If you're looking at a pie chart that has all of our earning assets, right now you would see just loans," Smith said in an interview. "But to be able to have loans, bonds and our wholly-owned subsidiaries all within that pie chart, and to be able to go in under those asset classes and break detail down to who is the top-producing lender, what are the top-producing products — those are the kind of things that I'm looking for."
For example, if Smith is managing the bank's liquidity and realizes he has $10 million in an overnight fed funds account earning next to nothing and that he wants to put that to work, he will be able to log in to the dashboard and look at the bank's most profitable areas.
"I would look at what percentage of my assets are already in those buckets, and I would decide how to deploy that capital in a way that maximizes the return for me," Smith said. "It's a tool to help me maximize the profitability of the money we're putting to work and save a ton of time doing it by having it all right there at my fingertips, rather than have to go sit down with all of our senior management, pull a bunch of data together and still not have everything that we need." The dashboard will also help the bank see how it's doing compared with its peers.
Today, 22nd has some analytics tools that let it assess the performance of individual loan products. Quantalytics is going to help it pull data on all products and businesses into that single dashboard.
It's something other community banks are also seeking to do.
"There is a definite need for this type of capability," said Carey Ransom, founder and managing partner at the venture capital studio Operate and managing director of BankTech Ventures, a community-bank-led venture fund. "The need and demand is high and growing. I'm certain that many consulting firms are happy to build custom solutions and bill small banks for them."
Generic data-visualization tools exist, Ransom said, "yet someone needs to develop the usable dashboards and business context for a bank, as well as the integrations to the systems that can provide that data into a single pane. The data plumbing and configuration can be a lot of work, and requires data competence and often some technical skills that may be missing in the current staff of a bank."
Smith at 22nd said much the same.
"Right now there are a lot of data sets out there," he said. "But a bank like ours doesn't have the personnel [nor] the know-how to find the data, aggregate the data, bring it together and then do an analysis on it."
22nd already has a relationship with a company that builds dashboards, "but they're pretty general in nature," he said.
Beyond analytics reporting, what many small banks really need are true insights, "deriving intelligent actions from the data to drive changes and improvements to their operations, priorities, focus and more," Ransom said.
Quantalytix provides "quantitative resource as a service," CEO Chris Aliotta said in an interview.
"Our big goal is providing the more esoteric financial analysis that's specific to banking, as a resource for banks," he said. "So basically bringing the big bank advantages in analytics to financial institutions of all sizes."
His consultants set up a foundation for how a bank can draw and use data in a performance dashboard. Then as the bank gets bigger, internal staff take over "and then we can kind of step back out of it," Aliotta said. "We think of it as building the house and then allowing that house to scale and grow with the financial institutions using it."
22nd State Bank was founded in 1917 as Farmers' Exchange Bank and bore that name for more than 70 years. In recent years, it has transitioned from a retail community bank to a commercial business bank where retail is an accommodation.
The bank has a lot of real estate customers, Smith said, but also a large commercial and industrial portfolio. It has a consumer finance company called Main Street Loan Co., an insurance business called 22nd State Insurance Services, an asset-based finance company and other subsidiaries.
"We're doing some things outside the box that a normal community bank would not," he said.
The new dashboard will help management assess performance across all these business units. Then Smith will be able to monitor loans and all other earning assets in one place.
"I'm looking for an enterprise management tool that will help me better allocate our resources, our capital," Smith said.
Most of the data will come from 22nd's core system and loan-origination and servicing systems.
"Our role is to aggregate and centralize, so the platform's built to sit on top of all these different operational systems and bring all that information together," Aliotta said. "The data stewardship and data aggregation aspect is critical. We live in a knowledge economy. The data's foundational."
Core software providers have been buying up data providers, according to Smith.
"But they don't work well within the same ecosystem," he said. "They don't talk to each other. The expense associated with trying to onboard new partners has become overwhelming. And none of the providers right now provide exactly what you're looking for, at least for me."
Part of the goal for Smith is to better compete with larger banks.
"We want to compete with any big bank out there and create efficiency through partnerships with companies and individuals like Quantalytix," he said. "Chris and his team at Quantalytix are much smarter than I am. And I've learned through my almost 30 years in this business to partner with people that are smarter than you and know the areas of the business that I don't know."
