Paladin Blog

For an institution implementing a future merger strategy, what would another $250,000+ per year in additional profit mean (without having to make a single loan)?  

The Business Performance & Innovation (BPI) Network created quite a brouhaha releasing a new and unique study in May called the Less Burn, More Return (LBMR) that looks at the issues and priorities facing today’s community banks during a period of prolonged low interest margins, increased regulatory pressure and sluggish economic growth.  While the study touches many different aspects of current industry business problems, it looks closely at one key area of non-interest expense (NIE) – spending on core bank processing and related IT outsourcing services.  The study uncovers a major opportunity for improved efficiency ratios, profitability and franchise value.  One California CEO quoted in the study completed a merger just a few months after restructuring a new 7 years deal with their core vendor that in turn added more than 7% to the merger deal for his shareholders.  The data used to validate the BPI Network study was collected from surveys conducted with over 10,000 senior executives from banks and credit unions with less than $5 Billion in assets.  Interviews and testimony from CEOs, CFOs, investors, and advisors are peppered throughout the 24-page report further standing up BPI’s claims and data sources.  The report can be downloaded for free at bpinetwork.org – just look for the Less Burn, More Return program link.

The Fiscal Cliff negotiations are temporarily off the table as our leadership has figured out a way to kick the can down the road.  At every level a qualified failure and we can all be disappointed at the entire spectacle.  We all saw this coming a year ago when they manufactured the post-election fiscal cliff show down and none of us were surprised they could not get it done when those chickens came home to roost.  Like most Americans I am enjoying the brief pause in non-stop news coverage on the failed negotiations.  There is always something to learn from failure and so during this respite I have taken the opportunity to reflect on the mechanics of the failed fiscal cliff negotiation and outline some key similarities and observations that I see all-too-often in the community banking industry when bankers and vendors negotiate their own fiscal cliffs (albeit a lot smaller).  I don’t believe for a minute that I might be the best negotiator on the planet, nor do I know anyone who might be, but the fact is over the last four years we have successfully restructured and renewed many dozens of multi-million dollar Core & IT services agreements for institutions of all sizes coast to coast.  In fact, all we do here at Paladin is restructure and negotiate deals using a proven, research-driven, outcome-based methodology that doesn’t harm existing relationships.  In just four years, we are approaching $65,000,000 in hard dollar non-interest expense reduction for our bank clients, averaging nearly $800,000 per deal, and without having to change core vendors (i.e. Fiserv, Fidelity, Jack Henry, etc.) or perform a wasteful RFP process (scam).  We’re proud to stand on such a strong record and experience and I hope to share some of these insights with you here.

More than ever in the history of American banking, bankers are looking for sensible costs of doing business. They want to pay a fair price to attract and retain solid core clients.