AMERICA’S COMMUNITY BANKERS MUTUAL COMMUNITY BANK CONFERENCE STRATEGIC PLANNING DISCUSSION Peter...
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AMERICA’S COMMUNITY BANKERS AMERICA’S COMMUNITY BANKERS MUTUAL COMMUNITY BANK CONFERENCE MUTUAL COMMUNITY BANK CONFERENCE STRATEGIC PLANNING DISCUSSION STRATEGIC PLANNING DISCUSSION Peter J. Ostrowski Peter J. Ostrowski Ostrowski & Company, Inc. Ostrowski & Company, Inc. Bank & Thrift Advisors Bank & Thrift Advisors March 8, 2004 March 8, 2004
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Transcript of AMERICA’S COMMUNITY BANKERS MUTUAL COMMUNITY BANK CONFERENCE STRATEGIC PLANNING DISCUSSION Peter...
AMERICA’S COMMUNITY BANKERSAMERICA’S COMMUNITY BANKERSMUTUAL COMMUNITY BANK MUTUAL COMMUNITY BANK
CONFERENCECONFERENCE
STRATEGIC PLANNING DISCUSSIONSTRATEGIC PLANNING DISCUSSION
Peter J. OstrowskiPeter J. OstrowskiOstrowski & Company, Inc.Ostrowski & Company, Inc.
Bank & Thrift AdvisorsBank & Thrift Advisors
March 8, 2004March 8, 2004
O&CoO&Co
Thrift industry nearly failed in the 1980’s Thrift industry nearly failed in the 1980’s due in part to narrow powersdue in part to narrow powers
Legislative changes enacted to create a Legislative changes enacted to create a level playing field with commercial bankslevel playing field with commercial banks
Over last ten years, little changes in Over last ten years, little changes in many thrifts many thrifts
Commercial banks still look very Commercial banks still look very differentdifferent
O&CoO&Co
Industry ComparisonIndustry Comparison
Looked at mutual institutions in existence Looked at mutual institutions in existence in 1993 and still in existence todayin 1993 and still in existence today
Reviewed major balance sheet Reviewed major balance sheet components and profitability at 12/31/93 components and profitability at 12/31/93 and 9/30/03and 9/30/03
Compared balance sheet components and Compared balance sheet components and profitability to stock thrifts and banks in profitability to stock thrifts and banks in existence over the same periodexistence over the same period
Data points are median values Data points are median values
O&CoO&Co
Significant Earning Asset Significant Earning Asset CompositionComposition
23.4
64.5
23.2
63.1
23.3
68.1
20.3
68.2
26.4
60.7
24.5
65.0
0
20
40
60
80
100
Mutuals1993
Mutuals2003
StockThrifts1993
StockThrifts2003
Banks 1993
Banks 2003
Significant Earning Assets as % Total Assets
Secs. Loans
O&CoO&Co
Significant Loan CompositionSignificant Loan Composition
0
20
40
60
80
100
Mutuals1993
Mutuals2003
StockThrifts1993
StockThrifts2003
Banks 1993
Banks 2003
Significant Loan Types as % Total Loans
1-4 Family Con. & Dev. CRE C&I Consumer All Other
O&CoO&Co
Significant Liabilities & EquitySignificant Liabilities & Equity
89.37
9.33
82.98
2.53
11.12
86.26
1.98
8.04
68.86
18.67
8.97
86.66
4.03
8.65
76.64
11.65
8.79
020406080
100
Mutuals1993
Mutuals2003
StockThrifts1993
StockThrifts2003
Banks 1993
Banks 2003
Significant Liabilities and Equity as % Total Assets
Deposits Borrowings Equity
O&CoO&Co
Significant Deposit CompositionSignificant Deposit Composition
0
20
40
60
80
100
Mutuals1993
Mutuals2003
StockThrifts 1993
StockThrifts 2003
Banks 1993
Banks 2003
Significant Deposits as a % Total Deposits
Demand NOW & Oth. Trs. MMDA & Svgs Time Other
O&CoO&Co
Profitability AnalysisProfitability Analysis
Net Interest Income % Average Assets
3.703.43
4.26
3.07 2.993.67
1.00
2.00
3.00
4.00
5.00
Mutuals Stock Thrifts Banks
1993 2003
O&CoO&Co
Profitability AnalysisProfitability Analysis
Noninterest Income % Average Assets
0.26 0.37
0.99
0.350.60
1.18
0.00
0.50
1.00
1.50
2.00
Mutuals Stock Thrifts Banks
1993 2003
O&CoO&Co
Significant Components of Non Int. Significant Components of Non Int. IncomeIncome
0.00
0.25
0.50
0.75
1.00
1.25
Significant Comps. NII % Average Assets
All Other 0.03 0.11 0.04 0.1 0.57 0.62
Serv. Chg. 0.23 0.24 0.33 0.5 0.41 0.56
Mutuals 1993 Mutuals 2003Stock Thrifts
1993Stock Thrifts
2003Banks 1993 Banks 2003
O&CoO&Co
Profitability AnalysisProfitability Analysis
Non Interest Expense % Average Assets
2.25 2.282.41 2.34
3.56
3.14
1.00
1.502.00
2.50
3.003.50
4.00
Mutuals Stock Thrifts Banks
1993 2003
O&CoO&Co
Profitability AnalysisProfitability Analysis
Return on Average Assets
1.05 0.991.16
0.740.90
1.18
0.50
1.00
1.50
2.00
Mutuals Stock Thrifts Banks
1993 2003
O&CoO&Co
Change is what happens when the pain Change is what happens when the pain of holding on overcomes the fear of of holding on overcomes the fear of letting go.letting go. Mutuals have the capability to compete Mutuals have the capability to compete
effectivelyeffectively Strategic planning process needs to be Strategic planning process needs to be
proactive and ongoingproactive and ongoing All constituents – directors and All constituents – directors and
management need to be “on the same management need to be “on the same page”page”
Conversion/MHC formation are not Conversion/MHC formation are not strategies by themselvesstrategies by themselves
Creation of a process that enables you to Creation of a process that enables you to determine what works for youdetermine what works for you
O&CoO&Co
The Planning Process is dynamicThe Planning Process is dynamic
O&CoO&Co
The prosaic reality:The prosaic reality:
““Sustained success is largely a matter Sustained success is largely a matter of focusing on the right things and of focusing on the right things and making a lot of uncelebrated making a lot of uncelebrated improvements every day.”improvements every day.”
O&CoO&Co
Traditional ProfileTraditional Profile
Mutual headquartered in nonurban Mutual headquartered in nonurban marketmarket
Financial Highlights (9/30/03)Financial Highlights (9/30/03) Total AssetsTotal Assets $103 million$103 million ROAAROAA 1.05% 1.05% Net Int. Inc./AANet Int. Inc./AA 3.46% 3.46% Non Int. Inc./AANon Int. Inc./AA .34% .34% Non Int. Exp./AANon Int. Exp./AA 2.04% 2.04%
O&CoO&Co
Strategy:Strategy:
Effective executionEffective execution Concentration in 1 – 4’s – 75% Concentration in 1 – 4’s – 75% Low cost operation – one office Low cost operation – one office
O&CoO&Co
Alternative StrategyAlternative Strategy
Mutual Bank headquartered in Mutual Bank headquartered in suburban marketsuburban market
Financial Highlights (9/30/03)Financial Highlights (9/30/03) Total AssetsTotal Assets $650 million$650 million ROAAROAA 1.24% 1.24% Net Int. Inc./AANet Int. Inc./AA 4.15% 4.15% Non Int. Inc./AANon Int. Inc./AA 1.72% 1.72%
O&CoO&Co
StrategiesStrategies
Increase non-interest revenueIncrease non-interest revenue Expand market penetration to Expand market penetration to
leverage infrastructureleverage infrastructure Announced two acquisitionsAnnounced two acquisitions
$374 million Mutual in a contiguous $374 million Mutual in a contiguous marketmarket
$67 million Commercial Bank in a $67 million Commercial Bank in a complementary marketcomplementary market
O&CoO&Co
Alternative StrategyAlternative Strategy
Mutual headquartered in non-urban Mutual headquartered in non-urban marketmarket
Financial Highlights (9/30/03)Financial Highlights (9/30/03) Total AssetsTotal Assets $195 million$195 million ROAAROAA 0.87% 0.87% Net Int. Inc./AA 3.84%Net Int. Inc./AA 3.84% Non Int. Inc./AANon Int. Inc./AA 2.49% 2.49%
O&CoO&Co
StrategiesStrategies
Purchased an asset management Purchased an asset management company to improve non interest company to improve non interest incomeincome
Net income benefit not as apparent Net income benefit not as apparent in short term due to aggressive in short term due to aggressive amortization of goodwill incurred in amortization of goodwill incurred in purchasepurchase
O&CoO&Co
Butler BankButler Bank
Mutual Bank headquartered in Mutual Bank headquartered in Lowell, MALowell, MA
Financial Highlights (9/30/03)Financial Highlights (9/30/03) Total AssetsTotal Assets $103 million$103 million ROAAROAA 1.19% 1.19% Net Int. Inc./AANet Int. Inc./AA 5.81% 5.81% Non Int. Inc./AANon Int. Inc./AA 0.75% 0.75%
O&CoO&Co
Significant Loan CompositionSignificant Loan Composition
020
406080
100
Mutuals1993
Mutuals2003
StockThrifts1993
StockThrifts2003
Banks 1993
Banks 2003
BUTLER
Significant Loan Types as % Total Loans
1 - 4 Cons. & Dev. CRE C&I Consumer All Other
O&CoO&Co
Significant Deposit CompositionSignificant Deposit Composition
0
20
40
60
80
100
Mutuals1993
Mutuals2003
StockThrifts1993
StockThrifts2003
Banks 1993
Banks 2003
BUTLER
Significant Deposits as a % to Total Deposits
Demand NOW & Oth. Trs. MMDA & Svgs Time Other
O&CoO&Co
Profitability AnalysisProfitability Analysis
Net Interest Income % Average Assets
3.703.43
4.26
3.07 2.99
3.67
5.86
2.503.003.504.004.505.005.506.00
Mutuals Stock Thrifts Banks BUTLER
1993 2003
O&CoO&Co
Profitability AnalysisProfitability Analysis
Return on Average Assets
1.05 0.991.16
0.740.90
1.18 1.19
0.50
1.00
1.50
2.00
Mutuals Stock Thrifts Banks BUTLER
1993 2003
