Engaging Branch Staff to Build Merchant Services Momentum


services-7-3-19.pngThe success of a bank’s merchant services program lives or dies by the support from branch staff.

While offering competitive rates and top-notch customer service is important, those things won’t make a difference if bank branch staff isn’t discussing merchant services with customers. Programs suffer without the support and enthusiasm of staff. Here are some best practices on keeping branch staff engaged in merchant services promotion.

Set Goals
A bank should employ a top-down directive from leadership that emphasizes the importance of cross-selling merchant services during customer interactions. It is imperative that the directive includes clear, attainable goals for branches and employees. “Goals are the fuel in the furnace of achievement,” writes development consultant and author Brian Tracy.

Goals help motivate branch staff to sell these services. Leadership also needs to track performance and offer recognition. If staff gets the impression that set goals are not followed up on, it can be incredibly demoralizing.

Empower Your Sales Staff
Employees may hesitate to sell products they have not been fully educated on. But the growing popularity of online banking means it’s important that branch staff capitalizes on every opportunity to cross-sell. It may be the only chance they have to speak face-to-face with a prospect.

Executives need to make sure that bank staff is trained up on all products and services. They can do this through role-playing exercises of different situations that focus on improving communication skills and preparing for curveball questions. This is one of the best ways to prime employees for productive conversations with prospects.

Implement an Incentive Campaign
Managers should encourage staff to stretch for sales goals through an incentive campaign. These campaigns can include referral bonuses, sold-product goals, raffle campaigns and more. Some merchant services providers may sponsor incentive campaigns for their partner banks. Additionally, incentive campaigns aren’t limited to employees; banks should consider incentivizing existing clients through referrals.

Provide Ongoing Training
Payment card technology is constantly changing. Executives need to provide branch staff with tools that will help them stay up-to-date on current trends and industry changes. One way to do this is through a portal that is regularly updated with new resources and information. It is vital that executives cultivate an environment where branch staff feels comfortable asking for additional training or information.

The success of a merchant services program rests on the shoulders of a bank’s branch staff. Executives must make sure they equip their front-line people with all the tools and knowledge they need. The investment of time and resources up front will pay dividends in the future. Every win for branch staff is a win for the bank.

Why Great RMs Matter So Much


manager-4-17-19.pngImagine you have given two commercial relationship managers (RMs) at your bank the same potential deal to work on.

Same credit worthiness. Same opportunity for cross-sell. The market is the same, the internal approval process is the same. So is the pricing technology they’re using.

Would the two RMs produce the same result?

Probably not. Even with all conditions being equal, the RMs working on it are not.

Some RMs are just better than others.

But how much better? Earlier this year, PrecisionLender looked for that answer. Our findings were published online in our report: “Measuring RM Performance: Proving Impact and Dispelling Myths.”

We delved into our database, which includes commercial relationships (loans, deposits and other fee-based business) from over 200 banks in the United States, from small community banks to the top 10 institutions. In addition to size, these banks are also geographically diverse, with headquarters in 35 states and borrowers in all 50.

We found three things.

  • The best RMs matter much more than we hypothesized.
  • They win on all fronts, without costly trade-offs.
  • They share common traits and tactics.

Right now it’s assumed that to gain in volume, an RM must give on price. By that logic, RMs with the thinnest margins should have the largest portfolios. Yet we found the RMs with the biggest portfolios aren’t compromising on price.

When normalizing for loan mix and looking at RMs in one line of business pursuing similar borrowers, we found the RMs winning the most volume were also earning the highest risk-adjusted spreads.

We found a similar lack of compromise when it came to risk. Some of the top RMs we studied managed to negotiate higher spreads on a higher-quality portfolio than their peers achieved on weaker-rated books.

Winning On Fees and Price
Most banks we looked at displayed a tremendous dispersion in fee incidence across their RMs. While market aggregate fees showed variance by product type, deal size and term, perhaps the most significant factor in fee performance was the RM.

That performance matters, because RMs who included fees achieved consistently higher risk-adjusted return on equity than those who did not.

To get those fees, top RMs didn’t have to give on price. In most sample banks, there was a positive correlation between spread and fees, largely due to RM talent. Those ranked at the top for fee penetration had above-average spreads. Those ranked near the bottom for fees were also the low performers on spreads.

With today’s thin credit margins, banks often lead with credit to win more ancillary business. RMs routinely justify below-target credit pricing by including an anticipated cross-sell.

Putting aside whether those cross-sell promises are fulfilled, it would be easy to assume relationships with non-credit revenue carry lower spreads. We found the opposite.

Our data suggests relationships with above-average cross-sell revenue tended to carry higher credit pricing than those with below-average cross-sell revenue. RMs often cited the strength of the relationship—thanks to a track record of delivering value—as the biggest reason.

How Do Great RMs Do It?
The evidence we’ve collected points to a set of best practices that top RMs have in common.

  • They act like trusted advisors instead of order takers.
  • They deliver tailored solutions.
  • They know what matters to the customer and the relative priorities.
  • They provide alternatives.
  • They maintain meaningful, ongoing communication.
  • They explain their pricing.
  • They leverage internal resources.
  • They implement performance-based pricing.
  • They are proactive in managing renewals.
  • They negotiate well.

Some RMs manage to achieve volume, add fees, cross-sell and minimize risk, without conceding on rate. Look closer, and you’ll find a common set of tactics and strategies.

Banks that understand what makes their top performers great can turn a best practice into a common practice.

Advice for Buyers & Sellers in 2019



The need for stable, low-cost deposits is driving deals today, and the increasing use of technology is changing how banks should approach integrating an acquisition. In this video, Bill Zumvorde of Profit Resources shares what prospective buyers and sellers need to know about the operating environment. He also explains how bank leaders can better integrate an acquisition and how potential sellers can get the best price for their bank.

  • Today’s M&A Environment
  • Common Integration Mistakes
  • Maximizing Acquisition Success
  • Tips for Prospective Sellers

Compensation Governance in Today’s Economy



Despite recent shifts in the economic and regulatory environment, bank boards still need to keep a close eye on many of the same issues—including risks related to your bank’s compensation practices, as McLagan Partner Gayle Appelbaum explains in this video. She also spells out how talent pressures, and the expectations of regulators and investors, will continue to keep banks on their toes.

  • Key Practices for Boards and Compensation Committees
  • Why You Can’t Relax in Today’s Strong Economy
  • The Need for Heightened Corporate Governance

Concentration Risk Management Remains an Exam Focus: Stress Tests are Vital


risk-9-4-18.pngMake no mistake about it: If your bank has concentrations that are at or above regulatory guidelines, examiners will expect to see a stress test that supports your concentration risk management plan.

Stress testing has never been mandated for community banks—but it is a tool examiners expect banks to use if they have concentration issues in their portfolio. And this isn’t going to change, no matter what Congress does to ease regulatory burden.

In the past year, many community banks have had regulators question their concentration risk management practices. Examiners have said the stress tests will be the primary focus, and in some cases the only focus, of the inquiry.

In several cases, regulators downgraded the bank’s CAMELS score for not having adequate stress testing in place. Regulators are most focused on the management’s command of the tests, and how they make real and critical decisions related to capital and strategic planning.

Banks with New Concentration Issues of Interest
Commercial real estate (CRE) concentration risk management is not a new issue, but regulators are especially targeting banks without a long history of managing CRE concentrations, and are growing their CRE book at excessive rates. 

A BankGenome™ analysis shows that 2,004 banks have grown their CRE portfolios by more than 50 percent in the last three years, a level that has regulators concerned. As of the first quarter of 2018, 293 banks were over the 100 percent construction threshold and 420 banks exceeded the 300 percent total CRE guidelines. Of banks exceeding the thresholds, 54 banks also had 50 percent or more growth within the last three years – a sure sign they will face increased scrutiny under current guidance.

Anticipate Exam Scrutiny
If you are one of these banks, the worst thing you can do is overlook your next safety and soundness exam. Regulators will come in guns blazing, and you should prepare yourself accordingly.

There will be findings and perhaps even formal Matters Requiring Attention (MRAs), no matter how prepared you are.

Make Minor Findings a Goal
However, the key is to manage those findings. You want only minor infractions, such as not having enough loans with Debt-Service Coverage Ratios (DSCRs) in your core, or having to deal with model risk and model validation. Those are easy to address, while allowing examiners to show their boss that they extracted blood from you. 

You do NOT want examiners to say management doesn’t understand or use the stress test. Those type of findings are far more serious and could lead to CAMELS rating downgrades or worse.

Regulators Expect Stress Tests
Examiners expect banks with CRE concentrations to conduct portfolio stress testing, so bank management and the board can determine the correct level of capital the bank needs. 

Banks with concentrations would be smart to follow the stress testing best practices outlined by the Federal Reserve Bank of Richmond’s Jennifer Burns. Those include:

  • Running multiple scenarios to understand potential vulnerabilities
  • Making sure assumptions for changes in borrower income and collateral values are severe enough
  • Varying assumptions for what could happen in a downturn instead of just relying on what happened to a bank’s charge-off rates during the recession
  • Using the stress test results for capital and strategic planning
  • Changing the stress test scenarios to stay in sync with the bank’s current strategic plan

Burns’ article also notes that one new area of concern is owner-occupied CRE loans, which for years were considered extremely safe.

Report Finds Increased Scrutiny and Risk
The Government Accountability Office issued a report in March that warned of increased risk from CRE loan performance, though still lower than levels associated with the 2008 financial crisis. The GAO found that banks with higher CRE concentration were subject to greater supervisory scrutiny. Of 41 exams at banks with CRE concentrations, examiners documented 15 CRE-related risk management weaknesses, most often involving board and management oversight, management information systems and stress testing.

Prudential regulators acknowledge that proper concentration risk management is a supervisory concern for 2018.
The Office of the Comptroller of the Currency’s latest semi-annual risk perspective noted that “midsize and community banks continued to experience strong loan growth, particularly in CRE and other commercial lending, which grew almost 9 percent in 2017. Such growth heightens the need for strong credit risk management and effective management of concentration risk.”

A Multifaceted Approach to Managing CRE Concentration Risk


Concentration risk is drawing scrutiny from financial regulators, who are focusing on lenders’ commercial real estate (CRE) concentrations. Financial services organizations are responding to this by looking for ways to improve their CRE risk management and credit portfolio management capabilities.

Lending institutions with high CRE credit concentrations and weak risk management practices are exposed to a greater risk of loss. If regulators determine a bank lacks adequate policies, credit portfolio management, or risk management practices, they may require it to develop more robust practices to measure, monitor, and manage CRE concentration risk.

For several years, federal regulatory agencies have issued updated guidance to help banks understand the risks. In 2006, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency issued a guidance related to CRE concentrations followed by a statement in 2015 titled “Statement on Prudent Risk Management for Commercial Real Estate Lending.” Noting that CRE asset and lending markets are experiencing substantial growth, the 2015 guidance pointed out that “increased competitive pressures are contributing significantly to historically low capitalization rates and rising property values” and said “many institutions’ CRE concentration levels have been rising.”

Since the 2006 guidance, additional regulatory publications related to CRE concentrations have been released. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010 began a shift, as banks with less than $10 billion in assets were exempt from more stringent requirements, according to a Crowe timeline analysis.

CRE-concentrations-small.png

Looking forward, the 2020 transition to the current expected credit loss (CECL) model for estimating credit losses will likely affect loan portfolio concentrations as well.

At the community bank level, CRE concentrations have been increasing. In 2016, CRE concentrations in smaller organizations had reached levels similar to mid-2007, according to Crowe’s analysis.

Comparison-small.png

These trends led regulators to sharpen their focus on CRE concentrations.

In one Crowe webinar earlier this year, 76 percent of the participants said their banks had some concern over how to better mitigate the risks associated with growing CRE concentrations.

In addition, 77 percent reported they received feedback within the past two years from regulators or auditors about CRE concentrations. The number of banks concerned about CRE concentration growth will likely continue to rise.

Approach to CRE Concentration Risk
The most effective methods for addressing concentration risk involve an integrated, holistic approach, which encompasses four steps:

  1. Validate CRE data. Banks must examine loan portfolio databases and verify the information is classified correctly. Coding errors and other inaccuracies often present a distorted picture of CRE concentrations.
  2. Analyze concentration risk. Banks can perform a risk analysis to expose both portfolio and loan sensitivity. Well-planned and carefully executed loan stratification can help management have a deeper understanding of their concentrations. Banks, even those not required to perform stress testing, should incorporate stress testing at the loan and portfolio levels.
  3. Mitigate CRE risk. Banks should establish policies and processes to monitor CRE loan performance and to adjust the mix of the portfolio as their risk appetite changes. Oversight of credit portfolio management is critical, as is an effective management information system.
  4. Report to management and the board. Reporting on a regular basis should include an update on mitigation efforts for any identified concentrations. Banks with higher levels of CRE loan activity might invest in dashboard reporting systems. The loan review and internal audit departments also should present additional reporting.

Loan Review and Stress Testing
Benefits can be gained by implementing a more dynamic loan review function that takes advantage of technology to identify portfolio themes and trends. The loan review function should identify if management reporting lacks granularity or other forms of risk associated with appraisal quality and underwriting practices.

Stress-testing practices can offer additional understanding of the effects economic variables might have on the portfolio. Tweaking several inputs can reveal how sensitive the bank’s models are to various scenarios. Stress testing can help facilitate discussions to better understand the loan portfolio and to identify better-performing borrowers and segments.

Other Best Practices
Other effective practices include establishing a CRE committee, creating a CRE dashboard, and adapting reporting functions to incorporate the loan pipeline. This approach can help management envision what concentrations will look like in the future if potential opportunities are funded. As CRE concentrations continue to attract regulatory scrutiny, risk management practices will become even more important to banking organizations.

Here’s What Bankers Are Asking About Risk Committees


committee-6-13-18.pngOne of the central topics of conversation at this week’s Bank Audit & Risk Committees Conference hosted by Bank Director in Chicago is whether a bank’s board of directors should have a risk committee separate from its audit committee. And for banks that have already established a risk committee, the question is what responsibilities should be delegated to it.

In one respect, the question of whether a bank should establish a risk committee seems easy to answer because it’s clearly delineated in the regulations. Under the original Dodd-Frank Act of 2010, banks with more than $10 billion in assets are required by law to have one, though that threshold was raised to $50 billion in legislation enacted last month designed to ease the burden of the post-financial crisis regulatory regime on smaller banks.

There is a general consensus among attendees at this year’s conference that a bank shouldn’t base its decision to establish a risk committee solely on a size threshold. “Now that we have a risk committee, I don’t know how we did it without one,” said Tom Richovsky, chairman of the audit committee at United Community Banks, a $12.3-billion bank based in Blairsville, Georgia.

Rob Azarow, a partner at Arnold & Porter, says the decision should be informed by two factors in addition to size. The first is the complexity of a bank, with the presumption being that a bank with a more complex business model should establish a risk committee sooner than a bank with a less complex model. The second factor is dollars and cents—namely, whether a bank has the internal resources at its disposal to essentially split its existing audit committee into two.

It’s worth noting as well, as Azarow points out, that even under the new legislation, the Federal Reserve retains the authority to require a bank to implement a risk committee, irrespective of size. Another point to keep in mind is that even for banks not required as a result of their size to establish a risk committee, once established, it is subject to regulatory oversight.

Approximately half the banks at this year’s Bank Audit & Risk Committees Conference have both types of committees—audit and risk—with many of the others still weighing the pros and cons of establishing both.

Deciding whether to have a risk committee is only half the battle; the other half involves deciding exactly what that committee should do. Should it be vested with all risk-related questions, thereby usurping the authority over those questions from other committees? Or should the other committees retain their authority of relevant risks, while the risk committee then plays the role of overseeing an aggregated view of those risks?

This distinction is clearest in the context of the credit committee, for example. One of the fundamental purposes of a credit committee is to gauge credit risk. It isn’t uncommon, for instance, for a bank to require its credit committee to approve especially large loans. Would the risk committee now handle this?

Generally, the answer is no. The role of the risk committee when it comes to credit risk is broader, focused on concentration risk as opposed to the risk associated with individual credits.

Another place this comes up is in the context of technology and information security. While the audit committee would retain the authority to ensure that current laws, regulations and best practices are being abided by, the risk committee would be more focused on looming threats.

Deciding which responsibilities fall under the risk committee as opposed to, say, the audit and credit committees seems to boil down to the question of whether the issue is backward-looking or forward-looking, tactical or strategic. Issues that are forward-looking and strategic should go to the risk committee, with the rest remaining under the jurisdiction of their home committees.

To be clear, conclusions on when and how to charter a risk committee are far from settled. There are rough best practices, but no overarching consensus in terms of bright lines. Even banks that have established separate risk committees with clearly delineated duties are still in a process of adjustment. They’re happy with their decision to do so, but they recognize that this is more of an evolution than a revolution.

Health Check of Governing Documents


governane-3-23-18.pngLike laws and regulations applicable to financial institutions, corporate governance best practices are not static concepts. Instead, they are constantly evolving based on changes in the law, the regulatory framework and investor relations, among other matters. When was the last time the governing documents of your financial institution were reviewed and updated? The governing documents of many financial institutions were prepared decades ago, and have not evolved to reflect or comply with current laws, regulations, and corporate governance best practices. In fact, in the course of advising financial institutions, we have come across numerous governing documents that were prepared prior to the Great Depression. Although such documents may still be legally effective, operating under them may subject your financial institution and its board of directors to certain legal, regulatory and business risks associated with antiquated governance practices. As such, reviewing and, if necessary, updating your financial institution’s corporate governance documents is not just a matter of good corporate governance but also an exercise in risk mitigation.

Certain common—yet often alarming—issues may arise from the use of outdated governing documents. These include:

  • Indemnification provisions may be inconsistent with and unenforceable under applicable law. Likewise, most governing documents also contain provisions providing for the advancement of expenses to directors and officers in connection with legal actions relating to their service to the financial institution. In addition to legal compliance concerns, these provisions should be carefully drafted to ensure that the financial institution is not required to advance expenses to such officer or director with respect to a lawsuit between such person and the financial institution.
  • Voting procedures may be inconsistent with applicable law and/or best practices. These practices may also be inconsistently defined and conflict with relevant governing documents of a single financial institution.
  • Procedures to prevent or discourage shareholder activism or a hostile takeover of your financial institution could be inadequate.
  • Rights of first refusal or equity purchase rights contained in different, but operative, agreements among shareholders and the financial institution could be inconsistent.
  • Provisions limiting the liability of directors and officers of your financial institution may be inconsistent with and unenforceable under applicable law, or such provisions inadvertently may be more restrictive than permitted under applicable law.
  • Non-competition and non-solicitation provisions contained in various agreements applicable to the same director or executive officer could compete with one another.
  • Shareholder agreements for financial institutions could be structured in a fashion such that the Federal Reserve deems the agreements themselves to qualify as a bank holding company under the Bank Holding Company Act of 1956. For instance, based on guidance previously issued by the Federal Reserve, this unexpected outcome could occur if your financial institution’s shareholder agreement contains a buy-sell provision and is perpetual in term. These are common terms of shareholder agreements designed to protect a financial institution’s Subchapter S election, so bank holding companies that are Subchapter S corporations are being required by the Federal Reserve to amend their shareholder agreements to limit the terms to 25 years. Without such an amendment, the Federal Reserve takes the position that a Subchapter S shareholder agreement, in and of itself, can be deemed a bank holding company.

The board of directors and management team can protect the financial institution from these risks by following a few simple steps to update its governing documents.

  • Locate your governing documents. These could include the financial institution’s articles or certificate of incorporation, bylaws, committee charters, shareholder agreements, buy-sell agreements, corporate governance guidelines or policies, intercompany agreements, and tax sharing agreements.
  • Review and analyze the financial institution’s governing documents to identify any risks or areas for improvement, or areas that could be updated to reflect current laws and to incorporate current best practices.
  • Revise the financial institution’s governing documents to mitigate identified risks, address legal deficiencies and reflect current best practices.
  • Develop a procedure for monitoring changes in applicable laws and best practices that affect the institution, and implement an ongoing process for addressing any such changes in a timely manner.
  • Finally, designate a committee of the board of directors (e.g. the governance committee) or a member of the management team to manage the monitoring procedure established for this purpose.

Although simple, following these steps will help to prevent or mitigate many of the legal, regulatory and business risks that may arise as a result of operating under outdated governing documents and, more importantly, strengthen your financial institution’s corporate governance practices in a manner that better positions the board of directors and management to effectively oversee your financial institution and protect against unwanted shareholder activism.

Driving Profitability by Keeping Score


profitability-2-19-18.pngTwo thousand and seventeen proved to be a pretty good year for banks, and 2018 promises to be even better. While the economic environment of lower taxes, rising rates and promises of deregulation have driven up valuations, the secret sauce that produces results still eludes many. The answer lies deep within banks and can be realized by implementing balanced scorecards throughout that hold people accountable for performance and provide targets for success that drive the bottom line.

Developing benchmarks by individual business lines to enforce accountability can help them improve their staffing, processes and strategies, and often exposes low performers and manual processes that negatively impact profitability. Although this seems logical, in practice few banks have had success in figuring out these scorecards.

The following best practice tips will help in creating these metrics, setting appropriate goals and designing an effective overall performance management strategy.

Keep it Simple: Every department should be working with five to seven (not 20) easy-to-track metrics. Too much detail can cause confusion as well as create more work than it’s worth to calculate. For example, tracking the average time customers wait in line in branches is next to impossible and non-productive, but tracking call center hold times is much easier and most likely exists in a canned report today.

Take a Balanced Approach: A mixture of efficiency, quality and risk benchmarks provides a good balance. The following example of a balanced scorecard in mortgage lending illustrates risk metrics including approval rates, average credit score, client service metrics for turnaround times and efficiency metrics for production of loan officers, processors and underwriters.

metric-chart.pngFocus on the Outliers: Tracking performance is only the first step in developing a scorecard system. As the performance culture matures and as data trends become clearer, identifying outliers and improving performance in those areas is the key. Becoming a high performer sometimes means changing an underlying process or technology. But it can also come down to one or two individuals who are driving either high or low performance. Digging in to understand those variants can pay significant dividends. For example, in our sample scorecard, one loan officer was doing 15 loans per month while others were doing three to four.

While compensation structure can account for some of this variance, the opportunity cost to get those lower performers up to at least average can be significant. It turns out that the officer doing 15 loans per month had reached out to marketing for lists of clients new to the bank that had mortgages at other institutions and was cross-selling those in his market while the others had no idea the information was available.

When it comes to revenue generation, most banks have squeezed expenses and capitalized on the low-hanging fruit. The next step is to drive the bottom line through well-thought-out business line scorecards that produce actionable data to improve performance. The goal is to use these key performance indicators to drive better processes, strong customer service, less risk and higher returns to shareholders.

Improving Workflow Saves Time and Money


workflow.png

Progressive banks add new features and functionalities on a regular basis. Most can attest to a long technology wish list, but bankers and their technology partners must be careful not to lose sight of what’s most important: the employee and customer experience. The multitude of disparate departments, systems and protocols that drive banks can be intricately interwoven and inherently inefficient. Standard workflows can involve the shuffling of paper and manual data entry, passing responsibility back and forth between numerous divisions with a general lack of ownership that creates longer turnaround and service times.

In an environment where bankers are regularly challenged to do more with less, improving workflows can be a goldmine for process efficiencies, regaining resources and creating an optimal user experience. Too often, banks just continue to hire staff to run redundant, menial processes, which only serves to put a band aid on the problem while still absorbing an inordinate amount of time and resources. The problem compounds as banks grow larger in size and are faced with scaling and combining already burdensome procedures.

Banks and vendors alike must consider new approaches to how they’ve done things in the past and address these inefficiencies. Most procedures that involve multiple steps, departments and systems can be streamlined into a simpler, expedited process. Think about the implications here: streamlining and automating the viewing, refiling, printing and indexing of documents for a bank with approximately 40,000 actions each month would save employees dozens of work hours a month, translating into tens of thousands of dollars in annual cost savings.

There are many practices banks can easily adapt for efficiency gains. The first step is to evaluate current processes with a careful eye for redundancies and bottlenecks. You can’t fix what you don’t know is broken, so begin by identifying the problems and determining their cause. During this step, it’s important to consult employees from all areas of the bank to gain sight of the bigger picture.

Next, prioritize where to focus first. Starting with a few targeted projects will give you a firm understanding of how to create and implement proper workflows, straightening out any kinks and asking any questions before tackling larger and more numerous projects. Workflows can be applied to nearly every area of banking, so it’s important to have a strategy in place or it may become overwhelming.

The Bank of Missouri, headquartered in Perryville, Missouri, recently teamed with Jack Henry Banking, its core technology provider, to transform its internal processes with a workflow solution. The bank recently surpassed $1.3 billion in assets in just six years through both acquisitions and organic growth. Its branch infrastructure also increased from 13 to 23 (soon to be 26) locations. This growth and merger of cultures came with some inevitable growing pains, most notably the need to standardize processes and optimize efficiency.

The Bank of Missouri worked closely with Jack Henry to automate arduous multi-step processes, both internal and customer facing. Its goal was to significantly improve its efficiency ratio and make a positive contribution to the bottom line by creating consistent, cost effective processes that reduce operational risk and unnecessary expense.

After taking the time to learn how to identify problem areas and create appropriate workflow solutions, The Bank of Missouri now has 17 workflows in production, enabling it to eliminate redundant data entry, boost visibility and streamline processes across several areas of the institution, including HR, IT, deposit operations, loans, retail and more.

An example of the bank’s success is how it transformed the deposit fee refund process. Front office staff had to print, manually fill out and scan documents before the reversal process was performed by back office staff who also imaged and indexed the document, consuming a large amount of time and manual effort. With its workflow solution, multiple steps and searches are now automated and approved. This workflow alone is currently saving the bank approximately 54 hours and $1,000 per month, yielding an annual savings of $12,000.

In addition to creating unrealized efficiencies, leveraging a workflow solution can also allow banks to channel resources that were previously spent on burdensome tasks into more strategic and customer facing activities. When bank employees are empowered to add and cultivate skillsets, they’re more likely to feel valued and stay with their institution longer. Returns such as this can prove to be indispensable for any well run financial institution.

Dedicating just a small portion of resources to improving the back office can make a monumental impact. If the only reason for your processes is history, they may be outdated. Revamping workflows to streamline procedures and optimize efficiency is an integral component of any modern and progressive bank.

Chris Congiardo, systems analyst manager for The Bank of Missouri, is theco-author of this piece.