Back in Black

Community Bank Net Income Rises to $6 Billion but There are Competitive Pressures

Community banks posted solid financial performance for the third quarter of 2017 as reported in the recently released third quarter 2017 FDIC Quarterly Banking Profile, putting banks well into the black with profitability and making the financial crisis seem more distant.

“Third quarter results for the banking industry were largely positive,” FDIC Chairman Martin Gruenberg said. “Revenue and net income were higher at most banks, net interest margin improvement was widespread and the number of unprofitable banks and ‘problem banks’ continued to fall.”

Of the 5,737 insured institutions reporting third quarter financial results, 67.3 percent reported year-over-year growth in quarterly earnings.

However, Gruenberg also warned about competitive pressures.

“We have seen more banks come to us in 2017 due to competitive pressures than in any past year,” Robert Mendez, executive vice president of BankOnIT, said.

Mendez related a story of lenders at one bank coming to BankOnIT because they lacked the capabilities they needed to compete with other institutions.

“This bank could only help customers with loan requests if the customer came into the bank,” Mendez said. “Meanwhile, their competitors were out calling on this bank’s best commercial customers with laptops and secure remote access, offering an easy way for these customers to move their banking relationship.”

A number of banks have also had security or reliability issues with their technology.

“Banks have come to us because they have had downtime, or they experienced a ransomware event or they had a cybersecurity event that adversely impacted their ability to serve their customers,” Mendez said. “One bank had no access to either customer data or their phone systems beginning on a Friday afternoon and through the weekend. Unfortunately, that Friday was a payroll day for many of the bank’s customers, and the bank was unable to pull in ACH files or update and authenticate balances for ATM transactions among other things. The bank president related how many upset customers they had and said that the bank survived the incident but that if it happened a second time they would not be so fortunate.”

With a return to solid financial performance across the industry, more banks are making investments in their technology capabilities that allow them to compete more effectively and better position themselves to grow and achieve their strategic objectives.

What strategic objectives are you planning for your bank in 2018 and beyond? Are you confident in the people, systems and processes you are relying upon to help you achieve your goals?

Discover how you can gain confidence in the people, systems and processes you rely on by contacting us at 800-498-8877, option 2, or solutions@bankonitusa.com.

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Resource:
FDIC Quarterly Banking Profile - https://www.fdic.gov/bank/analytical/qbp/qbpmenu.html