“The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.” –Alan Greenspan
Geeze, did things happen this year. Sub-prime messes, fraud all around us, compliance blues, growth challenges, profit challenges, margin squeeze, new competitors – hell, all we missed was falling under the beer truck, and we’re not sure that didn’t happen, too, somewhere around August. This industry needs a Christmas break. We just don’t know whether to use it to crawl to the corner like a scalded dog, sit in the lotus position and drone our mantra, or just hook an IV straight from the thrice-spiked punchbowl right into the left arm and hope Aunt Gertie doesn’t catch us under the mistletoe.
Thank God there’s always one light at the end of the year’s tunnel, one event that leaves the industry with a final positive tick, one place to make sense of the nonsensical – the GonzoBanker Awards! Yes, we’re back, shamelessly, for a seventh year of recognizing the good, razzing the not-so-good, saluting the fine people who got through it all, and putting some “huh?” on persons and things that made our eyes glassy.
So, sit back and hopefully get a laugh and some food for thought as we suck in some air and face 2008. As usual, we were careful to make sure that….well, actually, we weren’t careful at all. Enjoy.
PART I: THE BANKER AWARDS
Worst Public Policy of the Year
Bush’s bailout of the mortgage subprime mess. We don’t know what they taught this guy in his Harvard MBA classes, but this idea helps out Wall Street and irresponsible consumer behavior. What’s in it for the cautious, hardworking middle class folk? Deficits, taxes and a credit crunch for all.
The Biggest Economic Surprise of 2007
A 3.90% 10-Year Treasury rate late in the year. Who’da thunk we’d still have an inverted yield curve after 100bp in rate cuts by the Fed?
Bank Sale of the Year
Compass Bank sells to Banco Bilbaio of Spain. Interesting deal based on a solid Texas and Hispanic market niche. Paul Jones deserves credit for fetching a great price and building a geographic footprint from Alabama (Texas, Florida, Arizona) that most bankers drool over.
Least Accretive Deal
We predicted this last year, Wachovia’s $24B acquisition of Golden West just prior to the subprime meltdown and California housing fall. “Obviously our timing was not good and we understand that,” said Ben Jenkins, general bank president.
Bank Merger of the Year
National Penn and Keystone Nazereth – two local mid-size players do an in-market deal that makes sense. Expect more of these with thin margins and tough banking economic times.
The ‘Who Do We Talk About At Conferences Now?’ Award
Goes to WAMU, Commerce and Umpqua banks. These institutions have been the darlings and best practice examples of innovative and dynamic banks. With one facing controversy, one sold and one with serious earnings challenges, we’re all going to need to find other thought rabbits to catch in the future.
Incentive Plan Blues Award
John Mack, CEO of Morgan Stanley, bravely announced that he will not accept a 2007 bonus after they announced a $3.56 BILLION loss in the fourth quarter. Maybe he only qualified in his plan if they lost less than $2 billion? Here’s hoping that the $40 million bonus he made last year will tide him over.
The Gonzo Patriot Award
Goes to Vantus Bank (Sioux City, IA) CEO Mike Dosland. While CFO of First Federal in La Crosse, WI, Mike was called up for guard duty as a Lt. Colonel overseeing an area north of Baghdad. Now, Mike’s 20-year-old son Robert is serving as a Specialist E-4 in an area only four miles from where Mike was stationed. Our Gonzo hats off to a brave banker and his son.
The ‘Watch Your Nickels and the Dollars Will Follow’ Award
Goes to Brent Beardall at Washington Federal. This nearly $10 billion thrift has maintained a simple I.T. environment and spends less than many sub-$1 billion community banks.
The BSA Never Dies Award
Goes to poor Union Bank getting levied $10 million from OCC and $10 million from FinCen – ouch!
The ‘Best Member Service Manifesto’ Award
Dale Schumacher, president, Tampa Bay Federal Credit Union, for “The Tampa Bay Federal Experience.” With vivid examples of member service throughout, you’re left with a complete picture of how the credit union approaches member service and, most importantly, you’re ready to live it yourself. Bonus points for translating the Experience into scorecard metrics.
Best Move for Shareholders
Regional Bank Synovus spins off Total System Services (TSYS). With payments exploding on all fronts and TSYS able to use its new independent currency for acquisitions, future capital gains for shareholders are sure to be in the air.
The Shortsighted Weasel Award
To all who were afraid to compete with Wal-Mart head-on and cried about its bank charter application – and the FDIC who stalled, crawled and hid. Now, watch the retail giant back-door its way into banking services without a charter….
The ‘Diversification Is Good… Except When it Isn’t’ Award
NetBank failed as various strategies to diversify its earning stream imploded one by one over the past several years. After acquiring RBMG to diversify its asset base, mortgage production along with the value of servicing rights plummeted. It incurred losses related to its entry into the RV/boat/aircraft lending business. Lease receivables that it purchased went south. The QuickPost service that it introduced to allow deposits at UPS locations lost over $1 million/month prior to being shuttered. It’s a sad ending for one of the pioneers in Internet banking.
The ‘Get ’em Oriented’ Award
Hank Hoell, EVP and chief operations officer at Liberty Bank. Hank personally visits new employees at every orientation session and has a very nice “rules of the game” presentation he gives that lays out the spirit and soul of the bank. Not a bad presentation if you can get Hank to share it.
The ‘Nichemaster’ Award
Goes to Kip Alberston, Chuck Leibold and Jeri Le Henry and Bankers Trust in Des Moines, IA. In a world of “me too” ideas, this team has built several major national trust niches (ESOP, Public Funds, Corporate Trust) at a $2 billion niche bank. Here’s proof that you don’t need to be big or in New York to build long-term, sustainable niches.
The ‘Getting Off On the Right Foot’ Award
Cindy Purcell, Banner Bank. When Banner acquired F&M, Cindy put together a management orientation, meet-and-greet, team building day for management at both banks. Very nicely done. Hell, we wanted them to buy us after the meeting.
The ‘Don’t Tangle with a Regulator’ Award
Vernon Hill, formerly CEO of Commerce Bancorp and now of Burger King franchises.
Greatest Commercial Loan Approval Process in Banking
Whitney Bank, New Orleans, LA. John Hope, Lewis Rogers and the rest of the gang at Whitney have developed a loan process responsive to regional bankers while also maintaining industry-leading credit quality. Congratulations on an amazing balancing act!
The ‘Mistress of the Painfully Obvious’ Award
Goes to FDIC Chairman Sheila C. Bair who in a March 2007 Order to Cease and Desist is quoted as saying, “Our concern has always been that banks make loans that borrowers are able to repay. We believe that the agreement with Fremont addresses this basic concern.”
Nicest Branch on a Street Named After a Beatles Song
Bank of the Carolinas’ Concord, NC, branch located at 600 Penny Lane.
The ‘Now That’s Distracting!’ Award
Royal Credit Union in Eau Clair, WI, has a board room that overlooks the Chippewa River and a tree that serves as home for an American bald eagle. Now, that’s a cool sight when he takes off.
Coolest Bank Product of the Year
Rabobank’s green credit card – this card basically makes sure your consumer purchases are “carbon-neutral” by purchasing credits each year. What timing for a growing sustainability movement across the world. And Al Gore hasn’t claimed any ownership of the idea at this point.
The ‘Who Says Non-Banks Aren’t Innovative?’ Award
Robert Arant was accused in April of running a $28 million “warehouse bank” out of his home, taking customers’ money and promising to keep their identities private. According to court documents, for a fee Arant paid customers’ bills out of six different commercial bank accounts and also offered debit card access to customers’ money. He was charged in the civil complaint with promoting abusive tax shelters and unlawfully interfering with internal revenue laws. In the understatement of the year, Arant said, “I’m not where I need to be as far as responding to the IRS at this point.” You think?
The ‘Whatever Happened to…?” Award – Job Descriptions
When is the last time anybody saw a job description that didn’t have “October 1996” at the bottom? Do we just not need them any more?
The Golden Paperweight Award
Daily retail sales reports. We just get the feeling that there’s a lot less being done with all this information than people think. Partially that’s because we were in bank and credit union branches all year and never witnessed one coaching session.
The ‘Where the Hell is this Going?’ Award
High yield checking and other programs that start with the premise that you should pay 6% for large checking deposits. We’re not saying that the other relationships you can get aren’t worth the loss leader, but we’d sure like to see a detailed ROI on this idea a couple of years from now.
GREAT LINES FROM BANKERS
PART II: THE TECHNOLOGY AWARDS
Technology of the Year
Image Exchange Goes Wild. While remote capture started to get hot last year (our 2006 Technology of the Year), all the stars aligned in the second and third quarters of 2007 for high-volume exchange between banks and the Fed, and now image exchange is simply “en fuego”. Branch capture is also gaining lot of steam. Bravo, banking industry!
The ‘Living Proof that Remote Deposit Capture is Mainstream’ Award
Goes to Cornerstone Advisors. Our 25-person company with only several dozen deposits and checks a month has a scanner sitting in our comptroller’s office. We like to call that area our “Item Processing Data Center.”
Pragmatic Technology of E-Banking Fraud Management Tools
While neural network fraud systems first focused on money laundering and check fraud, banks lit up this year with initiatives to improve their electronic banking fraud detection.
The Blue Light Special Award
Goes to ATM/debit switch contracts. With the rise of debit card and explosion of micropayments, vendors are in a good ol’ fashioned pricing slugfest to retain or steal these contracts. Electronic payments (EFT networks) have gotten even hotter. Rumors of a buyer’s market abound, with NYCE, Accel/Exchange and Star duking it out for the primo business. This part of the banking scene will only get more important as paper check volumes continue to plummet.
The ‘With or Without You’ Award for Innovation
In an end-run around financial institutions, Geezeo rolled out a platform allowing anyone with Internet banking account access to check their balance via text messaging regardless of whether the institution offers mobile banking. With CashEdge as a partner, Geezeo is offering account aggregation as well. On Geezeo’s Web site users can discuss ways to spend less and save more, track their spending habits, and set budgets for themselves.
The Enough Excuses Award
Goes to every financial vendor who has promised an integrated retail sales and relationship management environment with its core system and still throws up PowerPoint and brief demos to share its future “vision”. Enough of that crap – proven, integrated retail platforms should have been delivered by every core vendor at this point.
The Too Obvious Question to Ask
If we can’t even capture complete customer information in our existing core system, exactly how is a six figure CRM system going to help?
The ‘Mutually Assured Destruction’ Award
Decoupled debit arrives on the scene, with Capital One and Tempo announcing offerings for consumers and financial institutions. This was water cooler talk in June, and now we have seminars in how to prepare for it. Decoupled debit cards allow consumers to earn points with the card issuer while making purchases, with the bank account withdrawal coming via ACH instead of the bank’s EFT processor. This deprives the customer’s bank of interchange income but it also creates risk for the decoupled card issuer since no authorization check is performed. Banks can use Tempo to offer their own decoupled debit card offering, so they can not only increase their rewards program costs but also increase their ACH loss exposure while at the same time depriving the bank down the street of interchange income – rock on!
Best Core Conversion
Texans Credit Union in Richardson, TX. Greg Gallant and Tim McCoy pulled off the smoothest conversion we’ve ever seen in spite of their vendor (which shall remain un-named) running through two project managers in a seven-month project.
Eastman Credit Union, Kingsport, TN. Except for the live snake in the fourth floor board room and a vendor (who shall again remain un-named… but it was the same as Texans’) running through three project managers during the project, Darrell Dinsmore and his team did it up well.
Dumbest SmartCard Implementation
The Britney Spears Card. Internet PLC, a U.K.–based company, developed the SmartFlash Web content and sold kits including a card and a reader via the Web and at her concerts. The Britney smartcard provided access to a secure Web site with video clips, e-cards to mail to friends and a preview of her upcoming video game. More than 25,000 kits were sold at $29.95 before they were discontinued.
The ‘Deer in the Headlights Technology’ Honorable Mention
Group collaboration on Word/Excel documents. It might help to train everybody in how editing actually works before trying this. Just a thought.
Overheard while walking through a financial institution call center:
“Yes, ma’m, I’m trying to help you, but I’m just the security guard and they asked for volunteers ‘cause there was way too many calls coming in…”
Also overheard that same day:
Frustrated customer: “But you have billboards all over the place trying to recruit new customers and you can’t even take care of the ones you have.”
Customer services rep: “Yes sir, I’ll make sure to let the marketing folks know you saw their billboards. Thank you for calling.”
Best Theme Song for a Mock System Conversion
“Jesus, Take the Wheel” (Eastman Credit Union)
PART III: THE VENDOR AWARDS
The ‘A Place Called FisaCheckaCori’ Award for Vendor Acquisition of the Year
While digesting its Corillian acquisition, CheckFree itself was acquired by Fiserv for a cool $4+ billion. Fiserv gets a top-tier provider of Internet banking and payment services, but key questions include “Will CheckFree’s customer base stick (BoA in particular)?”, “Can Fiserv back up its cost savings targets?”, and finally, “Will vendors coopetate?” Coopetate? Sounds illegal in some states, but Pete Kight insists that core vendors will both compete and cooperate with a combined Fiserv/CheckFree in a business model of “coopetition”. And if you use a made-up word three times, it’s yours – so here’s to “coopetate”… see ya at the top of the Google search results, baby!
The Vendor Endurance Award
Ed Ashenden, Metavante. While vendor sales and product folk tend to turn over every year and jump ship to the latest hot application, Ed has been plugging away working on improving Metavante and listening to client likes and dislikes. A loyal and honest trooper in an often unreliable industry.
The Mouse That Roared Award
Goes to all the alternative payment providers such as PayPal, Obopay, and Revolution Money. Mobile payments may explode on Facebook or AOL Instant Messenger long before banks know what the hell’s going on. Stay tuned.
The User Group of the Year Award
Goes to the MISER user group. These folks have hung in there, loyal to their product in the face of relentless corporate indifference from a succession of owners, since before Ross Perot learned to whine. Stability for MISER now appears in hand after decades in the corporate wilderness. (Note to Fidelity: Don’t mess with these people!)
Newcomer of the Year
Q2 Software showing signs of being The Little Engine That Could. Watch out, DI. This group, mostly ex-Q-Up wizards (but why in the hell did you sell, Hank?), has a good chance of really getting it right this time.
The Joining the Movement Award
Harland’s Phoenix Systems group, traditionally a bank player, announced that it is jumping headlong into the credit union market. This is going to take some serious development, but we welcome more viable products into the credit union world. Remember, shares = deposits, members = customers, and net capital contribution available for reinvestment for the betterment of our members = profit.
Banks – The Metavante team. We don’t see any one particular standout, but the team together is making waves with prospects. From presenters to product experts to slick corporate go-betweens, the team at Metavante is proving adept at what many of their competitors are not: listening to prospects and building a demo that is relevant and targeted.
Credit Unions – zzz-zzz-zz-z. Credit union presenters have lost their steam and energy, almost across the board. The nights on the road are catching up. No one set themselves apart this year, folks.
Golden-Throated Pitchman Award
The award for the winning corporate overview and demo support guru goes to Fran Kester, MISER. Fran opens a MISER demo and immediately captures the audience with a friendly, genuine and plainspoken charm, plus he is a walking, talking encyclopedia of the MISER client base. Wanna know which $1 billion+ MISER clients use APPRO for consumer origination? Fran will rattle them off and make you feel smart for asking the question. Santo taught you well.
Gone but Not Forgotten
We’ll miss the persistence, energy and raw decency of the late Steve McDaniel.
Whenever we see the growth of Open Solutions, we’ll remember that it all started from a “data model” built by the late genius Cliff Waggonner.
PART IV: GREAT MOMENTS IN DEMOS
Every year we think we’re going to run dry on remarkable moments in system demos. Every year we are happily wrong. Some 2007 contributions:
PART V: FEARLESS GONZOBANKER 2007 PREDICTION RESULTS
Well, how did we do on our-stick-the neck-out predictions for 2007? The humiliating results:
Legislation will be introduced by the new Congress to reduce the amount of overdraft/non-sufficient fees that a bank can collect from an individual account. Banks will clamor that the recent round of YTD fee disclosures addresses the concern and, furthermore, credit unions should have to pay income taxes. —Michael Croal
Probably right, just a year or two early, except for the fact that we might have heard a banker or two hint at taxation for credit unions.
We’ll see a significant exodus of senior staff at both Fiserv and OSI due to Fiserv 2.0 and the privatization of OSI. Due to the nature of the industry, look for the loss at Fiserv to be a gain at OSI and vice versa. Various explanations of the moves will be offered, the most common being “he/she is pursuing other business interests.” —Carl Faulkner
Well, the movement may not have been significant, but the “pursuing other interests” line was played like James Galway tooting the flute.
While CU mergers are being talked up big at board meetings across the country, large CU mergers of equals will be more talk than walk next year. These deals are going to be sticky and will face a TON of member and media scrutiny. Sure, some small CUs will continue to get gobbled by the big boys, but the mega-mergers of equals everyone’s predicting are just not going to happen in 2007. —Scott Hodgins
By the third quarter of next year, the banking industry will have acknowledged that the screeching slowdown in the housing boom and real estate cycle will create greater credit losses than any executive team had projected. Increasing provisions and weak earnings late in the year will lead to many banks throwing out their 2007 earnings with either large write-offs or a merger/sale transaction. —Steve Williams
Well, this is just showing off. Has a prediction ever been more on target? Was anybody else saying this last year?
An increasing number of financial institutions will switch to Linux and open-source type applications, especially with the release of Microsoft’s Vista platform. The multiple options alone in determining which Vista platform to select will prompt some to migrate; whereas others will migrate because of the new Microsoft licensing structure. That said, the boys in Redmond will continue to buddy-up to the open-source cult; however, that will probably result in yet another legal battle for the software giant. —Tripp Johnson
Hmmm. This was probably a bit of a stretch for 2007, but what do you expect from a guy who plays with all that open source stuff? BTW, is open source really a cult?
Experienced talent will be even more difficult to find in 2007 than in 2006. From bank ops people to experienced senior lenders—once common as Depression-era unemployed selling apples on street corners— broad experience will be costly and hard to find. Mergers without layoffs are coming. —Bill McFarland
Probably right, although layoffs looked pretty heavy. There may also be a former mortgage originator or two pursuing the apple sales idea.
The use of formalized portfolio management techniques for management and governance of technology projects will see a sharp increase as institutions face demand for projects that far exceed available resources. —Paul Novotny
Don’t know about portfolio management stuff, but at least the part about too many projects was right. 50 out of 100.
The costs associated with micro-debit transactions will have merchants and bankers threatening to sue processors if the fee structure is not changed. —Terence Roche
Bit of a whoosh, but has anybody noticed Tempo and the like trying to change the fee structure anyway?
Private equity firms will wake up to the fact that there’s still some money to be made in banking. That said, a private equity firm(s) will take a publicly traded bank private, funding a multi-state acquisition buying spree. Publicly traded banks, disgusted with the heavy burden of regulatory compliance, will embrace the opportunity presented by the PE firms to be more aggressive and nimble. —Scott Sommer
Well, at least the part about banks being disgusted with regulatory compliance is true.
Mergers and acquisitions will be top of mind for all financial institutions. Along with large bank deals like the Bank of NY-Mellon announcement, expect several large credit union deals in ’07. Specifically, I predict at least five of the top 100 credit unions will announce they are merging with another $1B+ credit union. —Eric Weikart
And the five were…uhhhhh…….hmmmmm….Ok, maybe not 100% on target, but Eric’s young and gets lots more shots at this.
PART VI: FEARLESS GONZOBANKER 2008 PREDICTIONS
A major wireless telecommunications provider will announce an agreement with a major bank to allow SMS purchases to be directly debited from the checking account. —Michael Croal
As Fiserv 2.0 runs wild, Corillian and CheckFree will be standard, tightly integrated offerings for all of Fiserv’s bank and credit union core products. Hey, a boy can dream, can’t he? —Scott Hodgins
Web 2.0 will gain greater adoption within the financial services sector. With the launch of Zopa and its partnership with six credit unions, community banks will begin to panic and social networking sites will begin appearing on numerous bank Web sites by the middle of the year. Furthermore, MySpace will find a way to incorporate some form of financial services into its site, creating even longer term loyalty from its Gen Y customer base. —Tripp Johnson
#1 – Trout shortage in the Northwest; Carl Faulkner’s on the business end of a fly-fishing rod.
#2 – The core system market will get more competitive. More new players than last year and more bankers looking than in the last five years. Open Solutions will be in the hunt again, after a year of BISYS-induced indigestion. ITI customers will be in their cross-hairs. —Bill McFarland
Embedded chips in cell phones will begin to chip (no pun intended) away at the plethora of payment cards one needs to carry in their wallet. Caveat: Next year may be too early, but time to get this one on the table. —Paul Novotny
By the end of 2008, declining volumes, increased support costs and a very hard focus on cost reduction will reduce the number of bank off-site ATMs by 33% to 50%. —Terence Roche
China, tired of dabbling around the edges investing in T-bills, pieces of banks (Morgan Stanley) and private equity firms, will send one of its top banks to the United States to either acquire a sizeable bank or de novo (most likely in the California marketplace). —Scott Sommer
Near-ubiquitous availability of text messaging, increased adoption of text messaging in the 25-44 demographic, and non-bank entrants in the space will result in SMS-based mobile banking having broader adoption than WAP and native clients combined. —Quintin Sykes
Most banks will realize that their high yield checking product is a losing proposition and will nix it. Those who don’t will go on believing that these price hungry customers are “potentially” their most profitable. —Eric Weikart
The foreign banks will go hog-wild with U.S. acquisitions in 2008. With many bank stocks losing 50% of their value and the dollar down more than 20% in two years, a billion dollar acquisition two years ago is effectively less than $400 million now. That’s a hell of a deal to expand financial services in the largest world economy. Scottish, Spanish, Irish, French, Italians, Chinese… look for acquisitions galore. —Steve Williams