Branch Profitability Strategies Presented at Central Jersey Breakfast Series Meeting
Strategic Planning Specialists from the Kafafian Group Provide Expert Commentary and Recommendations
The NY/NJ Chapter recently held the second of a planned series of three breakfast meetings designed specifically to enhance the professional development of financial decision makers at community banks in the central New Jersey region. The meeting was held at the Radisson Hotel of Freehold on Thursday, March 10, 2016 in Freehold, NJ. The Chapter holds regular monthly meetings at the Stony Hill Inn in Hackensack, NJ which primarily serve community bankers in the northern New Jersey and metropolitan New York regions. The third central New Jersey breakfast meeting is scheduled on Thursday, May 5, 2016 which will also be held at the Radisson Hotel of Freehold.
Jeff Marsico from the Kafafian Group presented Branch and Deposit Profitability: 2006 vs. Today.
Chapter Treasurer Stephen Feehan welcomes attendees to the Chapter's second Central New Jersey Breakfast Series meeting.
Jeff Marsico from the Kafafian Group discussed the "sorry state of branch profitability" compared to a decade ago.
Jeff Marsico, Executive Vice President and Gregg Wagner, Managing Director of the Kafafian Group presented Branch and Deposit Profitability: 2006 vs. Today. Each of the speakers has more than 20 years of experience providing key management solutions to the community banking industry. The speakers described today’s “sorry state of branch profitability” by showing that branch profitability at community banks has declined significantly over the past ten years. They noted a 63% decline in direct branch profits and a 6.3% decline in the number of nationwide branches compared to 2006. Historically low interest rates, smaller asset-liability spreads and dramatically smaller fee income were described as the “culprits” of the decline.

Jeff and Gregg clearly showed how the current branch unit profitability has declined vs. 2006. Gregg explained that the average deposits in each branch has increased due to a smaller number of branches. Jeff noted that the dramatically smaller spread from low interest rates combined with lower fee income has reduced net pre-tax income from a significant profit of 92 basis points in 2006 to an average net loss of 22 basis points in 2015. The speakers explained how the significant changes in the loan to deposit mix have adversely affected deposit profitability as well. They emphasized that core deposits are much more difficult to maintain and have much greater value than a fully loaned up position.

The speakers presented the following recommendations and key “takeaways” that financial managers should consider to improve branch and deposit profitability:

§  Pay attention to growing deposits and maintaining the traditional core deposit mix;

§  As loan demand challenges your bank’s ability to fund it, competition for deposits will increase.

§  Banks need to continue to evolve the structure of their branches to meet what is demanded by customers… loan and investment assistance and advice, and problem solving.

§  Branch cost structures should decline relative to the branch deposit size.

Topic and Speakers

Branch and Deposit Profitability: 2006 vs. Today

Sara Higgins Photo
Gregg Wagner
Managing Director
The Kafafian Group
973-299-0300 x114

Slide Presentation

Sara Higgins Photo
Gregg Wagner
Executive Vice President
The Kafafian Group
973-299-0300 x120

Attendees listen to the presentation by the Kafafian Group after enjoying a hot and cold breakfast buffet.
Financial managers learn current perspectives on branch profability presented by Gregg Wagner.
A Member closely follows the presentation by the Kafafian Group.