the blog: TWICE FOCUSED with JIM JONES

I’m in Milwaukee, WI, along with almost 300 attendees at the 2009 Mortgagebot Partner Conference.  My presentation, on June 9, 2009, was Online Lender Best Practices:  New Case Studies Reveal Success and Strategies.  Here at First Wellesley we’ve just completed four new case studies for Mortgagebot.  These case studies focus on lenders that have deployed Mortgagebot online technology and achieved some amazing business results.  My talk focused on Macon Bank, Franklin, NC; LGE Community Credit Union, Marietta, GA; Illini Bank, Springfield, IL and Indiana Bank & Trust Company, Columbus, IN.

The common themes of the lenders were that they all:

• Identified critical business objectives that prompted them to search for advanced online POS technology
• Selected Mortgagebot PowerSite® technology
• Created customized pre-launch strategies to build initial interest in their new online channels
• Implemented specific ongoing strategies and tactics to increase the number of online channel applications
• Produced consistently impressive results including high year-over-year online traffic growth, reduced app costs, faster cycle times and improved back-office productivity

In between sessions, I had an opportunity to network with lenders from around the country.  What I continue to find amazing is the extremely high volume of loan applications that have been received year-to-date by these lenders.  Many lenders have already exceeded their total 2008 app volumes.  Many have employed six and seven day work weeks to process the higher volumes.  And, many report a “flight to safety” trend that has led waves of consumers and realtors back to depository institutions for mortgages.  I was encouraged to hear many great success stories that are occurring during the depths of an economic recession.

May 13, 2009, found me in Augusta, Maine, delivering “The Six Factors Defining the Industry’s Next Five Years.”  The event was held at the Augusta Civic Center, famous for being the historic site of Elvis Presley’s only Maine appearance (May 24, 1977).  Elvis played Augusta and now I had my opportunity!

My strategic outlook session focused on the six factors defining the future of the banking industry.  We used our SurveyMatters^TM technology to conduct instant polling of the 175 member audience.

Here are some of the polling highlights:

• The directors were split on the possibility of a fourth quarter economic turnaround. A slight majority (54%) predicted that the 4Q09 GDP will be positive. A slightly smaller group (46%) called for a negative 4Q GDP. This split illustrates the high degree of short-term economic uncertainty that banks face this year.
• Directors don’t see new banks forming in Maine next year. More than three-quarters of attendees believe there will be zero de novo banks opening in 2010. This outlook contrasts with Massachusetts directors that project several de novo banks opening in Massachusetts in 2010.
• Ongoing compliance costs seem to be rising for many banks. Many banks have added compliance employees and/or outsourced compliance activities to respond to higher regulatory requirements. Some banks also believe they will add additional staff and/or outsource more compliance tasks in the future. This response shows one real cost of the complex compliance environment – higher employee and outsourcing expenses.
• Directors overwhelmingly believe that robust Internet services and mobile banking are essential to capture today’s new customers – Gen Xs and Ys. To that end, a small number of banks already offer mobile banking and many more plan to launch mobile banking soon. It appears mobile banking in Maine will have a relatively rapid bank adoption rate.
• Attendees also reported that core deposit competition has heated up. In fact, recent core deposit competition is reported to be greater for many banks as compared to residential mortgage and C&I lending competition.

The city of Augusta was great and the directors were highly engaged and focused on the current state and future of Maine’s banking industry.

OK, so it wasn’t a long road trip for me!

The event was the Massachusetts Bankers Association’s Directors and Trustees College.  The audience included about 80 bank directors and trustees.  My topic was “Banking Industry Trends and Strategic Risk Management.”

We used SurveyMatters^TM, our instant polling service, during the session.  Directors answered polling questions about the economy, competition, consolidation, the Internet, customer demographics and regulation.

Here are some of the polling highlights:

• Attendees predict a steady pace of continued consolidation of area banks fueled by merger activity. The top reasons they see for these mergers include earnings pressures, rising costs and pursuit of economies of scale. Many directors were bullish, short term, on de novo banks, predicting several brand new Massachusetts banks opening next year.
• Over 90 percent of directors and trustees rely on the Internet. Email, online purchases, news, banking and travel booking are the primary Internet activities of the group.
• Banks are already confronted with the challenge of satisfying the distinctly different preferences of two customer segments – bank customers that conduct branch transactions and customers that mostly use the Internet for banking. Most attendees said that their bank’s primary customer segments, Boomers or Swing Generation consumers, often prefer the branch. Their new customers, however, are most likely to be the Internet-focused Gen Xs and Gen Ys. It became clear that some banks must continue to focus on Internet/mobile banking technologies to capture these Gen X and Y customers.

One strategic message that I delivered was that greater technology investments by banks will require greater vendor due diligence and more comprehensive risk management to mitigate any potential problems that could accompany a heavier reliance on advanced banking technologies.

Some good news discussed during the day was the solid footing of the Massachusetts banking industry during the midst of a “once-in-a-lifetime” economic downturn!

All economic recoveries are local!

Recently, I had the pleasure of presenting “Online Lending Breakthroughs” at the ABA’s Annual Real Estate Lending Conference held in Tampa, FL.  My presentation, sponsored by a long-time client, Mortgagebot, LLC, showcased three banks that have been highly successful with online mortgage lending.  While in Tampa, I also attended sessions and networked with bankers.  I’d highly recommend the ABA RE Lending Conference to you – great content, solid speakers and valuable networking.

Dr. John Silvia, Chief Economist, Wachovia Corporation, delivered a highly informative economic message to the group.  Dr. Silvia, tasked with delivering a tough topic – economics – was easy to understand, direct and provocative.   Here are my thoughts as a result of his message:

• A positive GDP is forecast for 4Q2009.  However, and this is a big However, the recovery will vary widely from state-to-state.  Some communities will spike at 20% unemployment while others will barely break 6%.  Some local recoveries will be extremely soft and slow – others more rapid.  My takeaway is that economies are very much local. It’s important to follow the national and state economic numbers, but it’s essential to follow your market’s economy.  That’s what matters most to you as bankers.
• Dr. Silvia used the word “tricky” multiple times in his presentation, confirming what you already know – this recession is the most difficult recession to understand and predict in our lifetime.   The duration, severity and permanent changes are still largely unknown.  Bankers and lenders must be cautious until the market recovers to avoid big problems.
• The economy is undergoing permanent structural changes in major business sectors, including financial services, auto, retail, health care and education.  Bankers have to plan for a new economic reality for their retail and business customers.  Local auto dealerships will close.  Retail chain and local independent stores will shut their doors.  Newspapers will fold as more readers obtain their content online.  The rules for success for many industries are changing forever.  This will affect loan underwriting, loan concentrations and deposit and loan activity.
• Inflation may become the next big economic issue.  The recent moves by Treasury and the Fed to flood the market with dollars, the proposed federal budget, huge deficits and the demands by China and other countries for higher risk adjusted yields will drive up interest rates, trigger inflation and raise mortgage rates.

Speaking of lending, what’s happening with bank’s mortgage application volumes?  The positive piece of information I learned talking with lenders is that many bank’s mortgage departments are working overtime again, handling a huge inflow of refinances.  Lenders are seeing up to four to six times the application volumes they saw last year.   Consumers have turned back to the banks.  And, there is no substitute for low rates to drive volumes!

Monday, April 20, 2009, found my wife and me at the 14 mile mark of the 113th Boston Marathon volunteering on behalf of my running club, the Greater Framingham Running Club. Marathon day served up three noteworthy stories among thousands that may apply to those of us in the banking and mortgage industries.

Needham Bank, a local bank in my Wellesley, MA, community, used creativity and personal initiative to participate in the Marathon day experience. Leaving the cozy confines of their branch, the bank set up a sidewalk booth outside where staff personally handed out free popcorn and water to the hundreds of spectators that passed their location during the day. The photo says it all -bankers personally engaging the public at a world-famous event.

Needham Bank employees could have taken the day off and joined the ranks of spectators. These bankers, however, took advantage of a major event that literally passed the doors of their branch and demonstrated creativity and initiative.

Two moving examples of inspiration were among of the thousands of personal marathon stories. Richard Whitehead, 32, of Nottingham, England, inspired the crowd with his amazing achievement. As you can see from the photo, Richard is a double amputee. He sped by us at Mile 14, finishing the marathon in 3:02:44. A world record holder, he conquered a grueling course in an exceptional time. Facing cold temperatures, headwinds and the famous hills of Boston, he competed with the objective of recruiting other amputees to join him in the sport.

Team Hoyt, Dick and Rick, completed their 1,000 athletic event Monday. Once a Massachusetts inspiration, Team Hoyt has become an internationally known team with thousands of fans. I’ve run many races with Team Hoyt including the 1983 Bostonfest Marathon where we ran six-minute miles during the early part of the race. Ultimately, they left me in their wake as they powered through the course. I’ve always been impressed with their persistence.

One takeaway for those of us in financial services is this – persistence will get you to the finish line. We too can handle times of adversity and can accomplish things that some may think impossible. Richard Whitehead and Team Hoyt, along with many other inspiring personal examples, demonstrated this.

Another takeaway is that banks can connect with their communities by creatively taking advantage of popular community events. Bankers can meet their neighbors, one-by-one, and begin the process of converting consumers into long-term customers. Needham Bank showed us an example of this strategy.