NEWS RELEASE 2008
ABA Media Contact: John Hall
(202) 663-5473
E-mail: jhall@aba.com

ABA SURVEY SHOWS COMMUNITY BANK STRATEGIES FOR SUCCESS
One-in-three plan to acquire another bank in the next five years

ORLANDO, Feb 19 – Community bankers plan to compete for market share in 2008 by acquiring another institution, outsourcing traditional functions and harnessing technology, according to an American Bankers Association survey released today at the ABA National Conference for Community Bankers.

More than one-in-three (37 percent) of the 656 bankers responding plan to acquire another bank in the next five years.  Only seven percent expect to be purchased in that time. But respondents indicated that acquisition decisions are just part of competitive mix. 

"The survey results illustrate community bankers' desire to do more than their competitors, to offer products with more customer appeal, to improve business channels and more," said Steve Cocheo, executive editor of ABA Banking Journal, which sponsored the survey along with ABA's America's Community Bankers Council.  "It is clear that many of the bankers responding intend for their institutions to not only to compete, but to win."

According to the 12th annual ABA Community Bank Competitiveness Survey, many banks hope to steer their bank to success by outsourcing some functions that were traditionally performed by bank staff.  

Overall, more than one-third (37 percent) of the banks responding currently outsource some functions, and among banks over $1 billion, nearly half (49 percent) do so.  Topping the list of traditional functions currently outsourced were internal audit (53 percent), loan review (49 percent) and compliance audit (46 percent).  These were followed by item processing (45 percent), ATM servicing (28 percent) and IT management (25 percent).

"It's interesting to note that of the top four outsourcing choices, one is item processing, a mechanical function. But the other three are 'brain work' – all essential but requiring deep and expensive expertise," said Cocheo.

The majority of respondents outsourced to cut costs and obtain expertise – both at 60 percent – without having to create a full time position.  And this practice will grow.  Of those banks that do not currently outsource, 24 percent are actively considering outsourcing in the future.

In spite of the trend toward outsourcing, the survey results indicate that having technology expertise under the bank's own roof not only remains important, but actually increases with growth.  Overall, 56 percent of community banks use their own staff as the chief source of tech expertise, followed by consultants (20 percent) and vendors (12 percent).  But for banks over $1 billion that figure jumps to 96 percent. 

This may explain why respondents ranked IT officers (49 percent) as the second most difficult position to fill, with business lenders (50 percent) in the top spot.  Compliance officers round out the top three with 47 percent saying qualified candidates are "very hard" to find.

The survey examined bankers' opinions on a wide range of other topics.  Some of the key findings:

On remote deposit capture of checks:

  •  The number of community banks that offer RDC more than doubled from 16 percent in 2007 to 38 percent today. And another 25 percent plan to offer in 2008.
  • Most respondents (54 percent) said that RDC remains unprofitable. But 58 percent said they offer it purely to attract new business, and a whopping 71 percent used it to retain business clients.

On health savings accounts:

  • More than half of the banks surveyed do not offer HSAs.  However, 43 percent do offer them – a figure that represents a jump of 31 percent since 2007.
  • Employer programs (39 percent) have proven to be the most productive market for HSAs, followed by professionals (29 percent), retail customers (24 percent) and other (9 percent).

On examinations:

  • Bankers reported a shift in focus by exam teams from the Bank Secrecy Act  (35 percent) to commercial real estate lending issues (39 percent), although BSA remained a very close second.
  • Enterprise risk management continued to be a focus, even by exam teams visiting the smallest community banks.  Bankers said examiners main expectations were to have a written program (66 percent), risk rating system (54 percent), with risk training (13 percent) and risk committee (11 percent) trailing behind.

For complete results, and to view the entire 22-page ABA Community Bank Competitiveness Survey, visit http://www.nxtbook.com/nxtbooks/sb/ababj-compsurv08/index.php.

The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America's economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry's $12.7 trillion in assets and employ over 2 million men and women.

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