Hello, my name is Kelly Coughlin. I’m the CEO of BankBosun. I have the unique benefit of being both a CPA…I like numbers. Plus, I spend a lot of time thinking about how I can help community and regional banks capture market share.
I know that banks need to be careful and cautious about their expenses. And when it comes to revenue creation strategies and tactics. True to form, you bankers are extremely careful and cautious. Well, that’s probably a good, because with all the risk, regulation and revenue threats facing you daily, you are still standing. So, you are doing something right!
In a podcast titled “A Banker’s Voice is Mightier than the Pen and the Sword.” I talked about how community and regional banks need to utilize their voices through audio podcasting to get their message communicated, to build brand, get new customers and generate new revenues. If you haven’t listened to that, well this presentation isn’t gonna really make much sense. If you listened to the previous podcast, you know I am strongly recommending your bank implementation a podcast program to build your brand and get new customers.
I guarantee…and again, I don’t say that carelessly and loosely, you can increase revenues in many if not all your business lines at the bank, through the utilization of audio podcast media. Whether it be for:
- Wealth management
- and Trust…
Audio podcasting will generate new customers and revenues…guaranteed…full stop…end of story.
You create a podcast channel with your brand – ABC Bank Podcast Show – once or twice per month with one or more representatives of your company from your CEO down to your product technical specialists who would be interviewed and recorded. We talk about your industry; your market space; the needs, issues and challenges your customers face; what your industry does to help them deal with those needs, issues and challenges; and why and how you are so much better and different than anyone else.
Let’s face it though. With any new idea that requires a capital or expense investment, there really are three critical questions to ask and answer. What the cost, what’s the benefit and what’s the risk?
On average, it’s going to range from $3,500/month to $5,000/month. But there are a couple tips and unknown tricks a bank can and should use to reduce that or possibly take that down to zero. Let’s assume a net interest margin of 3%. To recoup a $40,000 – $60, 000 investments, the strategy would require about $1.5 to $3 million in deposits or loans. Or if you are in the wealth management with an average fee of let’s say 1.5% it would take between $3 – $6 million in assets under management. Or some combination of these…all are achievable, but certainly contain an element of risk and likelihood. Another approach is to use one or two of your existing financial assets.
Many banks hold over 40% of their financial assets in municipal bonds. Munis have their own credit risk, duration risk, and diversification risk that I have talked about in other podcasts and videos.
Let’s say your muni holdings average AA rating, 10-year duration at 2.5% yield. Let’s say you reduce the inherent concentration risk in municipal bonds and allocate $5 million to Bank Owned Life Insurance with an average yield of 3.75%. Higher yield, lower risk. The Muni portfolio generates cash flow income of about $125,000 per year and $10,000 per month. BOLI generates accrual income of about $187,000 per year and $15,000 per month
Now, you might say, with Bank Owned Life Insurance I can’t pay a cash expense with an accrued revenue. True. But here is a little secret that few will let you in on. Bank Owned Life Insurance pays a cash servicing fee to the servicing broker and agent. This fee is paid by the insurance company, not the bank. And THAT fee can pay the podcast expense. So, the expense is not reflected on your income statement. So, your investment is zero…actually, you generate an extra $5,000/month in that example through the higher yield from BOLI vs Muni in our $5 million example. And if you already hold BOLI on your books, in most cases we can modify the broker/agent of record so that we can utilize that fee to pay for this revenue generating program.
Now your current broker-agent might not be real keen on this because that is money out of his or her pocket. So, you are going to have to decide whether it is better to keep him or her happy or keep you shareholders happy. I think you know how I would vote on that.
So, that’s it for me. If you are interested in growing revenues…please contact me. I have been telling you all along I am committed to helping community and regional banks thrive and challenging ecosystem. I guarantee I will help you with this.