Net Operating Analysis Critical To Success, Consultant Tells Community Bankers Customer Retention, Profitability can Counter Nonbanking Competition -- John Floyd

John M. Floyd, a nationally known profitability consultant to financial institutions, advises community bankers to take a "big picture" look at their operation if they are to survive and thrive against nonbank competition and lagging lending activity. He spoke in Phoenix AZ (Scottsdale) as an expert invited by the American Bankers Assn. to the 25th Nat'l Conf. of Community Bankers.

PHOENIX, AZ (PRWEB) February 24, 2005 -- The proliferation of nonbank banks" and the long downturn in lending activity are reinforcing the importance of timely net operating analysis by community bankers, says a 33-year veteran of financial consulting.

John M. Floyd, CEO and Founder of John M. Floyd & Associates, Inc. (JMFA) of Baytown, TX, near Houston, addressed 175 attendees at the 25th National Conference for Community Bankers. The NCCB ended its four-day event at the JW Marriott Desert Ridge Resort in Scottsdale, AZ, on Wednesday. The American Bankers Associations invited Floyd as an expert on profitability.

Between 1980 and 2004, U.S. banks share of financial service business shrunk from 58% to 18%," Floyd emphasized. Nonbank institutions now enjoy 82% of this business. If community banks are going to survive and thrive, it is imperative that their managements constantly focus on return on assets and earnings...on operating costs as a percent of operating assets.

You must know the salary and benefits per million dollars worth of operating assets and how you stack up in every category against S&Ls and credit unions," he said as he walked the audience through a series of tables and comparison charts. He focused on income with credit risk and income with duration risk.

Increasing non-interest income (NII) is the most direct and quickest route to improving profitability," Floyd stated. Faster than sales and service improvements, expense reduction and even account acquisition. And value-added services, like a well managed overdraft program, will help retain customers as well as attract new ones."

JMFA, founded in 1973, is a leading provider of NII or fee income products to financial institutions. The company has installed profit improvement programs in more than 2,000 banks, thrifts and credit unions, adding billions in increased pre-tax earnings for its clients in 49 states and Central America. The firm, which has teamed with financial organizations in about 25 states, has successfully implemented variations of its JMFA OVERDRAFT PRIVILEGESM program in more than 900 institutions. (www.OverdraftPrivilege.com)

About 2,500 of the 18,000-plus financial institutions in this country now have defined and communicated overdraft or 'courtesy pay programs," he said. And in our vast experience, a financial institution can increase its income from nonsufficient funds (NSF) items by 50% to 300%. Our clients have an average 119% improvement in the first six months."

He urged the bankers to look carefully at improving operating income and competitive advantage; preventing profit leaks and increasing cross-sell income, market share and retail contribution, as well as enhancing merger and acquisition success. He recommended -- as needed -- operational, financial and delivery systems re-engineering; training, incentive and earnings enhancement programs, and product, service, pricing and technology improvements.

Customer Satisfaction = Customer Retention

Floyd posed two crucial questions: Are your customers satisfied? What have you done to change the way you grow and retain customers?" He estimated the median annual customer attrition rate at 14%, and it ranges from 12% to 30%.

If you are going to grow assets and retain customers simultaneously, you are going to have to offer new products and services, redirect fees that are now going elsewhere and attract new customers," Floyd said.

The community bank philosophy of focusing on the customers well being need not be discarded. Regulatory-compliant and consumer-friendly products and services like overdraft privilege are a win-win-win for the consumer, the merchant and the community banker." He listed the benefits as:

• Builds customer loyalty;

• Maintains a competitive bank posture;

• Redirects fee income now going to check cashers payday lenders and credit card firms;

• Increases fee income without raising accountholder fees, and

• Start-up costs are low.

The primary users of overdraft services are middle-income, employed consumers with $50,000 or more in annual household income who have lived at their current address 4½ years, Floyd noted. They have an average four years in their present job and 32% own their homes, and our studies show that they not only welcome but are demanding such discreet, value-added programs."

JMFA Overdraft Privilegesm is a service mark of John M. Floyd & Associates, Inc.

For More Information Or Interviews:

Steve Swanston, EVP-Sales, John M. Floyd & Associates, Baytown, TX, 800-809-2307;

www.OverdraftPrivilege.com; Steve.Swanston@JMFA.com

Preston F. Kirk, APR, Kirk Public Relations, Austin TX, 830-693-4447; kirk@281.com

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