ABA Banking Journal - September 2008 - (Page 16)
Community Banking Pass the Aspirin: Outsourcing IT p. 20 AN ABA BANKING JOURNAL ROUNDTABLE DISCUSSION Diamonds, Don’ts, and Dogs of fee income Noninterest income comes in many forms—including not letting your staff waive all the fees the bank should be receiving t’s the rare banker today that can boast of a surefire competitive lock, but Jo Heckman can. It’s in Tok, Alaska, home to 1,400. Tok lies 93 miles from the Canadian border, but up in the 49th state, that’s just next door. The community designates itself as the “Gateway to Alaska.” Tok’s geographical distinction is being the only year-round way of getting into the state, or leaving it, by road. Tok’s banking distinction is that it is home to one of the five offices of Fairbanks’ Denali State Bank, a branch that enjoys a special advantage—no competition. “That’s a fun location to have a branch in,” said Jyotsna “Jo” Heckman, president and CEO of the $234.7 million-assets institution. “It’s a low-cost operation for us, and yet it does a very good job of providing full-service banking to an area where there’s no other bank for more than 200 miles.” Do you envy Jo Heckman’s competitive environment? You shouldn’t. Isolated Tok doesn’t represent all of Alaska. Fairbanks itself is a hotbed of banking competition, much as any given market in the lower 48. “We’re about 80,000 people,” said Heckman of Fairbanks, “and we’re overbanked.” There are just too many financial institutions in Fairbanks, said Heckman. “We have the big ones like Wells Fargo and Key,” she said, “and we also have competitors like Alaska USA By Steve Cocheo, executive editor I Federal Credit Union, the nation’s fifth-largest credit union, plus lots of little credit unions.” With such advantaged competition, staying open hinges on “taking excellent care of the customer, being the hometown bank,” said Heckman. “My staff’s core group has been with the bank since inception, so we’re pretty well-known people, trusted people, whom customers can come in and feel good about working with.” However, when people know people, they tend to want to do something for them. And Heckman said part of the “hometown bank” mantle is a tendency to waive fees for good customers. Given the stiff competition on the rate front that Denali State faces, finding new sources of noninterest income ranks high, but stopping fee-income “leakage” on existing charges can practically be a source of fee income by itself. “We know we have a very significant portion of fees being waived,” said Heckman, “and we are looking at that and analyzing it.” Heckman spoke of this challenge during an ABA Banking Journal roundtable discussion, held in the spring, among five members of ABA’s America’s Community Bankers Council. Roundtable participants shared views on fee waivers and more. Waivers, enemy of fee income Banking fees come in many different forms, all of which the bankers discussed. These include credit-related fees; transactionSubscribe at www.ababj.com 16 SEPTEMBER 2008/ABA BANKING JOURNAL
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