BANKdynamics

Final Results: Regions 2008

1. Top Gun Bank and Trust
2. First Bank & Trust
3. Horizon Bank
4. Piggy Bank
5. Vulcan Community Bank
6. Think Outside the Bank
7. Summit Financial

See how these teams fared in the National Rankings.

Regions - Past Performances

If last year's group is any indication, the teams from Regions Bank are quite competitive.  Here is a list of how last year's teams finished in our national ranking:

• #36 - United Vision Bancorp
• #43 - Hollis Bank
• #46 - Benchmark Bank
• #110 - Cornerstone Bank & Trust
• #128 - Apex National Bank
• #201 - Street Cents Financial

Here is the complete national ranking.

Goals: Synergy and Conflict

You've had several quarters to live with the management goals you've chosen. Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

• What is your number one goal, and why did you pick that again?
• What goal are you really struggling with? Why?
• Which two of your goals complement each other well? Why?
• Which two of your goals are turning out to be in conflict with one another? Why?
• Throughout the competition you have attained, lost, and then re-attained your number 1 and/or number 2 goals. What moved you off your goal? What happened to get you back on track?
• How has competition impacted your ability to attain certain goals?
• If we could restate (or re-order) any of your goals, which ones would you restate, and why?

Market Interest Rate Changes

Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

• Does the current market interest rate trend concern you? Or is it just what you are looking for? Why?
• At the start how did the market rate environment influence your decision making?
• Did the trend (or change in trend if rates changed direction) cause you to make any adjustments to your strategy? (discuss some specific decisions)
• What is the up-side/down-side of the adjustments you mentioned in the last question?
• What is your current interest rate risk exposure? i.e. what is your net interest earnings at risk? What is the level of exposure (the percentage)? What is the direction of exposure (which rate environment, up or down)?
• Have you made certain decisions to reduce your risk to changes in market interest rates?

Focusing on Return-on-equity (ROE)

While attaining the highest ROE may or may not be one of your managerial goals, your shareholders are still looking for a decent return. Run several WIFs that aim to improve projected ROE. Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

• What strategy did you use to raise ROE? Did you increase Margin, Non-interest income (or reduce non-interest expense) or leverage?
• From an asset/liability management perspective did you change asset mix, volume, or rate? Or was it funding mix, volume, or rate?
• What difficulties did you encounter?
• How has past competition impacted your ability to generate better return? How might future competition impact your ability to attain this new level of ROE?
• Would a certain rate environment help your quest for higher ROE? Which one, up or down? A drastic change or a small change?
• As expected, in trying to attain this new level of ROE, you probably hurt your performance on certain "goal" ratios. How bad was the impact?
• Did you learn anything that you might try in the "real" competition?

Mid-term assessment

We've completed four quarters of competition. Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

• Review your number 1 and number 2 goals. How well are you doing in attaining those goals?
• What are some specific performance measurements (ratios) that are very positive for your bank? How do they compare to where you started with Maverick Bank?
• What are some specific performance measurements (ratios) that are worse now than when you started? Why?
• From a balance sheet structure standpoint, what are the key differences between your bank now and where you started with Maverick Bank (dollar size or volume; percentage mix)?
• What have been your key decisions so far?
• Have you had to make any particular sacrifices? Why?
• Are there any strategies that you have abandoned? Why?
• Preparing for your presentation next week, what are some key performance points that you will discuss?

Impact of Competition

During the simulation some of your decision making has likely been impacted by your competition. Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

How would you characterize your competition? Aggressive, middle-of-the-road, or "no-threat" (feel free to come up with your own adjective). Why?

• Does any one bank present a particular opportunity? How are you taking advantage of the opportunity?
• Does any one bank present a particular threat? How are you dealing with that threat?
• What are one or two specific decisions that competition had an impact on?
• Has competition impacted your ability to attain any of your goals? Which ones? Has competition helped or hurt you in this regard?

Assets and Funding

Now that you have a couple of decisions under your belt your bank is starting to change (for better or worse!). Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

• In total dollars, what is your largest asset category? What is that as a percentage of total assets?
• Can the bank shift assets (use overnight funds, sell securities, run-off certain loan types) to fund asset growth in other categories? Is the bank willing to do that? Why or why not?
• Talk about the bank's asset quality: Is the level of non-performing loans acceptable? Is overall asset yield high(er) or low(er). What is the value & performance of the banks security portfolio?
• Are your assets generally short-term or long-term assets? What impact does that have on your performance?
• In total dollars, what is your largest funding (liability) category? What is that as a percentage of total assets?
• Can the bank obtain more of this type of funding in order to fund asset growth? What is the cost? Is the cost higher than it is now? What impacts the cost of this type of funding?
• Is your funding generally short-term or long-term? What impact does that have on performance?
• Have you gotten the asset growth you anticipated? How has that impacted your margin?
• Have you gotten the funding growth you anticipated? How has that impacted your margin?
• On purpose, or by accident, you probably have some overnight investments or borrowings (Fed Funds Sold or Fed Funds Purchased). How is that impacting your margin? Do any of your goals place practical limits on this amount?

Statement of Goals

With this next decision set you will have to decide on and lock-in your management goals. Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

• What issues or problems did you identify in Maverick Bank?
• What is your number one goal and why? Did you see something in Maverick's historical performance that pointed you toward this number one goal?
• How will you measure your performance for goal #1? Describe the ratio/measurement used. Where do you find it in the reports?
• What is your number two goal and why? What are your remaining goals?
• How will you measure your performance for goal #2? Describe the ratio/measurement used. Where do you find it in the reports?
• What are some key decisions that will help you attain these goals?
• Are you likely to reach these goals quickly and then work to maintain that position; or do you think it will be a gradual process (perhaps not reaching the goal until the 7th or 8th quarter)? Why? (Another way to ask this question is which of your goals do you think will be easy to obtain, which will be hard?)
• How do you think competitors will influence your ability to attain these goals?

Race for Margin

Create a WIF that shows the highest net interest margin you can generate. Don't worry too much about other measures of risk & return like Asset Quality, Liquidity, Capital, etc. You must maintain at least 6% risk-based-capital, and you can have no more than 15% risk-based-capital. This is a mini-competition of sorts: can you generate the highest net interest margin % after 8 quarters? You can only create three WIFs in your attempt to get the highest margin. Name the WIFs "NIM #1", "NIM #2", "NIM #3".

Pick the WIF with the best NIM%. Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:

• What is the Net Interest Margin Percentage? (Look at the periodic Key Ratio Report, Net Interest Margin % in the last quarter).
• Look at your balance sheet composition as of the last quarter. What percentage of assets is in Securities, Loans, and overnight investments (Fed Funds Sold)?
• Look at your balance sheet composition as of the last quarter. What percentage of assets is funded by Non-Maturity Deposits, CDs, Structured Borrowings, and overnight funds (Fed Funds Purchased)?
• What is the projected total asset size of the bank in this WIF?
• How would the reality of competition impact this WIF?
• What rate environment would be most beneficial for this WIF?

ALSO, repeat the exercise from above: Create three WIFs in an attempt to generate the highest margin. However, this time you must limit the size of the bank i.e. after 8 quarters the bank can be no larger than $275 Million. Call your 3 WIFs "L-NIM#1", "L-NIM#2", "L-NIM#3".

Pick the WIF with the best NIM% and discuss the results as part of your presentation.