“Our hope is that as the latter of the two of us is going down the tubes,
we are giving away our last million dollars,” Herbert Sandler said.
“That will be true success.”
San Francisco Business Times, May 19, 2006
Ah, Christmas. The time of year when all of us banker/consultant residents of GonzoVille take a deep breath, relax for a moment, stuff our size 42 rear ends into that size 34 Santa suit just one more time, invest a large chunk of our year-end bonus in the outcome of the college BCS games, and see just how much more dark rum we can sneak into the nog without Aunt Gertie noticing or a riot breaking out.
Yep, we’re a sentimental bunch. But, at the same time, many of you hit this time of year with a feeling that things aren’t quite finished. The book is short a final chapter. The stool needs one more leg. The industry stocking need just a little more stuffing. The puzzle needs that final piece.
Well, we know what ails ya’, and we got the medicine – the 2006 GonzoBanker awards! 2006 was every bit the match of previous years. There were things that made us pump our fists, things that got us glassy-eyed, and things we still can’t believe and are trying to process.
So kick back, and enjoy our take on the year’s bankers, vendors and the industry before you get back to over-celebrating the holidays.
The Legends of Banking Award
A special salute this year to long-time Synovus CEO and Chairman James “Jimmy” Blanchard, who relinquished his Chairman title and stepped off the company’s board after a 30+ year ride in which the bank grew from a few hundred million to a $30+ billion regional powerhouse. Not only is Blanchard a brilliant business mind, but his emotional intelligence or “EQ” is simply off the charts. It’s rare to see an executive whose words of inspiration can bring tears to bankers’ eyes. Blanchard did it often.
Banker/Humanitarian Award
Muhammad Yunus, founder of Grameen Bank in Bangladesh. Yunus’s micro-credit concept, literally sweeping the world, is designed to help the truly destitute rise from poverty. Decent idea. Yunus better clear some room in the display case where he keeps his Nobel Peace Prize to accommodate his much-coveted GonzoBanker Award.
The Boy Scout Conversion Preparation Award
Bob Roth, Capitol Federal, Topeka, KS.
The Tenacious D Award for Project Management
Bud Klafehn, ESL Federal Credit Union. Bud’s got it under control – ’nuff said!
The Bank Merger of the Year Award
Mellon Bank and The Bank of New York. Two great niche players form a custody, securities processing and private wealth management powerhouse while also teeing up a nice succession – a great one for the long run.
The Something Smells Award – for the Worst Bank Merger of the Year
Hands down it was AmSouth and Regions. If you believe this line from the merger press release – “AmSouth shares Regions’ passion for delivering superior customer service, and the combined company will be in an excellent position to raise service standards.” – then we have some great beachfront land in the Arizona desert to sell you.
The Greater Fool Award for the Smartest Seller and Dumbest Buyer
Not a contest. This one goes to Golden West selling to Wachovia for a mere $25.5 billion. Here’s an amazingly run, rate-driven, low cost business model being acquired by a relationship-based service model at three times book. How long until the Wachovia retail bankers hit California and claim, “these branches are not up to our standards” and “we need to inject our sales culture into this acquisition”? It’s nice to see the Herb and Marion Sandler family donating the bulk of its greater fool windfall to charity – admirable move from two great business leaders.
The “Quiet Hero” Bank Stock Award
Goes to Community Trust Bancorp of Pikeville KY. While many bank stocks hit a plateau during 2006, Community Trust gained respect for its solid earnings and asset quality, appreciating nearly 30% in just the past year. Nice to see the thumbs up for Jean Hale and her team.
The Darling that May Have Hit Some Headwinds Award
Commerce Bank of New Jersey. After years of a love-fest run up in the stock, Commerce was up less than 5% in the past year and earnings will be down double digits from 2005. While Vernon Hill’s team keeps knocking out impressive deposit growth, a whopping 24 P/E ratio makes Gonzo unsure how much upside is really left on this run.
The “Out of the Box” Acquisition Award
Bank of America acquires HealthLogic Systems. This pickup by B of A’s Treasury Services group shows just how deep its planning to go into the healthcare industry. Can you say “business service niche?”
Now that’s a Niche Award!
Gonzo would like to salute a few of the many banks we know that have successfully established real, competitive niches. With ongoing commoditization in banking, it’s nice to see some folks differentiating:
One Area Where Whispers Will Turn to Shouts
Credit union mergers. There is dead serious talk at many credit unions about acquiring both in market and out of market. Credit union CEOs are eyeing each other like a pack of runners at the start of a race. Stay tuned – this will get interesting in 2007.
The Golden Paperweight Award
99% of all product and customer profitability reports. It’s time to use ’em or lose ’em, folks; they’re just too expensive to administer and support unless they’re driving some hard core decision making.
Technology Pioneer Award
Community Savings in Red Deer, Alberta, for bringing Canadian credit unions out of the 1950s when it comes to technology.
The Stick it to the Man Award
Goes to all the banks and credit unions that have developed products to compete more ethically against the sordid payday lenders and check cashers: Legacy Bank, State Employees Credit Union, KeyCorp, Alternatives Federal Credit Union, and many others. Bravo!
The Ben Roethlisberger Much Ballyhooed Bank Product that Fell on its Face Award
HSAs. Hell – even credit unions, which traditionally jump into new markets much more quickly and experimentally than banks, haven’t pulled off HSAs.
Coolest Inter-Meeting Activity Award
Ping pong in the Technology Credit Union break room.
The Gone but Not Forgotten Award
We’ll miss the charisma, charm, humor and belly-fire of our late friend, Mike Osborne from First Tech CU.
The Gonzo All-Star Band of 2006
Gonzo would like to salute some of the talented musicians who are lurking under the suits of financial service executives:
Great Lines Heard from Bankers in 2006
Technology of the Year Award
Corporate and merchant remote deposit capture. This technology was simply en fuego this year as banks raced each other to run aggressive pilots and get capture devices on the desks and cash registers of businesses everywhere. This is a great example of a technology that didn’t wait for a proven ROI. Banks made strategic moves quickly, and it will help our industry in the long run.
The Technology Gaining Steam Award
Mobile payments and micro-payments. Whether it was contactless cards, PayPay Mobile or pilots to embed commerce chips in cell phones and PDAs, the world of M-commerce had more buzz in 2006 than in the previous five years combined. Anybody standing in line at Starbucks or a fast food joint sees the card being whipped out for the $3 purchase on a pretty regular basis. What’s this going to do to fee volumes and related fee structures and revenue? Could be a hot 2007 topic.
The Technology Showing Some Resurgence Award
Data warehouse. After years of slick looking sample reports (like a graph of deposits by branch – zzzzz) and no ROI, the whole topic of data warehouse is getting a new look. Why? Suddenly, accurate and timely information that supports better fraud analysis, actionable profitability information and other real information issues weighing on financial institutions is creating some serious second looks at this investment.
The 11th Hour Technology Project of the Year
Multi-factor authentication. In fact, there are a lot of bankers who will be busy this holiday season trying to meet the fast-approaching December 31 FFIEC deadline.
The King of the Easier-Said-than-Done Technology Award
Document imaging for loan/deposit workflow. The sweet spot success stories so far have been in institutions between $500 million and $1 billion – big enough to afford it, small and un-complex enough to actually pull it off.
The Version Upgrade We’re Hoping Operates as Represented
Fiserv 2.0 – Our hats off to new Fiserv CEO Jeff Yabuki for moving quickly to more effectively integrate Fiserv businesses and product offerings. However, the risk of breaking down silos is that a lot of heavy debris can fall on you. For the benefit of our clients, here’s hoping Fiserv makes it through this necessary transition as quickly and painlessly as possible.
The Loan Origination Vendor that Pounced onto the Radar Award
Commercial loan workflow software provider CapitalStream had an impressive year, installing their system in several community and regional banks and signing a number of new client deals. The commercial loan software market heated up big time in 2006 and CapitalStream seemed to make the most noise.
Harland also made some noise with its CreditQuest product.
Technology Still Missing in Action
Integrated enterprise wide contact management… anyone… anyone… Bueller…?
The Mouse that Roared Award
Goes to Houston-based imaging vendor PROFORMANCE. This reseller of Hyland Software has developed a number of impressive modules around the OnBase imaging platform that have captured the attention of bankers around the country. Hats off to Wayne Whaley and his team for helping drive a stronger business payoff on imaging platforms.
The Most Important Contract Your Bank will Negotiate in the Next Few Years Award
Electronic payments (EFT) contracts. With continued growth in volume and a potential explosion in micro-payments, the costs of supporting debit card, credit card, ATM and bill pay could go sky high if bankers don’t head to the “renegotiation” table. Should make for interesting banker/vendor discussion.
The Finally, a Vendor Acquisition that Made Some Real Sense Award
After last year’s puzzling spate of credit bureaus buying loan origination software vendors, this year Intuit announced that it is buying Digital Insight. This deal works on so many levels, I’m embarrassed I didn’t predict it last year. One warning: Arrogant pricing will out this new organization into a completely different Gonzo Award category next year…..
Golden Cufflink Award
Jimit Kapadia – Fidelity MISER. Jimit is a repeat winner, and, quite frankly, there was not a close second this year. This guy wins over a room faster than Dick Cheney at a Mean-Spirited Hand-Wringer conference.
Bank Core Deal of the Year Award
No brainer. Fiserv CBS takes Associated Bank, Green Bay, WI ($20 billion in assets). Admittedly, there’s an element of robbing Peter to pay Paul in this Fiserv-to-Fiserv deal, but still a nice CBS win.
In the New Client Category, Jack Henry signed Miami-based Ocean Bank ($6.0 billion in assets).
Back in the Scrum Pile Award
After some years of inertia, Fidelity MISER signed several new clients over $1 billion and completed successful conversions.
Credit Union Core Deal of the Year Award
In-transition XP signs a biggie at Digital Federal Credit Union ($3.3 billion in assets), Marlborough, MA, in a deal that came out of nowhere.
Multi-Factor Authentication Vendor that “Gets It” Award
The 41st Parameter.
The For the Love of Babbling Elvis, Will You Please Sell and Release Yourself from This Misery Award
S1.
The Hurry Back Award
John Schooler, formerly of USERS. The industry could use more straight shooters like John.
The Peter Tosh Legalize it Award
Would the spineless weasels at the FDIC please go ahead and approve the freakin’ Wal-Mart ILB charter application already? C’mon, now!
Great Moments in System Demos
It never ends. Year after year, we hear some priceless comments from those in the vendor world trying to sell the goods to the industry. Some 2006 highlights:
Bashful Banker Basher’s Bid
Media-shy, New York A.G. Elliot Spitzer runs for and wins the New York governorship. With Spitzer’s complete lack of apparent political aspirations, press outreach or grandstanding while whipping up on some elements of the securities and banking industries, we never saw this one coming.
The Buzzword Replacement Award
It seems during 2006 that Good to Great got passed up by Blue Ocean Strategy for the oft-quoted buzzwords award. So, we heard less about the “bus” and “flywheel” and more about “red” water and “blue” water. Progress?
Runner Up: In an effort to sound less cumbersome and bureaucratic, Six Sigma is being re-branded as “Lean Six Sigma.” Is this merely Six Sigma with Olestra or should they have gone straight to Five Sigma?
Updated Goofy Web Search Statistic of the Year
From Google – number of hits from querying:
MOST UNDERRATED MOVIE OF ALL TIME
The Terminator. Going back in time to father your best friend and protect his mother/your lover against your enemy – even for science fiction that’s an incredible story line. Plus you get pre-gubner Ahnald. —Michael Croal
Door to door, 2002, William Macy, Kyra Sedgwyck, Felicity Huffman. —Carl Faulkner
The Three Burials of Melquiades Estrada. If your lips moved when you read the title, don’t bother renting it. —Scott Hodgins
The Milagro Beanfield War (1988) directed by Robert Redford. —Tripp Johnson
Immortal Beloved. Music written by Beethoven, no spoiled celebrity actors. —Bill McFarland
Hidalgo. The classic underdog struggle done well. —Paul Novotny
A River Runs Through It. There’s nothing better than a brilliant book that gets made into a brilliant movie. —Terence Roche
Harold and Maude (1971). Bud Cort and Ruth Gordon. Hands down the best black cult comedy involving love, death and a romance between a 19-year-old boy and a 79-year-old woman. —Scott Sommer
Tin Cup. Come on, any movie featuring Cheech Marin and the sport of golf has to be funny… add Kevin Costner, Rene Russo and Don Johnson and you’ve got an instant classic. —Eric Weikart
Ed Wood. A bizarre but touching tale of friendship with amazing acting from Johnny Depp in the lead and Martin Landau as horror film actor Bela Lugosi. —Steve Williams
MOST OVERRATED MOVIE OF ALL TIME
Brokeback Mountain. And while we’re talking about science fiction… … —Michael Croal
Lost in Translation, 2003, Bill Murray, Scarlett Johansson. —Carl Faulkner
Super Size Me – This movie featured an utterly predictable journey to fulfill a completely unimaginative premise. What, eating all junk food is bad for your body and gives you a tummy ache? Never heard that before. If you liked this flick, it’s because some movie dork on TV told you to. —Scott Hodgins
Titanic (1997) directed by James Cameron. —Tripp Johnson
Anything with Tom Cruise in it. He wasn’t any good before he went weird. —Bill McFarland
Moulin Rouge. Lots of hype and show with very little substance. —Paul Novotny
Rocky. (Yo, Adrian! This won best picture against Taxi Driver, All the President’s Men, Bound for Glory, and Network? Fugeddaboudit.) —Terence Roche
Forrest Gump. Long, stilted and one too many lines including the words “Lieutenant Dan.” ‘Nuff said. —Scott Sommer
Young Frankenstein – Black and white replaced color in the ‘50s… maybe it’s a generational gap, but I tried getting through this one twice with no success. —Eric Weikart
All three of the Tom Cruise Mission Impossible movies – please no more big-budget films with stupid scripts and an overacting, self-absorbed Scientologist. —Steve Williams
Legislation will be introduced by the new Congress to reduce the amount of overdraft/non-sufficient fees that a bank can collect from an individual account. Banks will clamor that the recent round of YTD fee disclosures addresses the concern and, furthermore, credit unions should have to pay income taxes. —Michael Croal
We’ll see a significant exodus of senior staff at both Fiserv and OSI due to Fiserv 2.0 and the privatization of OSI. Due to the nature of the industry, look for the loss at Fiserv to be a gain at OSI and vice versa Various explanations of the moves will be offered, the most common being “he/she is pursuing other business interests.”—Carl Faulkner
While CU mergers are being talked up big at board meetings across the country, large CU mergers of equals will be more talk than walk next year. These deals are going to be sticky and will face a TON of member and media scrutiny. Sure, some small CUs will continue to get gobbled by the big boys, but the mega-mergers of equals everyone’s predicting are just not going to happen in 2007. —Scott Hodgins
An increasing number of financial institutions will switch to Linux and open-source type applications, especially with the release of Microsoft’s Vista platform. The multiple options alone in determining which Vista platform to select will prompt some to migrate; whereas others will migrate because of the new Microsoft licensing structure. That said, the boys in Redmond will continue to buddy-up to the open-source cult; however, that will probably result in yet another legal battle for the software giant. —Tripp Johnson
Experienced talent will be even more difficult to find in 2007 than in 2006. From bank ops people to experienced senior lenders—once common as Depression-era unemployed selling apples on street corners— broad experience will be costly and hard to find. Mergers without layoffs are coming. —Bill McFarland
The use of formalized portfolio management techniques for management and governance of technology projects will see a sharp increase as institutions face demand for projects that far exceed available resources. —Paul Novotny
The costs associated with micro-debit transactions will have merchants and bankers threatening to sue processors if the fee structure is not changed. –Terence Roche
Private equity firms will wake up to the fact that there’s still some money to be made in banking. That said, a private equity firm(s) will take a publicly traded bank private, funding a multi-state acquisition buying spree. Publicly traded banks, disgusted with the heavy burden of regulatory compliance, will embrace the opportunity presented by the PE firms to be more aggressive and nimble. —Scott Sommer
Mergers and Acquisitions will be top of mind for all financial institutions. Along with large bank deals like the Bank of NY-Mellon announcement, expect several large credit union deals in ’07. Specifically, I predict at least five of the top 100 credit unions will announce they are merging with another $1B+ credit union.—Eric Weikart
By the third quarter of next year, the banking industry will have acknowledged that the screeching slowdown in the housing boom and real estate cycle will create greater credit losses than any executive team had projected. Increasing provisions and weak earnings late in the year will lead to many banks throwing out their 2007 earnings with either large write-offs or a merger/sale transaction. —Steve Williams
Work flow is in the air. Work flow and imaging systems will be the rage as banks finally get serious about process improvement and squeezing more cost out of the operations. Expect big cap ex dollars on these initiatives over the next 12 months, especially in loan and deposit back offices. –Steve Williams
Bingo. The dollars may be a bit late getting spent, but the focus is there
Another core system fades into the sunset. BISYS’s mainframe product is announced to be at the end of life by OSI – contrary to its earlier announcement. –Carl Faulkner
Well, they didn’t exactly announce it, but…..
2006 will reflect a pronounced interest by banks in payment strategies, especially HSAs. Banks will either be tremendously successful in pursuing this HSA/deposit growth opportunity through the branches and their commercial/small business bankers or they will lose out to other market players like they did in the ’80s/’90s when the brokerage and investment firms captured the 401(k) business. My prediction, unfortunately, is the latter. –Scott Sommer
Pretty correct, with the exception of some high performers that did hit the mark on HSA growth.
The sheer cost of compliance will be a major factor in smaller banks’ decisions to sell/be acquired in 2006. –Terence Roche
We’re teetering between a partially hit and swing and miss. It was probably more of a reason that was publicly discussed, but we also boldly will state that sellers getting a lot of money might have played an eensie, weensie part.
Per capita consumption of Pepto Bismol in Glastonbury, CT, will increase dramatically in 2006 as OSI continues to assimilate BISYS and numerous other recent acquisitions while also attempting a Canadian growth initiative. Customers expecting to convert in 2006 should beware of OSI’s explosive growth giving it a serious case of turista. Having said that, unless arrogance gets in the way, OSI will pull it off and the industry will benefit from the additional strong core processing competition. –Bill McFarland
We’ll leave the analysis of this one to the OSI and BISYS customers.
At least one core processing vendor that only serves banks/thrifts now will jump into the credit union market in 2006. –Scott Hodgins
Hmmmmm. Well, we did hear two vendors say they were thinking about it, but no toes went in the water. 1.1 out of 10.
Online banking and bill pay use will stall as banks address the widespread implications of two-factor authentication. Banks will rush to implement some form of two-factor authentication but in the process forget to educate customers. Consequently, customer confusion will set in and although customers may have received a cool looking “branded” two-factor fob in the mail, they will not know what the hell to do with it. –Tripp Johnson
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