A Marathon Effort

With the last turkey leg eaten and Black Friday behind us, we once again turn our attention to this hectic holiday season. It certainly is a busy time, with gifts to purchase, trees to trim, and much to plan and prepare. However it also can be a time to pause from daily routine and focus on family, friends and our spiritual needs.

At this time of year, our business lives likewise are hectic, yet reflective and forward-looking. We have holiday parties and receptions to attend. Many of us are scurrying to complete salary adjustments in time for a Jan. 1 effective date, while simultaneously conducting employee evaluations. And most of us are meticulously adjusting financial budgets and strategic goals to prepare for the New Year.

It was heartening to see improvements in the third-quarter statistical analysis released recently by the Federal Deposit Insurance Corp. Banking industry profits were up significantly, and the number of banks on the FDIC watch list decreased—both factors boding well for a strong 2012. Most surprising to me was that the average bank’s return on assets was above 1 percent. It has been several years since our industry supported this level of return.

While it is satisfying to see positive results, the forecast for next year is that it will not be easy. Mid-2011, the Federal Reserve proclaimed that it would hold interest rates at these historically low levels for at least two more years, undoubtedly putting immense pressure on you to hold loan rates at levels that provide for adequate profitability. There also is a growing urgency to build noninterest income, as regulators restrict overdraft program fees and debit card interchange fees. All of these challenges come against a backdrop of continued real estate loan foreclosures.

I know that it is a busy, difficult time, particularly for budgeting. I suggest that you keep in mind that the act of improving profitability is a marathon, not a sprint. Because of the worldwide economic climate and the factors enumerated above, we need to continue to make improvements in our bottom lines … but over the course of several years. Thanks to all Hoosier bankers for your careful analysis and conservative approach to the recovery. Patience and perseverance are the hallmarks of successful marathoners!

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