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Q&A

Q&A

Sector: Management Consulting / Banking

Tom Pickering is CEO/Principal of The Thomas Group,a management consulting firm in Jacksonville withassociates on the East Coast, in the Midwest and in Oregon. He founded the firm in 1993 after nearly 30 years in the banking industry ' where he held executive positions with banks in Iowa, New Mexico and Oregon,as well as the American Bankers Association inWashington, D.C. Pickering attended the University of Iowa and completed studies at the University ofWisconsin's Graduate School of Banking.

Q: Who do bankers consider their prime competitors?

They view other banks as competitors, because they have for years accepted that notion and never looked at what's going on in other organizations such as savings and loans and federal savings banks. Those are the banks that provide better service. In a survey that we conducted in Jackson County a couple of years ago, customers were more satisfied with service of the thrifts than they were by commercial banks. I think that was true for a long time.

Those thrifts were driven by customer service, they didn't have the commercial lending services and consumer credit services they can now. Home mortgage lending was their expertise. As a result, people who bought their home had some experience with those folks and liked them. Banks were about the bottom line, not for the customers. Mergers are not about customers, they're for the shareholders and management of the bank.

Q: How do banks become dominant players in their markets?

They have to identify what customers really want, rather than what they think the customer wants. Customers will buy some of what they don't want, but not as much of it.

When we did the Bank of Ashland survey, we asked what people wanted. They wanted Saturday hours, to have the bank open when it was convenient for them. They wanted control over their money, so some were interested in electronic banking. The ones not interested in it didn't want to be forced into the drill of calling a number and then punching four or five more numbers, they wanted to talk to someone.

What we want is service, not talking to a machine. Small banks can do that, but it might cost a little more money.

When we say it's a cost-effective way of doing business, we need to include customer satisfaction and there is no way of measuring its ultimate impact.

People choose where they bank based on what people tell them. When they first move to a community they go close to work or where they live. When they leave, it's based on information from friends. They may read ads and pay attention to prices if there are some nice rates, they might even buy a CD. But most people are skeptical about commercials.

Q: What kind of things occupy the thoughts of financial institution chief executive officers?

How he's going to grow and increase the value of the bank, whether it's small, medium or large. It doesn't matter the size, they'll be comparing themselves to FDIC peer group data trying to draw objective information.

Do they have too many employees per million dollars in assets? What are their margins on income? When the regulators come in and are comparing data, is the interest spread between costs and income?

Q: What kind of things catch bank examiners' eyes?

They've created so many regulations, trying to avoid what happened with the thrift industry a few years ago. Banks have so many more reporting policies to follow and regulators come in to make sure they are complying.

They will want a list of all loans made in the past year. They will want to see credit files above certain dollar amounts, new loans they can evaluate for credit quality and valuation. If they wrote up some of the loans to follow the previous year, they check those out. They'll look at past due reports. Of course banks do quarterly statements of condition reports with their past-due information. Peer reports also have past-due and delinquent information.

Banks used to have more freedom to be flexible, and that lack of flexibility hurts banks in the eyes of customers. They just think it's a sign of bad, poor or indifferent service. Some banks will stretch a little, not to break, but bend it a little to get more service to customer.

Q: Are there enough or too many banking choices in our community?

In my opinion, there is always room for more competition. Certainly there is more room for competition in Ashland.

One of the people from FDIC (Federal Deposit Insurance Corp.) who reviewed the application for the Bank of Ashland (which failed to gain enough capital) told me that we don't need more banks in Oregon. Regulators have so much power today that I think it's kind of scary.

Q: Who do you see gaining strength in Jackson County?

I see Washington Mutual getting stronger throughout the state. I see other savings banks such as Klamath First Federal and Liberty Federal becoming stronger. Liberty is managed by (chief operating officer) Hank Hoell. I don't see US Bank rebounding to the 40 percent statewide share it had five years ago from 27 percent now.

As long as Washington Mutual has no designs to sell the place, I don't see why they won't become the most dominant institution in the state. In Jackson County, I see them as a force.

But I think the other force here is PremierWest, certainly they've demonstrated their ability to grow. On the street, they have a reputation of being providers of good service. They may well have the greatest potential to grow as a bank in Jackson County.

If (Grants Pass-based) Evergreen spent more time here, who knows what they could do. They may just be here to collect mortgage loans they can sell on the secondary market, rather than as a deposit gathering function.

To suggest a subject for this column, please contact business reporter Greg Stiles at 776-4463 or e-mail

Tom Pickering: 'What we want is service, not talking to a machine.'