Investment programs at community banks are on a roll.
In the first half of 2013, they generated $283.3 million in revenue, the most they've made in the first six months of any year since 2007. In the second quarter, the programs produced $147 million, representing a 7.9% increase from the previous quarter and a 6.7% increase year-over-year, according to a report from Michael White Associates, a consulting and research firm based in Radnor, Pa.
"Our latest report finds that first-half community bank investment program revenues are the best they've been in seven years," said Michael Anderson, first vice president of Financial Institutions/Mergers & Acquisitions at Securities America, an independent broker-dealer and sponsor of the report.
The robust performance was driven by growth in securities brokerage fee income. In the first half of 2013, community banks earned brokerage fee income of $212.2 million, up 8.5% from $195.5 million in the first half of 2012. Income from the sale of annuities, in contrast, grew only 0.9% to $71.1 million from $70.5 million during the same first-half year period.
Most of the investment programs were growing. Of the 689 community banks on track to earn a minimum of $150,000 in yearly program revenues, almost three in four (74.6%) experienced growth over the first half of 2012, with nearly three in five (59.2%) registering double-digit growth. Almost two in five (37.3%) exhibited growth rates of 25% or more.
"We can assume that a program growth rate of 25% or greater indicates initiatives to expand programs through recruitment of additional financial advisors or acquisition of investment brokerage services, rather than simply growing an existing program organically through increased marketing and sales initiatives," Michael White, president of Michael White Associates, said in a statement.
CenterState Bank of Florida was the biggest producer of investment program income in the first half of 2013, generating $13.6 million, followed by North Shore Community Bank & Trust Co. with $11.4 million and TIB The Independent Bankersbank with $5 million.
The report, titled "Michael White-Securities America Report: Community Bank Investment Programs", is based on data reported by all 6,940 commercial and savings banks and savings associations operating on June 30, 2013. It defines community banks as banks and savings associations with less than $4 billion in assets.