Community banks’ investment programs are not yet back to their pre-financial-crisis levels of success, but the numbers confirm that 2010 was a step in the right direction.
Those community banks with investment program activity—about 22% of small banks—reported average fee income of $300,928 in 2010, up 15.8% from the 2009 average, according to the Michael White-Securities America Report: Community Bank Investment Programs.
“There are definite signs of improvement, certainly on the investment brokerage side of the business,” says Michael White, president of Michael White Associates and author of the report. “But annuities are having a tougher time.”
Fourth quarter 2010 program income of $113.7 million was down 2.4% from 2010’s third quarter, but up 8.1% from the fourth quarter of 2009.
Last year was the best for overall revenues since 2007, notes White.
Total investment program income at community banks was $456.5 million last year, up 9.4% from 2009’s result, the report notes.
The White-Securities America report details improvements in key measures of investment program strength: program concentration, penetration, productivity and density.
For example, community banks’ mean investment program concentration was 7.7% in 2010, up from 6.4% in 2009. The metric refers to the portion of total non-interest income that investment brokerage accounts for. It reflects how meaningful bank investment programs are among their banks' non-lending activities.
Productivity—the measure of fee income per bank employee—was another bright spot for small banks’ investment programs last year. Mean community bank employee productivity was $2,189 per bank employee last year, up 10.8% from 2009.
White predicts that community banks’ investment programs will continue to gain traction—with a caveat. “If we don’t have the rug pulled out from under us with regard to this economy, I’d expect to see continuing improvement,” he said.
Meanwhile, data on revenue mixes makes it clear that securities brokerage provided the lift last year. Community banks earned annuity fee income of $112.8 million, down 5.6% from 2009’s total.
The financial crisis and recession do seem to have taken a toll on community bank investment programs. The number of banks participating in such activities in 2010 was 1,517—5.5% lower than in 2009, according to the report.
CenterState Bank of Florida, based in Davenport, Fla., last year topped the list of community banks when it came to investment fee income: It raked in $33.91 million, up 86.9% from 2009. In the annuity arena, United Bank, of Charleston, West Virginia, led the way with $2.17 million, up 31.9% from 2009’s total, according to the report.