Cost Saving Opportunities for Community Banks & Credit Unions

Since the Great Recession of 2008, a number of new laws (e.g. Dodd Frank) and new regulations (e.g. Basel III) were enacted which have had a significant effect not only on how financial institutions conduct business, but also on the costs of compliance associated with these rules & regulations. Unfortunately, these costs have hit smaller institutions such as Community Banks and Credit Unions disproportionately harder than regional and national banks and are also a direct contributor to the rise in consolidation activity amongst institutions. The skyrocketing cost of compliance, in conjunction with increased FDIC deposit insurance fees and shrinking loan spreads due to the low interest rate environment, has caused management of these institutions to look for any type of efficiencies and cost saving opportunities which can be levered in order to bolster earnings.

Besides salaries and benefits, one of the largest non-interest expense items financial institutions incur are for costs associated with the operation of their facilities.  Savings vehicles for management to consider range from the full outsourcing of staffing & facilities oversight to having a facility sourcing expert augment its internal staff by handling specific activities which are not directly related to an institution’s core objective of accepting deposits and lending money.  At M|GROUP we call the latter “low dollar value/high volume tasks”, the most common examples of which are Lawn/Landscape Maintenance, Snow/Ice Management, Janitorial, and Parking Lot Maintenance & Resealing.

Some of the major benefits of partnering with a facility sourcing expert to manage these types of non-core tasks are:

• Improved Efficiency – rather than dealing with multiple vendors (and invoices) across the property portfolio, there is a single provider to contract with and pay. This results in a significant decrease in the number of vendors the internal staff has to interact with as well as the number of invoices which need to be tracked and paid. More so, a sourcing provider will regularly visit each site multiple times throughout the year, thereby becoming an adjunct site manager for the institution.
• Reduced Costs – A sourcing provider will actively bid each individual site with a number of different contractors in order to arrive at the lowest possible cost across the entire portfolio. The sourcing provider will also have considerably more buying power than an individual institution and these savings are used to further reduce the cost of individual services.
• Vendor Management – A sourcing provider is only as good as the vendors they select, so a thorough vetting process is undertaken to ensure that the reliability, quality and financial viability of the vendor is unquestioned. Additionally, the sourcing provider will collect, track and manage vital information such as Certificates of Insurance and IRS forms. Lastly, look for a sourcing provider who will seek bids from the institution’s customer base, along with the “marketplace”, so management can proactively balance relationships with cost control.
• Leveraging Technology – Smaller institutions cannot justify the expenditure for specialized facilities management software and mobile aps, however, they will be able to utilize the key time saving, performance reporting and record keeping tools of this technology through their partnership with a sourcing provider.
• Reduced Liability – a key result of robust vendor vetting and cutting edge technology is a tangible reduction in liability exposure. By utilizing a sourcing provider, not only is the institution obtaining another layer of insurance coverage, the detailed information provided by the specialized technology can be used to counteract potentially frivolous claims such as “Slip & Fall” incidents in winter.

If a financial institution desires to retain some level of involvement in the management of its real estate facilities while also looking to control costs and increase earnings, partnering with a sourcing provider, such as our M|SOURCE Service Networks division, is an important option to consider.

If you would like more information on how our experts at M|SOURCE Service Networks, Inc. can streamline vendor relationships and create customizable, dependable, and effective service management programs across your branch network, please give Timm Hahn a call at 262-439-4204 or via email at thahn@mghi.net