To Our Clients, Colleagues and Friends

• We haven’t been involved in too many start-ups this year, but one where we helped write their Strategic Plan was Bay Equity.  This San Francisco lender just finished its third month of operations and closed over $17 million in August.  Way to go, all you McGovern brothers.
• We’re always telling clients that they absolutely need a three year I.T. Plan.  But you can’t just have general goals.  As an example, you can’t just say in your plan that you want to be paperless in 2009.   The Plan has to have specific time frames and specific benchmarks, such as: (1) decide on possible vendors by January 2009, (2) Review and interview all vendors by April 209, (3) Have demos by May 2009, (4) make final selection of vendor by June 2009, (5) negotiate contract and initiate implementation by August 2009, (6) Go live in all branches by September 2009.  Without specific dates, nothing will ever happen.

• Ever hear of Tightwad Bank?  It was formerly Reading State Bank in Reading , Kansas , but they bought a branch in Tightwad, Missouri (population 63) and changed the name.  Funny.  Clever.  But still kind of a dumb name to build a brand around.

• Dobar dan!  Ja bih kod Vas podigao stambeni kredit.  That’s Croatian for “Hello.  I’d like to get a mortgage from your company.”  Hey, you never know when this might come in handy.
• Speaking of Croatian, why aren’t more mortgage bankers doing ethnic marketing? In Chicago , they have banks that cater just to Slovakians, others that target Lithuanians, and yet others that focus on Polish or Slovenian families. Think about it.

• In 2006 only 1.8% of all loans were FHA insured.  It’s now 23%, a 13-fold increase.   If nothing else, mortgage bankers are adaptable.

• Southwest Airlines has been profitable each and every quarter since 1991. That’s 17 straight years during which we had two wars, 9/11, recessions, and huge spikes in fuel prices.  Smart people.  If we were running a mortgage banking company in need of a CFO, we might try to hire someone who had worked for this airline.  

• The FDIC Quarterly Banking Profile now predicts that the Indy Mac failure will probably cost them $8.9 billion.  Originally, their estimate was $4-8 billion.  Just amazing. 

• What’s the national debt?  It’s a whopping $9.6 trillion.  With the federal government’s fiscal year not even over, we’ve already run up a $371 billion deficit.  It will presumably end up over $400 billion. And as we pointed out a few weeks ago, the Iraqi government will run about a $90 billion surplus this year.  Doesn’t that just really steam you?

• Don’t we all make decisions where a few years later you think, “Damn, I wish I hadn’t done that?”  How about Washington Mutual, which spent $6.5 million in 2006-2007 buying back their stock when it was over $40 a share? It’s now around $4.  In early 2007 CEO Kerry Killinger called it “a superior use of capital”, and at the time, it probably seemed like that.  We bet he’s now wishing he’d kept that $6.5 billion.

• Did you know that there’s a Transylvania University in Kentucky ?  Their team mascot is the Pioneers, not the Vampires. And one of our favorite banks is the Bank of Transylvania in Cluj , Romania .  Although it’s near Dracula’s castle, it’s not a gimmicky name.  Cluj is in the heart of the Transylvanian Alps , one of the prettiest spots on earth.

Thought for the week:  Work on your I.T. Plan, and keep it focused on ways you can use technology to drive down costs.  Remember that expense minimization equals profit maximization.  And that you need to have specific timeframes in the Plan or nothing will get done.

Joe Garrett (510-469-8633) and Corky Watts (408-497-3135)

Garrett, Watts & Co.