A $700 million financial institution had a problem. As part of an effort to attract new capital or a merger partner, the client had previously downsized its organization by hundreds of millions of dollars by shuttering out-of-state operations among other cost-saving initiatives. However, the institution still could not produce an earnings level that would attract capital or merger-related interest.
The Exploration
- After the bank’s elimination of its out-of-state operations, why was the client still experiencing operating costs significantly outside its new peer group?
- Was the client organized efficiently and effectively for a bank that was now $700 million?
- What were the client’s existing managerial skill sets and were those skill sets appropriate to what was now a much smaller institution?
- The client had lost key employees in its accounting function and was having difficulties filling those important positions. What could the client do to fill these key roles while not delaying its efforts to solve its earnings problem?
The Approach
Artisan Advisors spent the initial phase of the assignment learning about the organization and how it worked. We conducted a detailed review of the client’s operations, how it was structured, and identified where the client was doing well, and where the client was performing below par.
After establishing a knowledge base during the initial phase of the assignment, we interviewed members of the board and executive leadership, along with middle management and certain supervisors. Our objective was to understand their perspectives of the organization past and present, assess existing skill sets, and discover any talent gaps.
Due to its rapid asset shrinkage and recent closure of out-of-state operations, it was clear to Artisan that the client was caught in two worlds — one as a small regional institution and one as a community bank.
Using the organizational knowledge developed during the organizational review and subsequent interviews, Artisan then took a “fresh start” approach to evaluating how the client should be organized. This included determining required staffing levels and identifying key leaders who could move the organization forward.
Artisan conducted a blind survey of 10 similarly sized community bank clients to provide a baseline from which to validate its structure and staffing recommendations. We then created a detailed financial model that demonstrated the financial effects the organizational and staffing changes would have on the profitability of the client.
While evaluating the client’s structure and staffing, Artisan provided interim accounting support. An Artisan team member was onsite handling day-to-day accounting functions. That level of immersion in the client’s business also facilitated the identification of significant unnecessary operating expenses.
The Results
When Artisan Advisors’ analysis and recommendations were accepted and implemented by the client, employee expenses were lowered to survey group averages and unnecessary costs were eliminated, all of which provided a multi-million dollar annual cost savings. Additionally, the organization became better organized and more efficient.
Shortly after the full implementation of Artisan recommendations, the client successfully negotiated and closed a merger transaction with a larger institution — something that would not have been possible without the organizational and cost savings recommended by Artisan.
The merger partner retained Artisan to assist with the execution of the merger and the integration of operations and accounting functions. The merger partner remains an Artisan client.
Client Testimonial
“We never could have moved our organization this far and this fast without Artisan Advisors. Our successful merger was made possible by the Artisan team.”