2023 Community Bank Case Study Competition Journal

2023 COMMUNITY BANK CASE STUDY COMPETITION

is a high producer will often leave to open their own shop,” he said. The efficiency ratio is commonly used to measure non-margin performance. The danger of cutting expenses too much is that service levels and product offerings are then compromised. PSB’s metrics indicate efficient operations in line with peers and not too low to endanger the quality of customer service. PSB believes that superior customer service is a primary driver of customer acquisition. Halterman has stated that growth, combined with well-balanced, quality loans and investments will drive earnings. Commercial and small business accounts provide nice balances that provide lower-cost funding to

fuel those loans. The bank utilizes profitability modeling to ensure all loans are correctly priced for the risk and required return on equity. Such analysis and targeting will pay dividends toward bottom-line profitability. Loan Portfolio Composition The bank’s geographical footprint is rural and is in close proximity to metropolitan Des Moines. This footprint and proximity gives the bank a diverse look at commercial, small business, and agriculture loans. The resulting diversity reduces exposure to volatility in a particular sector, making the entire portfolio more resilient. The loan portfolio has nearly doubled during the past five years, far outpacing peers. A majority of the growth has been attributed

to business/ commercial borrowers. The agriculture-related portion of the portfolio has been steady after a spurt in 2018. Halterman is confident that agriculture-related loan opportunities will better present themselves as the bank expands further south of Des Moines. The loan composition for PSB (detailed in Table 3) appears balanced.

Table 3

2019

2021

2018

2020

2022

$2,577

$5,924

$8,052

$11,109

$5,526

Residential RE Construction

$5,209

$9,743

$14,028

$18,386

$23,944

Other RE Construction

Ag RE

$22,208

$32,377

$28,039

$30,373

$30,811

$25,588

$28,322

$26,052

$23,370

$33,549

Residential RE

$8,029

$7,456

$6,481

$6,045

$7,062

Multifamily RE

Commercial RE

$33,458

$31,858

$33,675

$42,278

$49,625

Ag Production

$15,508

$11,444

$12,134

$10,490

$11,903

Commercial/Industrial

$38,570

$48,214

$64,279

$61,174

$85,162

Government Entities

$3,381

$4,088

$4,149

$3,937

$4,636

Personal and Miscellaneous

$11,997

$13,464

$8,745

$6,980

$5,075

TOTAL LOANS

$166,525 $192,890 $205,634 $214,142 $257,293

source: section RC-C of PSB Call Report

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