Trustmark National Bank
Reducing the Efficiency Ratio
Trustmark National Bank, based in Jackson,
Mississippi, was concerned about expense controls, capacity
improvements and untapped revenue opportunities. Trustmark set a goal
to reduce their efficiency ratio below the current 53% level. Bank
management determined that a first step toward improvement was to
participate in the Robert E. Nolan Company’s annual Efficiency Ratio
Benchmarking Study.
Study Background
The Nolan Study is a survey of income, expense, staffing levels and
productivity by line of business. The Study benchmarks the efficiency
of participants against similar asset-size banking organizations. The
primary value of the study is to provide directional assistance to
identify, quantify and prioritize specific areas with the greatest
opportunity for improvement.
Benefits of Participation
Trustmark management placed high importance on uncovering the gaps
between their line-of-business performance and that of other banks,
including the top-quartile performers. The Nolan Study would provide
them with more than 1,000 comparative measures by line-of-business
efficiency and productivity.
The Project
Trustmark was involved in merger activity during the initial
data-gathering phase of the Nolan Study. To ensure they met the data
submission deadline, Trustmark retained Nolan to gather and prepare
their data. The gathering process in an organization of this asset
size, 8 billion, would take one consultant approximately two weeks.
The first step in the process was to translate
Trustmark’s financial and internal cost accounting reports to match
the Study’s format. In addition, the Nolan consultant identified
volumes (number and balance) for portfolio and new production and
full-time employee (FTE) levels.
The Trustmark Accounting Department provided the
financial, volume and FTE data to the Nolan consultant, and
facilitated meetings with business-unit managers for the more detailed
questions. They also clarified the operating environment that was
reflected in the financial and production reports throughout the bank.
As the data was gathered and recast to fit the
Study specifications, all steps were documented in detail to create an
audit trail for the decisions and reallocations made. The
documentation would be an important resource for answering questions
to enhance understanding of the results of the study. The
documentation would also serve as a road map to simplify data
gathering for future Study participation.
Upon completion of the first draft of the input
form, Nolan processed the data against its database of more than 70
previous-year participants. Trustmark reviewed these preliminary
results, comparing their ratios with the benchmark and average
results. Results that varied significantly were reviewed, data was
recast as necessary and input was refined to ensure an accurate
comparison.
Results
The results of the Efficiency Ratio Benchmarking
Study will vary by participant. For Trustmark, the study pinpointed:
