The savings industry of 1994 is far different from that of just a few years ago. The industry has had 11 consecutive profitable quarters, including a record annual profit of $7 billion in 1993. Capital is also at an all-time high. From my home state of Massachusetts and all across the country, the 2,200 institutions that comprise the savings business are stable, healthy, and profitable, significantly contributing to their communities in both traditional and innovative ways.

It is an exciting time to be in the business, perhaps, the most exciting in my 30 years. One reason is the ferocious competition in the marketplace.

The lion's share of competition today does not come from traditional savings and commercial banks, but predominantly from nonregulated entities. This phenomenon has encouraged many of us in the banking industry and our respective trade organizations, on the state and national levels, to work together on issues of mutual interest. We have put aside parochial differences, or at least "agreed to disagree" when interests diverged, and moved forward on key issues with one strong voice. There is today a much greater understanding that we can accomplish much more as allies than we can as enemies.

As a result, the banking industry has achieved a number of legislative victories in 1994 that not only help our business but, more importantly, the communities we serve. From interstate branching to community development banking and regulatory relief, today's banking industry, both individually and collectively, is much better positioned to meet the challenges of serving an evergrowing and more diverse customer base.

I'm not going to declare complete and total victory. There are still far too many unnecessary regulations on the books, and basic banking laws that must be changed, but at least the pendulum has slowly begun to swing in our direction. The success of 1994, both financially and from a legislative standpoint, can be repeated if the banking industry continues to work together.

Industry Reputation

Perhaps just as important as the legislative gains achieved this year is the restoration of confidence in the industry by Congress and the administration. As chairman of Savings & Community Bankers of America, I saw firsthand this dramatic transformation at SCBA's annual Government Affairs Conference. (At this meeting we conduct an open forum with members from across the country to develop industry policy and carry the industry's legislative program to Capitol Hill.)

As CEOs visited with their representatives, it was apparent that the industry has restored its reputation with a remarkable improvement in how we are perceived on Capitol Hill.

Industry representatives were greeted as honest, competent managers of an important industry. Those members and staff we visited with were very receptive to our legislative agenda and mindful of the burdens the industry has been asked to endure.

Achieving a turnaround in the political climate has been a major objective of SCBA since its inception two years ago. As a member-driven trade association, we have improved that political climate through our greatest strength -- our members.

It is our members who have rebuilt the industry's reputation through sound management of their institutions, commitment to serve their communities, production of strong earnings, restoration of capital, and communication of the industry's solid record of accomplishment.

SCBA itself has earned a reputation for integrity and professionalism -- through its highly competent staff, strong financial footing, and a comprehensive strategic business plan to guide our activities in the coming years. Together, SCBA and its members will further mobilize grass-roots efforts to continue to carry our legislative message from state capitals to Capitol Hill.

More to be Done

While the industry must be pleased with the general outcome of the 1994 legislative session, much more needs to be done in 1995. All of the victories won in 1994 could be moot if several issues are not resolved satisfactorily in 1995, the most pressing being the resolution of the BIF-SAIF premium disparity.

Disparity between BIF and SAIF premiums is a complex problem. As we work toward a solution, it is important that we not get caught up in rhetoric and the polarization that often accompanies it. SCBA believes that merger of the two funds, combined with other elements, such as use of RTC spillover funds, is the most practicable vehicle to deal with this problem. The ingredients of such a merger must be seen as both workable and fair. Every institution shares a common interest in resolving the dilemma facing the FDIC since all banks are dependent on the integrity of the deposit insurance system and the public's confidence.

The mutual-to-stock conversion issue is even more basic. With some 1,200 mutual institutions serving their communities and customers well, SCBA will fight to preserve their right to determine their own fate, based on a business decision by their management and board of directors, not by outside groups.

Another major issue for 1995 involves the need to restructure and reform the Federal Home Loan Bank System to the benefit of all members.

To achieve our reform goals, and to maintain a financially healthy bank system, SCBA wants changes to occur within a comprehensive framework. SCBA's major concern is to protect the interests of shareholders on such issues as: voluntary membership, relief from the REFCorp payment, an improved capital structure, a governance structure delegated to the district banks, a separate and strong regulator, and a continued focus on home lending. As the debate over reform continues, SCBA will take the initiative by drafting its own bill.

SCBA will continue its efforts on other key issues in 1995 including CRA, fair lending and credit union issues, and regulatory consolidation.

Reasons for Success

The current success of today's industry is not an aberration due to a positive interest rate environment, it is a reflection of competent management, and a strong, well-capitalized industry.

Today's successful institutions did not sacrifice long-term gain for short-term profits but, rather, positioned themselves to serve their communities and customers today and into the next century.

Today's successful institutions have found their niche in the financial services arena of their communities. They continue to emphasize real estate lending, but also offer new products and services, building on the relationships they have established.

Today's successful institutions are also taking a hard look at pricing. This is always a tough issue, but we believe that institutions are pricing sensibly even if it means losing market share. This is the sign of a mature industry that knows the value of its products and services.

Today's successful institutions also know when to "right size." Managing costs, especially personnel costs, is a major factor in the financial well-being of any organization.

Finally, successful institutions tend to be on the cutting edge in technology, especially in the delivery of existing products and services, and in customer service, by creating innovative, quality products and services to their community.

In short, successful institutions are well managed, know their customers, know their products, keep costs under control, use technology to their advantage, and serve their community.

Conclusion

The future for the banking industry is potentially a bright one. We must recognize that the legislative successes achieved in 1994 came about because various segments of the financial services industry worked together.

Working together not just with bankers but with all those involved in the process of delivering products and services to the communities we serve, from homebuilders and mortgage bankers to community groups and government, we can continue the great success of 1994 into 1995 and beyond. I am confident that together we can make it happen!

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