Like a golfer's handicap, the lower a bank's efficiency ratio, the better.
And like a bunch of golfers, some bankers at the FIG Partners CEO Forum in Atlanta on Tuesday were more eager to boast about their efficiency ratios than others were.
Tracy French, president and chief executive at Home BancShares' Centennial Bank in Conway, Ark., enthusiastically brought up the subject during a panel discussion.
"I just wanted to say this … that we're going to go from an efficiency ratio with a '4' in front of it to one with a '3' in front of it," French said during a conference panel.
For the record, Home BancShares, the $8.1 billion-asset holding company for Centennial Bank, posted a 40.39% efficiency ratio, at the end of the second quarter. The efficiency ratio measures noninterest expenses as a percentage of the combination of net interest income and fee income.
As of Dec. 31, 2014, the most recent data available in American Banker's "Ranking the Banks" data collection, Home BancShares' efficiency ratio of 42.54% was No. 16 among bank holding companies that file a Y-9C statement with the Federal Reserve.
In other words, it is hard to do much better than Home BancShares.
But after French started the conversation, his counterparts had to respond.
"Our efficiency ratio is 42%, and we're comfortable with that level," said Ron Paul, chairman and CEO of the $5.8 billion-asset Eagle Bancorp in Bethesda, Md. Eagle reported a 43.28% efficiency ratio at June 30.
Edwin Hortman, CEO of Ameris Bancorp in Moultrie, Ga., said, "We wish we could get to a ratio that starts with a '4' or even a handle of '5,' but we think we'll get there."
The $5.2 billion-asset Ameris reported a tax-equivalent efficiency ratio of 92.74%, at June 30. Ameris' efficiency ratio, according to the FDIC, was 81.18%. Perhaps Ameris had an eye toward meeting Hortman's goal of a lower efficiency ratio when it announced on Monday that it will close 10 branches to save about $5 million.
David Dykstra, chief operating officer of the $21 billion-asset Wintrust Financial in Rosemont, Ill., discussed his company's efforts to get more efficient. Wintrust's ratio, as of June 30, was 65.64%. That was slightly worse than a year ago, when the ratio was 65.36%.
One possible way, Dykstra said, was to find banks to acquire that have branches in the same markets as Wintrust's branches. By acquiring these banks and closing overlapping branches, Wintrust can cut expenses while generating higher revenue, thus improving its efficiency ratio.