Virtually every analyst who follows the banking industry agrees that once loan quality has been brought under control, the best way to increase share price is to lower the efficiency ratio. Every one-point drop in the efficiency ratio for a $10 billion-asset bank adds $5 million to pretax income.

The $10 billion bank whose efficiency ratio drops from 65 to 55 adds $50 million to earnings and increases earnings per share, and presumably stock price, by 30% to 50%.

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