I recently spent an afternoon with the chief executive of one of America's top-performing banks. The bank's return on assets and return on equity were great; its efficiency ratio was something to be admired; and the banker effused an enthusiasm for his job and his bank that many would envy.

"What makes you so profitable?" I asked.

Among his answers: careful lending that cut losses to a minimum and the luck of having a customer base that still likes to keep core deposits in savings and demand deposits-at least for now. This differs from the experience of some banks in major cities where senior citizens figure out interest to the penny and demand the top rates going or ask for a withdrawal slip.

But what interested me most was the fact that even though his is a multibillion-dollar bank with more than 100 offices, its CEO stated that either he or his second-in-command signs every check paid by the bank and that every expenditure over a modest minimum must be reported to the board (most of whose members, I must add, are also very large shareholders).

"You will be amazed what you find when you sign every check other than routine salary checks," he explained.

"In acquiring other banks, we have found checks being sent out as rental payments for buildings they have not occupied for years.

"We have seen charges for telephones that can't be found; duplicate, triplicate, and quadruplicate subscriptions for inappropriate publications; and other similar waste."

The bills for nonexistent phones also was a red flag warning that some employees were stealing. So having a top officer sign expense checks can lead to exposing waste, he said.

(Two decades ago, I hosted a monthly seminar series that banks could buy on cassette. The publisher would send out quarterly bills for $36 instead of annual ones for $144 because he knew that in many banks any bill under $50 would be automatically paid but a larger invoice would lead to questioning.)

Another secret my CEO friend revealed was that the bank had to think of the full impact of every new action on policies already in place.

Say marketing comes in with a plan to win deposits by paying a high rate on large new balances. Won't that attract deposits that are already on board but earning a much lower rate of return?

When contact people are rewarded for selling an annuity, aren't they likely to talk people into taking money out of bank accounts? This takes money out of the bank in return for only a small sales fee.

Other points this high performer revealed:

Declaring bankruptcy is a sign of weak character. If someone has been in personal bankruptcy, even a good number of years ago, the bank will almost never lend to him again. (This is one issue on which I would love to hear some readers' views for use in a future column. You can fax me at (908) 273-7309. The best response will win a presidency for a day at Schmidlap National Bank.)

Answering your own phone and wandering around the bank and its branches is a way of learning what is going on.

When taking over another bank, no salary should ever be cut, no matter how out-of-line it is. It is far better to let time even out salaries than to make an enemy in an industry where the grapevine is so influential.

My friend was modest enough to start our discussion by saying that much of his bank's success-and his own-was luck.

But as the afternoon passed, he admitted that the harder you work, the luckier you get. I had made my appointment to see him by calling his office at 7 a.m.-and he answered his own phone, which in itself shows why he runs such a high-performance bank.

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