ConnectOne Bank—one of the youngest banks in the US—has grown rapidly by quickly spotting and acting on new opportunities for expansion.
For example, in 2013, it was the first financial services firm in the country to take advantage of the Jumpstart Our Business Startups (JOBS) Act—a law that helps make it easier (and less risky) for small and medium-size businesses to take their companies public. This gave ConnectOne the opportunity to assess the market’s appetite for new issues and as a result, ConnectOne Bank became the first financial institution to issue an initial public offering (IPO) since the great recession. It was also the first New Jersey-based bank IPO in 10 years.
These “firsts” helped provide enough capital to finance a merger with Center Bancorp, which has since pushed the combined company’s loans and deposits to $4.5 billion from approximately $500 million in 2012.
As quickly as the bank was seizing new growth opportunities, it found that its legacy on-premises IT systems were too manual and labor-intensive to keep pace, not only with its own rapid growth, but with the potential threats from financial technology (fintech) startups. Staff struggled to efficiently consolidate financial data, comply with Securities and Exchange Commission (SEC) audits, and quickly close its books.
In 2015, the bank decided to improve its cost structure and give itself the flexibility to work with emerging financial services firms that would have otherwise become competitors by replacing many of its financial systems with cloud apps.
By tapping into Oracle Database Cloud Service and Oracle Compute Cloud Service, ConnectOne Bank built a financials platform into which loan balance information and customer transaction data from the bank’s on-premises, core banking system are imported. From there, the data is compiled into encrypted files, transferred into Oracle ERP Cloud via Oracle Developer Cloud Service and Oracle Java Cloud Service, and then translated so it can be viewed, shared, and managed by the bank’s finance staff.
Today, ConnectOne Bank saves an average of 17 hours of work each month, simply by reducing the effort required to manually crosscheck all of its financial data. By using the cloud to help automate the data consolidation, financial analysis, and month-end close, the bank is also able to complete external audits 10% faster than before, translating into tens of thousands of dollars saved each year in auditors’ fees.
In the fourth quarter of 2016, ConnectOne Bank generated an efficiency ratio of 42.9% (which means that it cost the bank about 43 cents to generate $1 of revenue)—a score that bested the top 10 US banks, which had a combined average efficiency ratio of 61.5% during the same period, according to the 2017 All Banks Call Report from BankRegData.
While the cloud helped automate all of these core processes and increase productivity and cost savings, the greatest benefit of using the cloud to manage ConnectOne’s financials has come from analytics. “If our net interest margin is down in a certain category, we can immediately drill down into the data, see what the issue is, and then quickly make an adjustment to correct it,” says Neil Martucci, senior vice president and controller at ConnectOne Bank.
By integrating its Oracle ERP Cloud app with Oracle Enterprise Performance Management (EPM) Cloud, staffers at every one of the bank’s 22 branches can now run detailed financial reports to help ensure they’re staying on track with performance targets. “Having a single financial reporting platform that authorized personnel could access from any location wasn’t even possible with its on-premises applications,” says Daniel Colon, applications manager with Oracle.
As it prepares for the future, the bank is using cloud analytics to find new ways to provide better client service to millennial business owners—one of ConnectOne’s newest and fastest-growing customer segments.
Aside from offering more mobile banking services to augment its more traditional, in-branch experience, the bank is now providing entrepreneurs with new loan products, deposit services and financial management expertise to help them pay off their student loans and borrow enough capital to start and grow their businesses.
Despite the threats of a sluggish economy, floating interest rates and a harsh, post-recession-era regulatory environment “running analytics in the cloud has helped us identify the right mix of products and services to help both our business and our clients’ businesses succeed,” says Martucci.
Even the rise of fintechs—an emerging financial technology industry of online banking services firms that provide millenials with easy-to-use, mobile-only banking platforms—has not fazed the company.
Instead of trying to compete with fintechs head on, ConnectOne has decided on a different tack. “At first, we were really worried that the fintechs were going to drive us out of the market,” says Martucci. But now, “we’re actually looking to partner with some of them and are adapting our business model so we can anticipate the needs, timelines and expectations of this new generation of customers,” he says.
Sasha Banks-Louie is a brand journalist for Oracle.