Independent Banker - January 2021 - 61

Turning the ship around
When Derek Fraley joined Systematic Savings Bank as president and CEO in 2017, it was in trouble. To
save it, he changed the community bank's charter, launched an IPO and executed sweeping culture
changes. The result: the bank has had four back-to-back positive quarters for the first time in more than
a decade. By William Atkinson
erek Fraley came from another
local bank to become the
president, CEO and chief financial
officer of Systematic Savings Bank in
2017. Today, the $50 million-asset
community bank in Springfield, Mo.,
barely resembles how it looked the day
Fraley walked through the door.
Back then, the community bank had
nearly $23 million in gross loans, with
average annual non-interest expenses
of more than $2 million. " Quick math
shows that the loans would need to
throw off roughly 10% net just to cover
non-interest expenses, " Fraley says.
Given the situation, Fraley knew
he needed to do two things to prevent
the bank from going under: reduce
non-interest expenses and increase
revenue. Fraley couldn't tackle these
complex challenges alone, so he asked
his long-term mentor, Brad Weaver, to
join him as Systematic Savings Bank's
chief loan officer and also named him
to the board.
" Brad had made a hobby of saving
troubled banks, and his presence
and guidance provided value beyond
Name:
Systematic Savings Bank
Location:
Springfield, Mo.
Assets:
$50 million
D
measure, " Fraley says.
In terms of reducing expenses,
Fraley's first step was to cut staffing in
half, from 17 full-time employees to
nine. He then switched group health
plans and renegotiated software and
service provider contracts. He also
cancelled nonvital services.
While difficult, he says, the costsaving
measures were necessary
to getting expenses under control.
Thanks to his efforts, Systematic
Savings Bank was able to reduce noninterest
expenses by $640,000 in 2018
and by another $207,000 in 2019.
Turning the ship around
Next on Fraley's to-do list was a major
cultural shift at Systematic Savings
that would ultimately make the bank
more profitable. The bank went from
being inefficient, with an attitude of
" close enough, " to a team that looks
at every task with the goal of learning
how to perform more effectively.
" We cut hours out of days and
weeks out of months by learning our
systems better and introducing very
precise and consistent procedures, "
Fraley says. " Most importantly,
though, we get things right the first
time, so we don't have to do the same
process two or three times. "
To increase loans, he took a big
gamble. Fraley leveraged the bank
to buy time while he was reducing
headcount and renegotiating
contracts. " We were losing $68,000
a month in net income with only
" Until you actually take
over a sinking ship,
you cannot explain
what it is like. However,
[chief loan officer Brad
Weaver] has been able
to help me understand
what to anticipate. "
-DEREK FRALEY,
SYSTEMATIC SAVINGS BANK
$6 million in capital, and that
couldn't last long, " he says. " It was an
enormous risk. ... In fact, it was the
biggest risk I had ever taken. "
He explained his plan to regulators
and brought on internet CDs, issued
brokered deposits and grew assets by
more than $14 million-a 50% growth
in one quarter, via participations.
The gamble paid off. The year
2018 saw net interest income up
$232,000. " We were still unprofitable
in 2018, but we had cut the loss from
$1.3 million in 2017 to a $120,000
loss in 2018, " Fraley says. " It was the
least amount the bank had lost since
losing only $40,000 in 2013. "
By 2019, the community bank
had gained even more traction. The
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