Security Federal Bank

Security Federal Bank (SFB) is located in Northwest Indiana and employs about 200 people. The bank was historically focused on mortgage lending with very little emphasis on retail or community banking. It had the reputation of being solid but sleepy.

In the banking industry, the 1990s has been a decade of sweeping changes. Banks are striving to increase profits and offer more and more services than the next bank, while becoming more dependent on non-interest income (versus interest income).

In 1995 the decision was made at SFB to embark on a new way of banking to survive in this changing and competitive market. A strategy for doing business was developed to institute a new way of doing Community Banking. SFB's focus was going to be on becoming Customer Intimate ­ having relationships with their customers as friends and advisors, not simply as transactions. A true paradigm shift.

Key to successfully implementing these revolutionary changes in the highly regulated and rigid banking industry has been TOC.

Initially, copies of The Goal were given to the officers and management staff at SFB. Weekly meetings were held to translate the practices and procedures in The Goal from the manufacturing environment to the banking environment. The 34 core measures in banking were divided into the three core measurements of TOC ­ Throughput (T), Investment (I), and Operating Expense (OE).

All staff were taught the TOC Thinking Processes, first being trained in the acceptance of change, then enabling them to work with their customers to solve conflicts and create plans to reach their goals, rather than just process an impersonal transaction.

This has effected how all employees approach banking and how they are measured and compensated. SFB now holds bi-weekly management meetings on the Thinking Processes and what is or is not working in their environment.

The results since implementing TOC speak for themselves:

June 1996 ­ Before TOC	September 1997 ­ With TOC
$212 million in assets	$317 million in assets (+ 49.5%)
$850 million in loan servicing assets	$1.4 billion in loan servicing assets (+ 64.7%)
Net Interest Margin (T) 2.02%	Net Interest Margin (T) 3.56% (+ 76.2%)
Non-Interest Income (T) 1.03%	Non-Interest Income (T) 1.65% (+ 60.1%)

What's Next

As part of its process of ongoing improvement, Security Federal Bank is taking the following steps:

• Continue experimenting with new ideas and concepts to make TOC viable for banking and for the growth and prosperity of the bank.
• Focus on the institutionalization of TOC in Banking
• Document the learning processes of TOC in Banking

This success story was presented by Security Federal at the Jonah Upgrade Workshop in November 1997. The presentation is available on video (#JFL-3). .