Click Cover to Read Digital Edition



ICBA National Convention
March 1-5
Gaylord Palms Resort
ABA Mutual Community Bank Conference
March 22 & 23
Marriott Marquis
Washington, D.C.
Card Forum & Expo
April 8-10
More events >  

<- Back

Share |

Print Friendly and PDF

Uncertain Times Require Sound Planning

By: Joe Hemker and Scott Frost

The U.S. Treasury’s approach regarding the Small Business Lending Fund and the actions of bank regulatory agencies inhibiting a banker’s ability to make loans to credit–worthy borrowers are but two of the most recent examples of actions creating challenges for community banks and their returning to profitability. This, combined with continued anxiety surrounding the mixed effects of the Dodd-Frank Act on smaller banks has created a lot of discussion regarding the right path forward for community bankers.

With real estate still in a downward trend, where can community banks look to create favorable business opportunities for their institutions while adding resources and value to the communities they serve? The answers will be unique to each institution, but lie in understanding and aligning skills, strategy and creative execution.

Assess Your Skills and Capabilities

Officers know today’s banking industry is unrecognizable from just a few years ago. However, the pace with which change has occurred has left little time for proactive strategic assessment, review of an institution’s strengths and identification of potential gaps in the skills needed to lead an organization forward. The only way to uncover the opportunities that may exist with an institution is to get serious about strategic planning. Following are three key elements to any successful plan.

1.) Board engagement. No longer is it enough to have a board of directors that is politically, economically or otherwise connected to the community. Today’s board must represent a cross-section of practical, strategic and technical skills that reflect the new regulatory environment as well as the needs of your customers. Directors with a deep knowledge of technology, compliance, social media and strategic planning, to name a few areas of importance, are required for organizations that hope to be successful.

2.) A working relationship between the board and management. The relationship between the board and the management team cannot be underestimated. It must be clear that the board sets the strategy and bank policy. The management team is there to execute the board’s plan. Without the expressed confidence of the team by the board, however, the plan is likely to falter. Each group must have a seat at the table, and 360-degree communication with management offering its assessment of the strategic plan back to the board is critical for honing a successful strategy and efficient execution.
3.) Deep understanding of legal and compliance areas. Without a complete understanding of the regulatory environment the plan will lack the strategic and creative thinking needed to come up with profitable solutions for the institution. At the board and management levels, legal experts and compliance professionals are needed to set policy and monitor stringent execution.

Develop the Plan: Service and Products

Differentiation for community banks typically comes down to two things: service and product offering. Focus on these areas may have waivered to some extent as banks have devoted much of their recent attention to safety and soundness issues. Now is the time for community banks to be opportunistically focused on delivering service and identifying products customers and prospective customers want and are not accustomed to getting from the bank.

For example, community banks are now uniquely advantaged by their reputation among small business owners, many of whom have found it difficult or impossible to obtain credit from the larger financial institutions. What can your institution offer to small business that is unique (either in the industry or from what your institution is known for offering)? Do you have a product-bundling strategy that will allow you to structure competitive loan terms? Can you offer creative loan restructuring solutions that keep good loans on your books? Naturally, understanding your institution’s capital position and strategy for building capital is central to any plan, but very important to any discussion around product development and delivery, in particular.

The current lack of credit availability is due to the combination of at least two circumstances: the global credit crisis and the lack of strategy maintained by larger institutions for financing smaller business operations. The latter represents a unique opportunity for community bankers who are willing to commit to the strategic planning process. Our financial services practice has seen its bank clients achieve measurable benefits from building and following a framework similar to what has been outlined above. Through organization, clarity and skills-alignment, your organization will be in the best position to set its course and achieve desired outcomes.

Joe Hemker and Scott Frost are members of Chicago-based Howard & Howard Attorneys PLLC, and practice in the firm’s financial services practice. Contact Hemker at jhemker(at) and Frost at sfrost(at)

Copyright © September 2011 BankNews Media