4/6 four community bankers, six questions

RMA Journal, The, April, 2005 by Beverly J. Foster

What do you do when you have a question (or six) that you'd like to have answered? You do what any other RMA Associate would do: Ask another RMA Associate. In this article, four community bankers provide their perspectives on topics ranging from communicating goals to what makes their institutions appealing to employees.

Each community bank is unique--whether it's by geography, commercial/retail orientation, industry focus, distribution strategies, management focus, incentives used, or any number of other considerations. The banks in this article--ranging from $125 million to $2.3 billion in total assets--address challenges familiar to all community banks. The answers they provide reveal distinctive as well as similar aspects of their institutions' cultures.

1. How does your CEO communicate your bank's goals to everyone throughout the organization?

Jim Hilty, CRO of The Bancorp Bank, says the CEO chairs both the Loan Committee and Senior Officers' Committee. "Both forums open the lines of communication to discuss the bank's goals and to measure our year-to-date progress," be says. Many members of the management team have worked together for more than a decade, and Hilty feels this has helped them assume a proactive leadership role, and offering additional assurance to the CEO, board of directors, and shareholders that their expectations are being met.

Columbia Bank's communications process begins once the CEO and executive management group have established the ROE/ROA, revenue and expense targets, and other key objectives for the coming year, says Mark Nelson, EVP. The line managers use these objectives in their budgeting process. Once the budget is finalized and approved by the board, each line unit's specific budget is provided to the respective manager as his or her goal for the year.

After senior management (which includes all executive vice presidents, senior vice presidents, and the regional commercial banking managers) develops Mid-State Bank and Trust's plans, the objectives are delivered to all officers at an annual President's Meeting and then to all employees through an intranet message. "We continue to focus on the goals at staff meetings throughout the year," says Paul Mistele, SVP and credit administrator.

Incentives serve as one communication device for Midland National Bank (MNB). Once the budget and return objectives are set by the executive committee, the department heads relay the goals for each area to their associates. Vice President Susan Downey says all officers have access to the bank's financial statements and analysis within five business days after each month-end. If the bank maintains a return on assets of 1.30 or better at year-end, the officers receive a bonus from a formula-based pool of money.

2. How do you assess your competition and find advantages to exploit?

Word travels fast in Kansas, where three important factors are reputation, reputation, and reputation. "Midland National Bank is known around town as the bank to see if you have commercial financing needs," says Downey, and the bank has 73% of its loans in commercial and commercial real estate while its local competitor has just 29%. Further, most MNB customers are willing to discuss terms offered by other banks, which gives the bank the opportunity to demonstrate the advantages it offers. "Also, we participate with a number of institutions on the sale and purchase of loans," says Downey, which allows MNB to find out the terms and conditions being quoted at other institutions.

Oxnard may be the largest city in Ventura County, California, with a population of 182,000, but Mistele says it's still a small community, and Mid-State's approach is pretty direct. His bank's officers ask the competitors directly about products and prices, and they also ask their competitors' customers when they call on them. However, like any successful community bank, Mid-State has its specialty niches, which offer a competitive advantage. The bank also capitalizes on its small size to respond quickly to compete with the "big guys" as well as other small banks. "The authority level is close to the line officer," says Mistele. But in the final analysis, Mid-State, like MNB, works hard on its reputation to follow through on promises in an accurate and timely manner.

Columbia Bank's marketing group performs monthly analyses on competitors' deposit and loan pricing for various products, which are then presented to the bank's pricing committee for review and recommendations. In addition, line officers readily share competitive information that they learn about on their sales calls.

The Bancorp Bank views its lending activities in two separate baskets; competitive assessment is done differently for each. "Commercial lending to family-owned businesses, high-net-worth individuals, and professionals is a regional program executed by experienced lenders coming from a range of institutions," says Hilty. However, his bank focuses on what it knows how to do and so expands its loan base vertically. "On the other hand, the extensive referral network established within our private-label groups is a national business limited to lending type, such as home equity loans, fleet auto leasing, and other lines that can be pursued comfortably in a variety of markets," he says. "For this segment, opportunity is identified by adding referral sources that meet our private-label lines of business."