1. Strategies to Drive
Community Bank
Profitability
James B. Bexley, Chair
Smith-Hutson Endowed Chair of Banking
Sam Houston State University
Huntsville, TX
jbbexley@shsu.edu

2. Some Basics
Your bank needs an annual strategic planning meeting
and a written plan.
Don’t let “greed” put you at risk.
Don’t do it just because other banks are.
“Easy money” may work inA gambling--but not banking.
If it doesn’t pass the “smell test”, don’t do it.
Like it or not-Dodd Frank is with us
Not knowing is not a defense A
Old fashion ethics and integrity is in vogue
B
C

3. Direction of Banking is
Changing
In the Past, Customers Sought:
Convenience
Access
Price
HOWEVER, TODAY IT IS A NEW“ BALL GAME”
THEY WANT:
BETTER
CONTROL INTERACTION CONVENIENCE
INFORMATION

4. The New Customer Profile
50% College Educated Increasing to 70 % by 2014
Increasing to $65K
Average Salary $50K by 2014
Over 60% Own A PC &
Will Be On-Line User

5. The New Customer Profile (Cont.)
Use 3 or More Sources--
High Information Seekers
Don’t Trust 1 Source
30% Will
Like Electronic Payments
Use Them
Will Have 4 or More
Accounts

6. What You Need To Watch
Momentum of Large Regional Banks
Widening Gap Between “Haves” & “Have Nots”
Branches in Multiple Markets by Your Competition
How
This Impacts
You!
Opportunity to Increased
More Merger
Take Business
Formidable & Acquisition
From Weak
Competition Opportunities
Banks

7. Evaluate Risk
First, recognize there is a certain amount of
risk in all that happens in the bank.
Evaluate all functions of the bank for risk
BEFORE taking a course of action.
Establish a program for on-going risk review.
Keys to risk management
Risk identification
Risk evaluation
Risk control
Document your findings.

8. Develop A Niche Strategy
Limit the number of products.
Make products attractive & repeatable.
Pick specific loan & deposit products, making
sure that your staff knows their benefits & how
they work.
Keep administrative & development costs low.
Advertise specific products.
Get the officers out the bank, calling on
customers & prospects.

9. Corporate Governance
Corporate scandals cost $40 billion a year
Must avoid conflicts of interest
Congressional overreaction
Dodd-Frank
Sarbanes-Oxley
Patriot Act
Bank Secrecy Act
Overreaction
Need for director education
Cooperation with regulators

10. Funding Strategies
Develop a funding strategy that has appropriate
spreads to the asset side of your product mix.
Consider pricing deposits at 10% above market
average.
Consider pricing loans just under the highest
pricing in the market.
Carefully examine risk related to your funding
strategy.
Consider “matched funding” in unique risk
situations.
Focus should be toward a 4 percent spread.

11. Overhead Containment
•Make everyone accountable, particularly your
loan officers.
•Do time & motion studies for staffing purposes.
•Require cost/benefit justification for staff
increases.
•Keep fixed cost & long-term commitments as low
as possible.
•Don’t build “branch monuments.”
•Develop renewable non-interest income sources.
•Use incentives to improve performance.

12. Sensible Strategies
Grow by selective acquisition,
minimizing dilution.
Branch into attractive markets that
“fit” your niches.
Stay true to the community bank
philosophy.
Don’t outgrow your ability to
support the bank--i.e. not enough
staff, improper training, or
inadequate facilities.

13. Reinforce Community Bank
Culture!
•Local decision making
•Quick responses
•Friendly, helpful staff
•Exceed customer expectations
•Place major emphasis on customer service
•Meet the needs of the local banking public

14. REMEMBER!
In spite of how smart you think you are--YOU
DON’T KNOW WHAT YOUR CUSTOMERS
WANT AND NEED—ASK YOUR CUSTOMERS!
Make every officer & employee accountable!
Know your bank & what makes it “tick!”
Know your competitors!
Know your customers!
Know your market & take what it will give you!
Evaluate everything you do for elements of risk!