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Echo Partners Community Bank Blog

    Bank Regulatory Trends in MRBA

    BankExamMatters Requiring Board Attention (MRBA) trends are a hot topic in the latest FDIC Supervisory Insights.  Read the full publication here.

    Over the period 2010 - 2013 the FDIC's MRBA comments on the Report of Examination (ROE) were collected, categorized and statistically aggregated.  This summary data forms the basis of the article.

    The most common areas ("Top 5") mentioned in MRBAs, along with key areas of specific mention, are listed below. Keep in mind these are typically for "1" or "2" rated institutions.

    1. Loans (Cited in 69% of all MRBAs)
    2. Board or Management (45%)
    3. Violations (24%)
    4. Earnings (24%)
    5. Interest Rate Risk (24%)

    Loans focused on credit administration, problem assets, ALLL deficiencies and concentrations.  Over the period of the study (2010 - 2013) the loan category has been declining in frequency, although it is still by far the most common category.

    Board / Management comments focused on policies, audit, strategic planning and succession planning.

    Violations typically involved appraisals and/or insider lending practices.

    Earnings is primarily concerned with strategies to safely improve earnings.

    Interest Rate Risk mentions have been on the rise since 2010.  This should be no surprise as numerous regulatory releases and attention since then have targeted interest rate risk.  Eventually rates will rise and your regulators' concerns will be realized.  The time to prepare is now.

    Generally, citations for interest rate risk have involved improved monitoring and control of the IRR process.

    Liquidity didn't make the "Top 5", but deeserved special mention for declining in importance over the period.  Again, as the crisis passes this is expected behavior.

    IT issues on the other hand were not in the "Top 5" but have increased in frequency over time.  Watch this emerging category.

     

    Photo provided by Images Money

    Bank Strategic Plan: Free Training


    Bank Strategic PlanBuild Bank Growth and Profits Via Laser Focused Goals While Satisfying the Board, Shareholders and Regulators

    This Bank Strategic Plan free training session on Thursday October 17 at 3pm ET will show you:

    • What every banker needs to know about their strategic plan
    • Which approach to strategic planning almost never works...and what you should do instead
    • The secret ingredients to a quality strategic plan
    • What to do if you don't have a strategic plan
    Click to Sign Up for this Free Training right now.
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    Your bank strategic plan is a required regulatory element of your overall management process.  It can also be a valuable roadmap to growth and profit improvement.  Learn how with this valuable free training.
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    Bank Strategic Planning SMART Goals

    Chess Have you ever heard about SMART goals?  They're another strategic planning staple that can be easily misused.

    SMART goals are goals that are:

    • Specific
    • Measureable
    • Achieveable
    • Relevant
    • Time based

    We've all heard that you need to set goals to maximize your chances of attaining success.  But all goals are not equal.  And goals can sometimes ignore the realities of the workplace.

    In fact, sometimes in the rush to get going we can actually set goals that are counterproductive to the overall big picture outcome. 

    The idea with SMART goals is that by setting goals in this specific fashion you are more likely to establish goals that actually drive you towards your desired outcome.

    But here's the big secret...Unless you establish clear and detailed big picture overall goals first, and communicate them exactly, SMART goals can result in missing the result you are ultimately looking for.

     

    If you're a banker, and you'd like a high-resolution, full size copy of my EPIC Bank Strategic Plan infographic, just click here and I'll send it right over to you, along with some other helpful materials.

     

     

    Photo provided by Mukumbura

    Bank Strategic Plan Concepts: Competitive Advantage

    competitionOne of the "old standby" base ideas typically used in developing strategic plans is called Competitive Advantage.  Competitive advantage is one of strategic planning's most fundamental concepts.  And most misused.

    The notion of competitive advantage was developed by Harvard professor Michael Porter in the late 1970s to help explain persistent excess profits apparently earned by various companies over time.

    The 5 key precepts of Porter's competitive advantage are:

    1. Competitive rivalry within an industry
    2. Bargaining power of suppliers
    3. Bargaining power of customers
    4. Threat of new entrants
    5. Threat of substitute products

    Over time, these forces have been distilled down in strategic planning to simply talk about a sustainable competitive advantage, which is unique to your bank, and not easily nor effectively copied.

    The only problem with this shortcut approach is that it really just doesn't exist.  After all, think about your own bank.

    How's the competition?  Does the Fed have much power in setting short term rates?  Do you ever have customers asking you to match rates?  Do any new banks ever enter your region?  Have new types of financial services providers sprung up?

    So far, most banks are batting 0-for-5 on competitive advantage.

    And then there's the most difficult part of competitive advantage...the idea of sustainability.  Yes, that's right.  The strategic planning gurus insist that your competitive advantage must be sustainable.

    I can remember the late 1970s, and there's one thing for sure.  Markets move a lot faster today than 30 years ago.  Thanks to globalization and the internet among other things.

    Sort of makes me long for the good ol' days of the late 70s and early 80s when all we had to worry about was volatile double digit interest rates.

    What do you think about sustainable competitive advantage?

    How can your bank best compete?

    Give it some thought - it might change the way you think (or manage).

    Let me know how I can help.  Thanks.

     

    If you're a banker, and you'd like a high-resolution, full size copy of my EPIC Bank Strategic Plan infographic, just click here and I'll send it right over to you, along with some other helpful materials.

    Photo provided by Zanini H

    3 Building Blocks of a Bank Strategic Plan

    BuildingBlocksNo matter what you do with your bank strategic plan, whether you hire it out or build it yourself, these 3 key building blocks should form the basics, and basis, of your entire effort.

    Do you know what they are?

    • Mission:  Mission answers the question of why you are doing what you're doing.  What is the bank's core purpose?
    • Vision:  Vision lays out the promise of what you want your bank to become.
    • Values:  Values represent the foundational beliefs and guiding principles of what your bank stands for.

    The true litmus test for anything you do at the bank boils down to whether or not it is consistent with your mission, vision and values.  If it does, you are building your bank.  If not, you are best off going in another direction.

    Like so many things in life, the most important concepts are also some of the simplest.  

    Get these right and your bank strategic plan falls into place.  Get them wrong and your plan will frustrate you at every turn. 

     

    If you're a banker, and you'd like a high-resolution, full size copy of my EPIC Bank Strategic Plan infographic, just click here and I'll send it right over to you, along with some other helpful materials.

     

     

    Photo provided by woodleywonderworks

    SWOT for Banks

    SWOTPretty much everyone has heard of SWOT analysis.  Even if you don't really know what it is, you've probably heard of it.

    SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.  SWOT generally refers to a structured analysis looking at these 4 factors, as related to your bank.

    So far, so good.

    But what a lot of people miss is that there is a real division between these terms, and it boils down to internal versus external factors.

    Strengths and weaknesses relate solely to internal factors.  

    For example, a strength might be a state-of-the-art, highly efficient operations center.  This strength can lead to an advantage in processing or effectiveness in reaching customers.  

    A weakness, to give another example, might be a lack of cross trained staff that hobbles your ability to "right size" your branch staffing.

    Here's the key distinction.  Internal factors (strengths and weaknesses) are ultimately under your internal control.

    Opportunities and threats, on the other hand, are both external and out of the bank's direct control.  Here are quick examples of these.

    A major regional bank restricting CRE loans due to a head office edict might well create an opportunity, while a new denovo competitor could be a threat.

    One of the most common mistakes that I see related to bank strategic planning is when the SWOT analysis does not properly seperate the comonents into external and internal factors.

    It sounds simple, but it's easy to miscategorize some items.  Let me know if I can help.

     

    If you're a banker, and you'd like a high-resolution, full size copy of my EPIC Bank Strategic Plan infographic, just click here and I'll send it right over to you, along with some other helpful materials.

    Photo provided by pshegubj.

    Bank Strategic Plan Infographic


    Bank Strategic Plan InfographicIf you're like most bankers, you occassionally consider how you might implement inhouse strategic planning.  Then, once you reflect on all of the steps, tasks and tools involved, it's an easy step to jump to something else instead.

    Something less complicated...like brain surgery.

    But I have a secret to share with you.  Making a subject seem complex, or emphasizing how much effort, knowledge or technique is involved in something is a well known tactic to minimize the D-I-Y movement.  

    And just like those handy fix-it projects that the local big box hardware stores teach each weekend, I can help you see how easy (and how much less costly) it can be for you to tackle this job yourself.  After all, who knows your bank better than you do?

    Just like those "to do list" projects, I can show you a simple roadmap to keeping your bank strategic plan on track.  We'll really start the exact same way...with a plan.

    The infographic on the right side of this article shows my basic bank strategic plan, and is an extract from my high level strategic planning program.  I have developed and use the EPIC Strategic Plan for all of my bank strategic plans.

    EPIC focuses on the 4 core tasks of any bank strategic plan.

    • Evaluate:  The best place to start a plan is with an evaluation of where the bank is now, and how it got there.  We'll examne your bank's advantages and weaknesses, and how we can turn them to your benefit.
    • Plan:  Here's where we get down to the basics of your bank's strategic plan, starting with Mission, Vision, and Values.  And like any building ptoject, you'll want a firm foundation before moving on.
    • Implement:  This is the nuts and bolts part of your plan.  Here we'll translate the 30,000 ft level ideals of your plan into SMART goals and action steps.  Because a plan that sits on the shelf gathering dust is not really a plan at all.
    • Correct:  We'll celebrate our wins, adjust for our missteps, and refine our plan as needed.  Because you want a plan that's alive, not a static point in time balance sheet approach.

    Then after we've reviewed, selected and maybe tweaked a plan, we'll talk about the tools.

    Strategic planning has it's own set of tools and techniques that will let you plan like an expert usually much sooner than you think possible.  Just like a table saw and drillpress can help with those woodworking projects, your strategic planning toolbox can help you turn out a serviceable plan in short order too.

    So, if you're a banker, and you'd like a high-resolution, full size copy of my EPIC Bank Strategic Plan infographic, just click here and I'll send it right over to you, along with some other helpful materials.

    And then you can get started on your own bank strategic plan.

    Do you want to grow your bank profits with little to no risk? Click Here to  Discover How

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