Implementing a Profitable Growth Strategy for Today and Tomorrow

Growth in banking often gets reduced to pure asset accumulation, but profitable growth requires maintaining a strong strategic foundation that includes considering the net interest margin, noninterest income, efficiency and disciplined expense management. 

When seeking profitable growth, institutional goals may include: 

• Streamlining processes to maximize efficiency.
• Improving meaningful metrics such as return on assets (ROA) and efficiency ratio.
• Unifying the customer experience.
• Balancing and creating a value exchange with the institution’s product mix. 
• Choosing partners wisely. 
• Investing in robust analytics to measure what’s important. 
• Showcasing the personal touch of community banking. 

Strategic Clarity Is the Road Map to Growth
Acquisition is not the only way to grow. A customized strategic plan provides a road map to growth and should always be the foundation of an institution’s specific growth strategy. As part of the strategic planning process, banks should conduct an honest internal appraisal that includes their strengths, weaknesses and capabilities. Additionally, identifying a group of aspirational peers can help set a realistic vision for the next stage of growth.

John Denkler, CEO of Farmington, Missouri-based First State Community Bank, says his approach is to shift the employee mindset that an institution only grows by acquisition. He regularly challenges his teams to become the financial leaders in their markets, focusing on growth potential and customer relevancy. 

To increase clarity and set a positive direction, the bank’s strategic plan should always answer the following questions:

• Where are we now? 
• Where do we want to be? 
• How do we get there?
• How do we measure progress?

Profitability Still Starts With the Fundamentals
The fundamental blocking and tackling of banking never changes, regardless of institution size. Managing the following basic levers well fuels both growth and resilience at any size:

• Net interest margin, including loan mix, pricing discipline, deposit mix and funding strategy.
• Noninterest income, including treasury management, debit card, wealth, insurance and mortgage banking.
• Noninterest expense, including people, fixed assets and other controllable costs.

Growing Through Deposits
Growing the right deposits is essential, especially for loan driven banks. Effective strategies include: 

• Strengthening relationship banking and customer experience.
• Reviewing or revamping deposit products.
• Expanding digital offerings.
• Exploring private banking or wealth avenues.
• Competing with larger banks and fintechs through better customer value.

Culture, Infrastructure and Pace
There is a difference between scaling up and scaling smartly. Managing the pace of growth requires staying true to the institution’s identity, using the strategic plan as a foundation and utilizing pricing and underwriting standards to modulate expansion. In addition, it’s important to pay attention to infrastructure readiness by pre-building capacity for the size the bank aspires to grow into. Finally, don’t neglect succession planning, evolving the organizational chart and building the talent pipeline as organizational complexity increases. You’ll need the right people on your team to carry and implement the vision as the institution climbs to the next level.

Technology Multiplies Profitable Growth
Technology’s role in bank growth is not only about speed. Today’s technology is smarter, more efficient and allows for more consistent growth. Choosing technology partners wisely is recommended, as the right platform plus the right support can accelerate execution exponentially.

Examples of banking technology that acts as a profitable growth multiplier include:

• Robotic process automation to scale without head count.
• Data analytics for deeper insight into profitability drivers.
• Interactive teller machines and digital platforms that enhance customer experience and justify value-based pricing.

Robb Blume, CEO of Kokomo, Indiana-based Community First Bank of Indiana, a subsidiary of Community First Financial Corp., said of his $909 million bank, “We’re concentrating on building out our data management and analysis systems and are beginning the process of utilizing robotic process automation to streamline processes. We believe technology will allow us to continue to grow the balance sheet at a much faster rate than our head count. It should also provide opportunities to upskill some of our people, leading to better employee opportunities and job satisfaction.”

Culture, Talent and Communication
As institutions grow, they become more complex and require enhanced approaches to meet the moment. Growth often demands the following steps to level up:

• Increasing communication and intentionality. Evaluate the effectiveness of internal communication channels and be responsive to team needs. 
• Investing in people early to build long-term capacity. This can include leadership development, apprenticeships and employee stock ownership plan strategies.
• Paying attention to culture as the make or break factor in M&A integration and retention.
• Revisiting organizational structure, talent needs and succession plans regularly.

What Profitable Growth Today and Tomorrow Really Means
Profitable growth really means balancing short-term performance (ROA, margin, efficiency) with long-term value creation. The importance of customer experience, especially at community banks, cannot be overemphasized.

You must ensure the customer experience remains consistent and personal — even at scale. Your relationship with the community and their experience with you will determine your capacity to grow profitably and sustainably in the future.