strategy-4-17-18.pngDHG recently embarked on a research initiative to listen to the success stories of top-performing community bank CEOs. The past decade has resulted in tremendous economic shifts, with significant consolidation among community, regional and national financial institutions. On average, these top-performing community banks double the long-term financial performance of the typical community bank, as noted in a white paper that we have produced. When asked about their views on the community bank landscape, it is trends in regulation, technology and cost discipline that come to the forefront for top–performing community bank CEOs.

Market and Strategy Diversity
The banks of the CEOs interviewed serve urban, suburban and rural markets with asset sizes from $400 million to more than $7 billion. They tend to exist along a continuum of product, operational and customer strategies, including: (1) full-service community banks delivering a range of products to retail and commercial customers in their chosen markets, (2) business banks maintaining deep and profitable relationships with small and middle-market businesses and their owners, and (3) niche banks delivering highly targeted lending products to carefully chosen industries and segments.

From the interviews, we developed a framework for assessing the current state of community banks: ahead of the curve, on the curve, and emerging risks and shaping the future. Community banks can be in multiple areas of this framework, but the key is to stay focused on the execution of their strategies to serve their customers. Based on the results of our research, successful community banks differentiate on some elements of service, keep up on others and remain aware of future risks and opportunities.

Ahead of the Curve with Strategic Focus, Talent and Relationships
Collectively, these top-performing community banks are ahead of the curve when it comes to their strategic focus, talent caliber and relationships. Although many have footprints that cross state borders and major metropolitan statistical areas, execution of successful strategies is very local for community bank CEOs, and embodied in the talent at senior and junior levels of their organizations. Staying committed to their strategy and keeping a constant focus on deep customer relationships, combined with talent, differentiates community banks and reinforces their position as a unique, critical part of the communities they serve. The CEOs interviewed unanimously agreed that “top-performing banks are built on top-performing people.” Talent is the wellspring and platform to execute sound strategies, develop deep customer relationships and address the challenges of the ever-changing economic environment.

On the Curve with Technology, Success Metrics and Strategic Planning
These banks are on the curve in their use of technology for the customer experience, determining success metrics and strategic planning. To remain competitive with large players, it is necessary to stay on the technology curve (staying current and keeping up, but not seeking to be on the bleeding edge). One hundred percent of the CEOs agreed that “technology-driven products and solutions are becoming a must-have for community bank customers.”

Top performers in this realm have a clear vision and a thorough understanding of their goals and growth strategies, their shareholders and culture. While some focus on creating long-term plans, others are more execution-focused. The common thread is that whatever process they adopt puts teeth into execution and go-forward plans.

Emerging Risks and Shaping the Future with Millennials, Big Data and Big Banks
The interviews suggest a number of emerging risks and opportunities, primarily in their responses to the emergence of millennials and big data analytics.

First, the strategies that community banks and their customers use to address millennial wants and needs are ultimately of critical importance. Secondly, though community banks are confident in their differentiation of service, solutions and value from big banks, should those banks dedicate significant resources to the middle market, remake their models and customize their service delivery, community banks would need to adapt. Finally, our research showed mixed adoption and application of big data to refine product and customer segmentation, pricing, risk and profitability strategies.

Despite challenges facing the financial services sector, community banks are competing effectively. We present the stories of these top-performing CEOs with the hope that they will benefit the industry. To request the full white paper, please contact [email protected].


Walter McNairy