Twenty Questions

If there’s a common complaint we hear from our director readersu00e2u20ac”and it’s a complaint that regularly shows up in our annual “What Directors Think” survey of corporate directorsu00e2u20ac”it is that bank directors too infrequently talk about bank strategy. Too much time, they tell us, is taken up with looking at the financials, reviewing the nonperforming loans, and, essentially, talking more about the minutiae of running the bank than about where the bank should be in five years and how to get there.

So now that 2005 is behind you, and now that the ink’s dry on the 2006 budget, here are some questions worth asking at your next board meeting.

  • Of our five toughest competitors, who is growing faster than we are? Why?
  • Are any of our competitors keeping longer hours than ours? Is it hurting us?
  • If you weren’t a director of this bank, would you bank here? Why or why not?
  • If our CEO died today, have we identified the logical replacement?
  • If we were to go to totally free checking, would we gain market share?
  • If we’ve had totally free checking, has the growth stopped and should we reinstitute checking service charges?
  • What is our end game? Are we ultimately an acquirer or an aquiree? Is the board’s endgame in line with that of the majority of our shareholders?
  • Does our board and our management team reflect the diversity of our customer base? Of our community? Is that important?
  • How many households are we serving? How many personal checking accounts do we have? How many did we have a year ago? (This is probably the quickest measure of how the bank is really and truly growing. If this number shows good growth, it will normally carry over into the asset side of the ledger as well. Healthy banks almost never have a declining depositor base.)
  • How many branches do we have today? Are they all profitable? Are we weeding the garden?
  • In an era of growing fraudu00e2u20ac”identity theft, computer fraud, falsified financial statementsu00e2u20ac”and with the reliability of outside auditors being in question, are we adequately protected from all fraud risks?
  • What does management consider the worst mistake made last year?
  • Who is our top lending officer and how is he or she compensated?
  • Which of our competitors is most likely to be acquired? By whom, and how might that affect us?
  • What is our exposure in a worst-case, Katrina-like natural disaster?
  • Are we relying on brokered deposits? Are we doing so more than we once did?
  • How’s our online product doing? Is anyone in our market doing better?
  • Do we mystery shop our bank and its branches? Could the board see an executive summary of how we’re doing?
  • Do we have a policy on monitoring our employees’ emails?
  • What help would our CEO like to get from the directors this year that was lacking in 2005?

Throw out some zingers at your board meetingsu00e2u20ac”the questions above, or some specifically related to your own bank. I guarantee it will generate more discussion than what the Fed is likely to do with interest rates this month.

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