A Strategic Planning Blueprint Can Fortify the Smaller Bank; but Some Tiny Community Banks That Have 'Natural Niches' Do Not Always See Advantages

By Fraust, Bart | American Banker, June 11, 1984 | Go to article overview

A Strategic Planning Blueprint Can Fortify the Smaller Bank; but Some Tiny Community Banks That Have 'Natural Niches' Do Not Always See Advantages


Fraust, Bart, American Banker


NEW YORK -- Wen officers of community banks are asked to give their strategies for dealing with the deregulated 1980s, it is often noted that in terms of return on average assets, small banks outperform large banks.

So why do community banks need strategic planning?

"You make money by design, not by happenstance, in today's deregulated environment," says Kendon T. Birchard, senior vice president of the $167 million-asset National Security Bank of Chicago.

Mr. birchard, whose bank has implemented a strategic plan, adds that a formal, written strategic plan is necessary to maintain or enhance what a bank has achieved.

Tom Mularz, who coordinates strategic planning programs for the Bank Administration Institute (BAI), notes that banks as a rule have done very little strategic planning and community banks have done none. In the past, there was little reason to do so.

The cost of funds was fixed by regulation as was the marketplace and the type of products offered.

Now, the rates banks pay for deposits are deregulated, and geographic and products limitations are disappearing.

These trends affect all banks, but community banks have fewer ways to cope.

The smallest banks, which have natural niches that are unlikely to attract competitors, can be run on an ad-hoc basis. But the largest banks have the financial and managerial resources to develop a strategic plan.

Banking industry observers believe the mid-size banks -- lacking size, capital and management depth -- will have the biggest problems competing in the 1980s.

"Community banks have -- through automated teller machine and correspondent networks -- the same complexities in products and markets as the larger banks but less internal management to cope," says Roger W. Smith, a bank consultant. Mr. Smith works out of the Portland, Ore., office of Arthur Andersen & Co. He recently coauthored a book, "Strategic Planning for Banks," with Richard Sapp, professor of finance at Portland State University.

Mergers and acquisitions play a larger role in today's banking market than they did in the past, and a bank must decide whether it will be a buyer or seller. Without a strategic plan with regard to mergers, the bank can fall prey to an unwanted suitor or be caught unperpared for either a good deal for its stockholders or an opportunity to enter a new market by acquiring another bank.

Mr. Smith notes that with all of the talk about mergers and acquisitions, a number of community bankers thought they could sit back and wait for the big money-center banks to ride into their towns, buy their banks, and leave a trail of cash behind them.

"The fact is that community banks have not proven to be attractive merger targets for large banks," says Mr. Smith, "and community bankers have come to the realization that there is no market for their stock and that they will have to learn to deal with the new environment." Regulators Want Formal Business Plans

In some cases, regulators require community banks to develop formal business plans for either improving the capital position or improving the performance of the loan portfolio.

Strategic plans also can help small banks take a longer-term view of their marketplaces, avoid making unilateral decisions, and reduce subjective decision-making.

Once a community bank decides to establish a formal strategic plan, the procedures are the same as for large banks.

"The first step is to determine where a bank is, whether it has a strategic plan, whether it has a process for developing one," he says.

In its strategic planning programs, Bank Administration Institute (BAI) looks at four main areas of a bank, Mr. Mularz says: Marketing, human resources, operations, and accounting and finance.

An important element in the process is what BAI calls its "Marketscan" and Arthur Andersen calls environmental scanning -- basically tools for analyzing a bank's marketplace. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

A Strategic Planning Blueprint Can Fortify the Smaller Bank; but Some Tiny Community Banks That Have 'Natural Niches' Do Not Always See Advantages
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.