Eyes Facing Forward


ICBA has planned an educational lineup of more than 60 workshops and networking sessions for next month’s Community Banking LIVE conference in New Orleans. Many workshops will address changes shaping our industry today as well as its future. Here’s what three of those forward-looking workshops will be covering.

On New Competitors
Digital Jujitsu

Community banks can beat tech-based, nontraditional competitors at their own game.

“Digital disruption.” The catch phrase for new nonbank competitors leveraging digital operations and service channels against community banks can conjure up daunting challenges.

But industry consultant Joseph Cady says community banks can stand up and win against the new breed of technology-tethered competitors, including online-only lenders. Moreover, in a form of digital jujitsu, if you will, community banks should—and ultimately can—adopt nimble electronic frontline service channels comparable to those of the new digital-only competitors.

“Disrupters are frictionless,” Cady says. “If the banks can match that with lower cost of funds, they are going to do just fine. They will not only be competitive, but will be a superior option for most customers.”

Cady, managing partner of CS Consulting Group LLC in San Diego, will help lead a Community Banking LIVE workshop on forces shaping the future of the community banking industry, titled “Future Forces: How to Thrive in a World of Digital Disruption.” Joining him in presenting the workshop will be Chris Nichols, chief strategy officer at CenterState Bank of Florida, a $3.9 billion-asset community bank in Winter Haven, Fla., with extensive digital service channels. During the convention workshop, Nichols will provide an “actionable road map” for adopting digital operations and service channels.

“If the banks can match [nonbank competitors] with lower cost of funds, they are going to do just fine.”
—Joeseph Cady, Industry Consultant

The rapid growth of nontraditional financial service players means that community banks now face unprecedented “substitution risk” from these new competitors, Cady says. Fortunately, community banks have a certain leg up by secured lending that is collateralized, a package of credit that takes time to assemble but provides much lower credit costs for customers. Alternative lenders make unsecured loans that are more expensive than those offered by community banks, and most customers will typically choose a less-expensive traditional bank over a more expensive newcomer offering rapid digital channels, he adds.

Nevertheless, digital service channels everywhere, in all industries, are changing expectations of all consumers—particularly younger ones, Cady says. As younger workers advance in their careers and increase their buying power, they might choose to pay more for faster and easier loans, enabling nonbank digital disrupters to potentially gain real traction. This will force more banks to “raise their game” in their digital service channels.

“Banks need to shift to digital to become relevant to millennials, because they still like the emotional connection,” Cady says. “They’ll just want it faster and easier.”

—Katie Kuehner-Hebert

On Profits and Sales
Revving Up Revenue

Long gone are the days when community banks can succeed solely by making loans based on the deposits they gather, says industry consultant J. Michael Woody.

Community banks, pressured by declining net interest margins, must find other ways to generate revenue to maintain their earnings expectations, Woody says. For that reason, he says, their future success in community banking will require two additional activities: generating more fee income and continuing to nurture and cross-sell deeper into established customer relationships.

“You name it, every arrow in the quiver that can be used, should be used,” he maintains.

Woody, principal of a consulting firm in Destin, Fla., bearing his name, will be conducting a Community Banking LIVE workshop next month in New Orleans titled “The Future of Community Banking.”

“You name it, every arrow in the quiver that can be used, should be used.”
—J. Michael Woody, Sales Consultant

He says community banks can take cues from other companies, such as car rental agencies. He recalls a recent business trip in Colorado where he rented a car. “Last time I did this, the price was $108 for two days, with unlimited miles. This time the price was $26.80, and for 300 miles a day that equates to 8 cents a mile for a car.”

Now how can a car rental company stay in business renting a car so inexpensively? Woody asks. His answer: by cross-selling extra services and amenities, such as satellite mapping and casualty insurance. Vehicle upgrades, perhaps to a four-wheel-drive car if the weather appears uncertain or ominous, are a big revenue driver in the industry.

Similarly, for community banks, services fees and cross-selling products and services such as insurance, brokerage and trust services should become a normal everyday event to bolster revenue and profitability. With service fees revenue declining from such traditional income sources such as overdraft protection programs, Woody advises community banks to consider atypical revenue-generating avenues. That includes making partnerships with technology firms to generate new lines of business, he says.

Woody says community banks should carefully consider each activity the Federal Reserve allows financial holding companies to pursue, but they also should carefully acquire the expertise they need to capitalize on new activities. Because of that, he says, some community banks may have to think and act differently about new business arrangements. For example, paying commission-driven agents and brokers based on a salary structure used for bank executives—where those agents and brokers would make less than they did earning commissions—often hasn’t worked, he says.

“Let them run the [new business] unit the best way they see fit,” Woody says. “Get out of the way.”

—Katie Kuehner-Hebert

Schedule at a Glance

Sunday, March 6

  • Registration/Banquet Reservations Desk
  • Bank Director Current Issues**
  • First-Time Attendee Orientation
  • Expo Open
  • Welcome Reception in Expo

Monday, March 7

  • Registration/Banquet Reservations Desk
  • Concurrent Workshops
  • Tour Desk
  • General Session
  • Expo Open
  • Lunch with Exhibitors in Expo
  • State/Regional Partners Reception*
  • Roundtable Discussions
  • State/Regional Affiliate Associations & Exhibitor Receptions*

Tuesday, March 8

  • Registration/Banquet Reservations Desk
  • Concurrent Workshops
  • General Session
  • Regulators Luncheon*
  • ICBPAC-VIP Champagne Reception and Auction Preview**
  • 27th Annual ICBPAC Silent Auction Fundraiser**

Wednesday, March 9

  • Attendee Registration/Banquet Reservations Desk
  • Concurrent Workshops
  • Final General Session
  • Chairman’s Reception
  • Annual Banquet
  • Stage Show Featuring: The Pink Flamingos

*By invitation
**Additional registration fees required

On Workforce Development
Your Future in People

For community banks, building an outstanding team of current and future executive talent is crucial. While a bank must have enough financial capital to perform, says Alan Kaplan, CEO of the executive recruiter firm Kaplan Partners in Philadelphia, it also has to have quality human capital.

“Talent development has to be a mindset that is embedded in the organization.”
—Alan Kaplan, Executive Recruiter Expert

“At the end of the day,” he says, “what differentiates banks ultimately is how well they execute their plan, and the execution always comes down to people.”

In a workshop titled “War For Talent in Banking: Strategies For Success,” Kaplan will talk next month at ICBA’s Community Banking LIVE national convention in New Orleans about the opportunities of finding. nurturing and retaining executive talent. He will expound upon three pieces of talent-development advice:

1. Link your community bank’s business strategy with its talent strategy. Be realistic about who your community bank can entice to join its team and the compensation it should provide for top talent, Kaplan says. “You are going to have to spend the money.”

A-players have the most choices, and community banks need to see things from potential employees’ perspectives. Why should they come to work for your community bank versus the other institutions or corporations that may be interested in them? Find a compelling answer, Kaplan suggests.

2. Create an executive incentive plan that is a magnet. Develop senior management incentive programs that are performance driven. A senior management recruiting plan that gives everyone the same bonus potential, or a small bonus potential—5 percent or 10 percent—won’t attract and keep top talent, Kaplan maintains. If your community bank is a stock-traced institution, offer equity stakes as par to an executive compensation package that reward longevity for top-tier players.

3. Keep and nurture the top performers you have. Because 20 percent of any company’s employees generate 80 percent of corporate value, it makes sense to nurture your stars, Kaplan says. “Identify the people who in five years will be your key managers and nurture them. Spend time with them on a regular basis.”

Also, involve your community bank’s young up-and-coming managers in challenging projects, because they not only need to learn they want to be stretched. They are willing to work hard, but the work has to be meaningful. Kaplan says direct bosses of high-potential employees have to understand that a big part of their responsibilities is developing up-and-coming future leaders behind them.

The people in middle and upper management may be experts in their areas, but if they are not capable of grooming and developing those they are managing, he says, find someone else to mentor and develop talented employees.

“Talent development,” says Kaplan, “has to be a mindset that is embedded in the organization.”

—Kathryn Fallon