In the next issue of FOCUS, Dr. Ed Seifried and I will discuss our vision of community banking in 2016. This article will be an introduction to our vision based on some of my thoughts.
In our first in a series of books for community bank directors, The Art of Strategic Planning in Community Banks, Dr. Ed and I recommend that directors dream about what they would like their bank to look like in 10 years. This is based on the BNK approach to strategic planning. So our article on the future of community banking is really based on the premise of how we believe each individual bank should look at its own future. We believe that if each community bank board were to think this way, the industry will create an enormous amount of value in the future.
The way I like to put it is that it is not whether or not you sell the bank, but rather the important point is that you have the choice of remaining independent or not. Whether you are a stock institution or a mutual, dynamic growth in value will maintain your relevancy in the communities you serve. In fact, our vision does not even mention banks selling out! We focus on what is going to create positive value creation.
The central theme of the valuation is core deposit creation and retention. In this issue, James Glueck has written an excellent article on EVE. Economic Value of Equity should be the foundation of all strategic plans. Core deposits primarily drive the value of your EVE calculations. While most banks say they want more core deposits, few banks "walk the talk."
The strategic focus of BNK will be to help banks in this area, both strategically and tactically. Our strategic planning focuses on core deposit generation and how boards and management can make the dream happen. We advise directors on how to create their strategic plan and how they can keep it alive and evolving.
BNKBa/lance is structured to assist banks in this focus. Our depth of experience allows us to educate and advise banks. We can consult on your current ALM modeling or perform your asset-liability modeling, which can provide your bank with a dynamic and robust ALM model that calculates EVE accurately. Our A/L model validation services can assure directors and executives that their bank's model is set up appropriately and calculating your risk exposures accurately. Our new core deposit study should be used by every bank. If core deposits drive your value, you need to have a solid knowledge of what your core deposits actually look like. This is vital to know what actions you must take to make your 10-year dream a reality.
BNKAnalytics has a new product called the BNKBall. This ranks your bank to all banks nationally based on your risk/reward trade-off. This is an exciting tool for knowing where you are now and where are you going.
So as I reflect on community banking in 10 years, I have also set the strategic direction of BNK to help meet the challenges of community banks to create value.