BankNotes: The keys to community

Scott Custer - Jul 29, 2014 - 4:00:00 pm

There is no magic formula for building a successful community bank, but there are certain characteristics common among the most successful ones in our state.

The first is a very focused business model — in other words, the bank shouldn't attempt to be all things to all people or, for that matter, the right things to the wrong people. In fact, a leading community bank typically concentrates its efforts on the target client segment that gives it the best chance for success. In contrast to large national banks that employ a “one size fits all” approach, community banks should exhibit a very intentional focus on serving the unique needs of businesses, business owners and professionals. By focusing on one key segment or industry, a bank can realize greater return on investment by developing knowledge and services tailored to those areas.

Another key trait is never losing sight of what “community” truly means. These banks leverage the fact that they have local bankers with local ties — people who know, love and have roots in the area they serve — in order to build trust among customers. They also empower their bankers to make decisions on a local level. This streamlines and speeds up critical processes for customers, who, in turn, will reward the bank through deeper loyalty and increased business.

Delving even deeper, a well-defined risk management infrastructure is not simply a characteristic of successful community banks — it’s a must for financial institutions of any size. This should include credit risk as well as operational risk, interest rate risk, market risk and Bank Secrecy Act/ Anti-Money Laundering (BSA/AML) compliance. Any perceived weakness in risk management can make an otherwise successful community bank a target for regulators.

Lastly, the most obvious attribute common to all successful community banks is high-quality financial performance on a consistent basis. Unfortunately, there is no magic formula for generating profits.

It's by combining these features with an institution’s own inherent strengths – including its connections to, deep understanding of and sense of responsibility toward the community of people it serves – that true long-term success is achieved.

Custer has been director and chief executive officer of Yadkin Bank since 2011 and director and CEO of Piedmont Community Bank Holdings since 2010. Before joining Piedmont, he served as chairman and CEO of RBC Bank (USA).

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