ABA Banking Journal - February 2008 - (Page 20)

Community Banking who, regardless of their level of problems, is committed to focusing their entire institution on increasing future franchise value. This is the leader we want to highlight and learn from here. Now is the time to solidify and renew your strategic directives–proactively attack this uncertain economic environment with investments in training, management development, and even recruiting. You as community bank leaders must take steps to manage your way out of this difficult time, and just as importantly, lead as if you were already on the other side. Balancing strategy and risk Where can you start? The first step is to pull out your strategic document. As you evaluate it, ask: “Does it state clear, concise goals? Identify value? Evaluate risk and return? Establish succession planning? Set measurable benchmarks?” You need to be sure that your plan is structured properly to get you to where you wish to be in the long-term–after the current downturn is over. Next, start assessing your bank’s risk in a recessionary environment by considering the implication of declining interest rates and a steepened yield curve. Risk assessment is always an essential part of a community bank strategic plan. But now, more than ever, it’s important for boards and management teams to be aware of the degrees of risk taken while determining the direction of the bank in the near- and long-term. In addition, incorporate regional and national economic information into your ALCO and board meetings to stay on top of how risk is addressed within the framework of your long-term plan. Here’s a framework for beginning a risk assessment: ic downturn. Ask yourself, “Would my bank experience higher or lower nonperforming loans than other banks nationally or in the region?” This is important because credit risk is “the mother of all risks.” Don’t just focus on what is occurring now, but have dialogue about what should occur as you move forward, out of this credit environment. Make trending reports, peer comparison reports, and similar data yardsticks when discussing the pitfalls of your credit policies and long-term plans. And, if your bank does have problems with credit risk or impaired assets, be proactive to the highest degree by developing an Emergency Strategic Plan. This plan is short-term in nature but addresses all issues and what actions need to be taken. The regulators respect this proactive approach. What is your liquidity risk? Liquidity has not been much of an issue in recent times. In fact, many of the problems being experienced today are the result of too much liquidity. To this point, the FDIC recently released a paper that bankers should not take liquidity risk lightly. Many bankers say they can borrow plenty of money from their Federal Home Loan Bank. But FDIC is urging banks not to rely on this source and instead, create liquidity contingency plans. The lines of people in front of Northern Rock in England and the high rates that Countrywide has been offering on its CDs are both wake-up calls on liquidity risk. To turn your liquidity risk around, make alternative funding options and the capture of cash-type deposits priority discussion items in your long-term planning. ous key individuals—the style of language was very different in the mid-1800s. But I found it well worth the time it took to read over 900 pages. The author’s historical account is a truly great example of the value of the diverse opinions of a diverse team, and of how a leader can create unity among that team. The communication of the day—sans phone, fax, cell, etc.—is also quite interesting. The many attributes of Lincoln are illustrated in such a way to enlighten every reader as to why Lincoln is revered as one of the best leaders in the history of our country. Remedy 3 Debra R. Lins, president and CEO, Community Business Bank, $61.1 million-assets, Sauk City, Wis. You Don’t Need a Title to Be a Leader: How Anyone, Anywhere, Can Make a Positive Difference, Sanborn & Associates, Inc., by Mark Sanborn. This book compares how a manager versus a leader leads and what characteristics each displays. Sanborn provides this key definition: “Leadership is the art of getting extraordinary performance from ordinary people.” I used this book as part of the kickoff to our officers’ planning session this past fall. I had the opportunity to share many of the author’s key points on how a leader communicates and his view on what makes a manager versus what makes a leader. Here are three examples from Sanborn: • Concerning change. Sanborn says that managers react to change, leaders create change. • Concerning people. Managers direct groups, leaders create teams. • Concerning attitude. Managers take credit, leaders take responsibility. The book talks about mastering leadership as a lifelong process, and that many 2. 1. What is your level of credit risk? In our book, The Art of Risk in Community Banking, we define credit risk not by whether you have nonperforming loans, but what impact the loan portfolio would experience in an econom- 3. What earnings at risk does your bank have? Most asset-liability models are reporting a huge increase in prepayments on loans and investments. The models cannot discern the likelihood of refinancing between one asset and another. The reality is that not everyone will be able to refinance as was the expe- 20 FEBRUARY 2008/ABA BANKING JOURNAL http://www.cbbwi.com http://www.cbbwi.com http://www.amazon.com/gp/product/0385517475?ie=UTF8&tag=ababankingjou-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0385517475 http://www.amazon.com/gp/product/0385517475?ie=UTF8&tag=ababankingjou-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0385517475

Table of Contents Feed for the Digital Edition of ABA Banking Journal - February 2008

ABA Banking Journal - February 2008 Contents On ABABJ.COM: Have You Visited Our Brand-New Website? Editor's Column "That's Edutainment" Snapshot: Tier 1 Ratios Stable so Far 100th Anniversary: Then and Now ABA Resources ABA Chairman's Position Don't Despair Pass the Aspirin Cover Story: Socially Responsible Banking Profitably - Incoming America's Community Bankers Council Chairwoman, Dorothy Bridges Demonstrates the Way A True "Rags-to-Banker" Story Retail Banking: On the Money Hunt Community Bank Management: The Ugly Truth About Board Relations Does Core Really Matter? Security 2.0: Not Just a New Kettle of Phish A Personal Case of Mal-Serendipity DOD Credit Regs Demand Attention Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - February 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.