Community bank performance in slower growing markets : finding sound strategies for success

A substantial number of community banks in the Tenth Federal Reserve District are located in rural areas that are experiencing slower economic growth, a less vibrant business environment, and little or no population increase. As a result, these banks face a variety of challenges, including how to maintain prosperous banking operations, find sound lending opportunities, and attract an adequate supply of deposits. Other possible challenges involve finding capable staff, growing and achieving an efficient scale of operations, and contributing to the health of their communities. ; This article looks at how banks that operate in slower growing markets are responding to these challenges. As a group, Tenth District banks in slower growing counties appear to be performing at a satisfactory level, but they fail to match the returns achieved by banks in faster growing markets, and they also fall short on several other performance measures. ; A portion of the banks in slower growing markets, though, are doing remarkably well. Telephone interviews with senior officers at these high performing banks revealed a number of strategies and keys to their successall of which could provide an excellent focal point for other banks in low-growth markets. These successful strategies include: getting the basic business of banking down right as the first step; being open to new business opportunities that are consistent with the banks resources and expertise and then taking a slow and careful approach in entering these activities; and actively assisting the local community and the banks next generation of customers.