How Is Your Bank’s Strategic Plan?

by Miles Pringle, EVP & General Counsel

Dwight D. Eisenhower once said: “In preparing for battle I have always found that plans are useless, but planning is indispensable.”  While banks are required to have a strategic plan, examiners are quick to note that there is no one “best” approach. Instead, regulators focus on the reasonableness of the plan’s assumptions. Their assessments consider many factors such as a bank’s personnel resources, geography, financial resources, and operating circumstances. Sound strategic planning is crucial to successful performance in the face of uncertainty and change.  

According to the FDIC Examination Manual, examiners should consider the following when assessing the adequacy of the strategic planning process: 

• How formal is the bank’s planning process compared to the bank’s business model, risk profile, size, and complexity? 
• Were the right people involved? The board? Middle management? 
• Is the plan based on realistic assumptions regarding the bank’s present and future financial condition, market area(s), and competitive factors? 
• Does the bank monitor actual performance against its plan? 
• Does the bank consider alternative plans in response to changing conditions?  

Some banks may be able to internally develop a satisfactory strategic plan. With that said, community banks need to do more with less, and comply with many other regulatory requirements, so strategic planning may be a good project for which to seek outside help. This start to a new year might be a good time to consider current strategic planning processes. 

A good strategic plan will forecast internally (e.g., what people do we need?) and externally (e.g., what are our competitors going to do?). The plan should set your bank’s goals and describe how to measure those goals. Generally, a 3–5-year plan is best. Shorter plans are likely less ambitious and will not move the bank. Longer plans can delay necessary changes and will be less useful in later years because it is harder to predict the future the further out one goes. 

Finally, and most importantly, strategic plans should be dynamic, not static. When assumptions prove wrong, they should be revised. When goals are accomplished, or become less important, they should be revised. A strategic plan is not a script, it is a tool to prioritize goals for success and avoid risk. As stated by the great Benjamin Franklin, “By failing to prepare, you are preparing to fail.”

Make sure to talk to TBB about your strategic planning needs. We have resources that can help with your planning, including PRINGLE® Strategic Plans for Community Banks.