Management and staffing challenges

Community banks are known for their personal service and strong customer relationships. They are an important source of working capital for small businesses and act as engines of economic growth for their communities. If they are to continue in these roles, community banks must be able to attract strong, competent management and dedicated, capable staff. However, our examiners have noted a general aging of senior management at many of the banks they visit. In addition, they have noted instances of understaffing at smaller banks. With this anecdotal information, we asked Tenth District bankers if they will be able to meet their management and staff needs and what personnel challenges they see ahead over the next five years, 2001 to 2005. ; Looking forward, a significant majority of District community banks believe they can attract and retain the directors, officers, and staff they will need. In those instances where bankers saw problems ahead, invariably it was factors beyond the bank’s control—lack of qualified individuals, poor community prospects, or tight labor markets—that were seen as stumbling blocks rather than banks’ inherent inability to pay a competitive wage. Thus, it is the demographics of the marketplace rather than the competition of the marketplace that weighs more heavily on the future of those that see problems in getting directors, officers, and staff for their banks. ; On a more specific matter, management succession may become an increasingly important issue for many banks as time passes. Many executives at survey banks plan to retire, and a good number (as many as 30 percent of chief executive officers) will reach age 65 during the next five years. However, only about 30 percent of survey banks had written succession plans. Even taking into account family ownership and possible succession arrangements within families, nearly 40 percent of survey banks were left without some form of management succession plan in place, leaving them exposed to a potential leadership shortfall at a time when officer turnover may increase. If survey results typify those for banks more generally, succession is an important evolving issue that deserves attention by bank management and bank supervisors before future turnover, expected or unexpected, occurs.Banks and banking ; Federal Reserve District, 10th ; Management

Corporate governance : where do Tenth District community banks stand?

Troubles at publicly traded companies have led to the passage of recently enacted laws that add more rigor and formality to the corporate governance process. Most of these reform proposals and new laws focus on protecting investors in publicly traded firms. Relatively few Tenth District community banks, however, are publicly traded or are subject to new laws that would require them to change their corporate governance practices. Indeed, many are small in asset size, family-owned, closely held, and owner-managed. Given these characteristics, the governance process at community banks tends to be less formal and structured than requirements for publicly traded companies. What then has been the impact of corporate governance reform on community banks? Have community banks perceived benefits from the practices recommended by proponents of a more formal governance process? Although not required to do so, have community banks adopted any of the practices required of publicly traded companies? To answer these questions, the analysis in this article used information obtained from 26 governance questions included in the 2004 Tenth District Community Bank Survey. These questions dealt with matters that receive attention by good governance proponents, including board size, composition, committee structure, compensation, succession planning, director assessments, and other governance matters. Because ownership structure and size can influence the governance process, the analysis divided the survey data by family- and non-family-ownership, and within these ownership categories smaller and larger banks (assets less than $150 million, assets greater than$150 million). The conclusions drawn from the analysis are that Tenth District community banks have adopted many principles advocated by strong governance proponents. However, larger and more complex organizations are more likely to have adopted recommended governance principles. Further, non-family-owned organizations, regardless of size, proportionately engage in more of recommended practices than do family-owned organizations.Corporate governance ; Federal Reserve District, 10th ; Community banks ; Bank directors ; Bank management

The 2004 survey of community banks in the Tenth District

Periodically, the Federal Reserve Bank of Kansas City surveys Tenth District bankers for their views on a variety of matters. In February 2004, we solicited banker opinion on a number of topics pertaining to governance and staffing practices, vendor management practices, competitive environment and future prospects, interest rate risk management practices, internet banking services, and payments system issues. This article briefly sets out the survey methodology and describes the applicability of survey results to the entire population of District banks. It also reviews what bankers told us about their environment, competition, and future challenges. Broadly speaking, survey results can be generalized for all Tenth District banks. The representative community bank in the District has assets less than $150 million, is family-owned and locally controlled, and is headquartered outside a metropolitan area. The economic and competitive environment these banks face depends, in part, on growth prospects and diversification opportunities within their communities. Their most intense loan and deposit competitors are other community banks. Their greatest challenges involve basic aspects of successfully managing a bank: funding, income sources, and meeting competition. Despite identifying many problems, all but a few bankers expect their banks will remain in business and succeed.Federal Reserve District, 10th ; Community banks

New Community Reinvestment Act regulation : what have been the effects?

Effective January 1, 1996, the federal financial supervisory agencies (agencies) implemented their new Community Reinvestment Act (CRA) regulations. The new regulations currently apply to small institutions; they will apply to large institutions in 1997. ; In adopting their new regulations, the agencies sought to address complaints voiced by banks and the public about burden, relevancy, and consistency of CRA regulation under the agencies' old supervisory approach. To judge the new regulation's success in addressing these complaints, we surveyed 38 small Tenth District member banks examined during the first half of 1996. We found that for the most part the agencies accomplished what they set out to do. However, final judgement on the agencies' ultimate success in addressing earlier complaints with CRA regulation must wait until experience is gained with large banks in 1997.Community Reinvestment Act of 1977

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 success—all 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 bank’s resources and expertise and then taking a slow and careful approach in entering these activities; and actively assisting the local community and the bank’s next generation of customers.Federal Reserve District, 10th ; Community banks

Community Reinvestment Act lending : is it profitable?

In 1977, Congress passed the Community Reinvestment Act (CRA) to encourage federally insured depository institutions to lend in low- to moderate-income neighborhoods and to low- to moderate-income people. Since then, the profitability of the many special lending programs designed to achieve these goals has been questioned on both theoretical and practical grounds. ; The study examines the CRA loan profitability issue in the context of home mortgage lending. We surveyed 97 large institutions to explore profitability differences between their CRA and conventional home mortgage lending. ; Twenty-four percent of those answering the survey said their CRA lending was as profitable as their conventional lending. We found these lenders were more likely to treat their CRA lending like they did their conventional lending. Further, they managed to keep origination and servicing costs for their CRA loans similar to those for their conventional loans. These findings have important implications for lenders, community groups, government enhancement providers, and banking regulators as they seek wider markets for CRA loans.Community Reinvestment Act of 1977

Strategic options for bankers in rural development

Many agricultural communities in the Midwest have experience protracted job and population loss. With recent strains in agriculture and the potential for further loss looming, many bankers have expressed an interest in initiatives they can undertake to promote local growth and development. This article outlines a community development process to help bankers succeed with their development activities. Within the context of this process, it recounts the community development initiatives of several small rural community banks, examining the management decisions behind them and lessons gleaned from them.Rural areas ; Rural development ; Community development

The 2001 survey of commercial banks in the Tenth Federal Reserve District : changes and challenges

Periodically, the Federal Reserve Bank of Kansas City surveys District bankers for their views on a variety of matters. In February 2001, we solicited banker opinion on a number of topics pertaining to deposit and loan competition, management and staffing challenges, Internet banking activities, funding options, operational issues, the effects of the Gramm-Leach-Bliley Act, and near-term prospects. ; This essay briefly discusses the Tenth District’s geography, economics, and demographics and thereby provides context for the survey responses we received. It introduces subsequent articles that describe in more detail responses to survey topics. It also sets out the survey methodology and describes the applicability of survey results to the entire population of Tenth District banks. Broadly speaking, survey results can be generalized for all Tenth District banks. ; We also review what bankers told us about their environment, competition, and future challenges. The representative bank in the District is family owned and locally controlled. The economic and competitive environment that District banks face depends, in part, on growth prospects and diversification opportunities of the bank's communities. The most intense loan and deposits competitors are other community banks. Problems that most challenge survey respondents involve basic aspects of successfully managing a bank: funding, income sources, and meeting competition. Despite identifying many problems, all but a few bankers expect their banks will remain in business and succeed.Federal Reserve District, 10th ; Banks and banking

Factors in economic development: an empirical analysis

Call number: LD2668 .R4 1968 M93

Applying Semi-Automated Hyperparameter Tuning for Clustering Algorithms

When approaching a clustering problem, choosing the right clustering algorithm and parameters is essential, as each clustering algorithm is proficient at finding clusters of a particular nature. Due to the unsupervised nature of clustering algorithms, there are no ground truth values available for empirical evaluation, which makes automation of the parameter selection process through hyperparameter tuning difficult. Previous approaches to hyperparameter tuning for clustering algorithms have relied on internal metrics, which are often biased towards certain algorithms, or having some ground truth labels available, moving the problem into the semi-supervised space. This preliminary study proposes a framework for semi-automated hyperparameter tuning of clustering problems, using a grid search to develop a series of graphs and easy to interpret metrics that can then be used for more efficient domain-specific evaluation. Preliminary results show that internal metrics are unable to capture the semantic quality of the clusters developed and approaches driven by internal metrics would come to different conclusions than those driven by manual evaluation