Once again, we are reaching a new year with several possibilities and many of the same challenges. And, as always, it is essential to contemplate the future of the industry in order to prepare for it. But first, let's discuss where we are right now.

Today, community bankers are all too familiar with the growing list of pressures their business model is facing.  As you know, increased regulatory requirements are placing heightened pressure on bank capital levels and compliance resources.  If that is not enough, thin margins, continued slow economic recovery, low activity volumes and excessive overhead still weigh heavily on community bankers.

All of this coupled with ever increasing regulatory scrutiny, anemic bank stock valuations and the poor public image of financial institutions in general suggests we should prepare for an industry transformation and consolidation. Plain and simple:  The current model and environment is not sustainable, and the providers of capital will ultimately demand considerable change.

While the picture of community banking can certainly be painted as bleak within the context of these pressures, there are forward-looking measures banks can take to not only survive these battles, but to position themselves to thrive in the future. Here are some steps that can be taken to achieve this goal.  

  1. Remain vocal in conveying your opposition to unwarranted regulatory proposals.
  2. Reshape your bank into one that can confidently and strongly operate in a changing world. This can include transforming your operating culture to one that rallies every employee around a key set of core values by which you serve customers and improves processes, productivity and profitability.
  3. Revise policies and procedures to more clearly help staff understand regulatory requirements and how to comfortably and correctly comply with them.
  4. Devise a series of key indicators that will help you better understand the risks your bank is exposed to. 
  5. Understand your true competition by studying peer data. Look at what they're doing to drive high performance. Examine alternate products and services to determine how to make your own offerings more competitive, customer-relevant and profitable.
  6. Eat, breathe, preach and execute sales – but sell to profitable niches in a profitable manner.

Even in 2012, new baselines and new realities are evolving, as this industry prepares (reluctantly so) for the Great Consolidation. As this consolidation moves forward, we will see banks more focused on fee and advice business lines and enhanced bank cultures that emphasize greater sales effectiveness, improved service and heightened productivity. Roles of branches and bank staff will be impacted by the Millennial Generation's influence, not to mention the proliferation of mobile banking customers.
My experience strongly suggests there is an upside for the bankers that fully embrace this tremendous opportunity to change their model, renew their relevance, focus on profitable business lines, improve their processes, change their culture and create organic growth. There has never been a time like the present to make true transformational change happen.    

L.T. "Tom" Hall is president and CEO of Resurgent Performance Inc., a bank performance advisory firm.