September 16, 2025 • 26 mins
In this episode of Banking Out Loud, host Sonia Portwood and Curt Hecker, industry veteran and CEO of PCBB, unravel the essentials of strategic planning for community financial institutions (CFIs). Discover how senior leaders and boards can leverage digital transformation, AI, and compliance best practices to drive growth, enhance customer experience, and stay competitive amidst rapid industry change. The conversation highlights actionable strategies, technology modernization, project management, risk mitigation, emerging fintech partnerships, and market trends shaping community banking in 2026. Tune in for expert insights and proven approaches to future-proof your CFI.
Guest: Curt Hecker CEO & Executive Chairman PCBB
Download this episode's companion PDF for takeaways and tips on Strategic Planning. DOWNLOAD
Check out this PCBB BID article for even more Strategic Planning insight from Curt Hecker. READ ARTICLE
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back to Banking OutLoud. I'm Sonya Portwood,
and we're happy you decided to join us.As the banking world keeps evolving,
regulations shifting,
technology advancing andcustomer needs changing,
(00:20):
strategic planning is coming intosharper focus for all of us. Today.
We'll take a look at whatgoes into shaping a strong plan for the future and how
community banks can set themselvesup to stay ahead As 2026 gets
closer. I'm excited tohave Kurt Hecker with me.
Kurt is the executivechairman and CEO at PCBB,
(00:42):
and he spent nearly 40 years in bankingand finance helping institutions
grow and adopt along the way,
he led Intermountain CommunityBank Corp from 40 billion to over
1 billion in assets. So he knows a thingor two about navigating big changes.
Kurt's here to share his insights on howwe can set ourselves up for success as
(01:04):
we look to the future. So, Kurt, we'rethrilled to have you on the podcast.
We appreciate you joining us today.
Thank you, Sonya, and, uh,
appreciate it very much andlook forward to the discussion.
Thank you.
So I thought probably be a good ideabecause we do have a broad range of
bankers on the call. Somehave participated in strategic planning in the past,
(01:27):
and some may have not,
or maybe it's their first time tohave the opportunity to participate.
So I thought it would be a good idea ifwe were to level set our audience a bit.
And if you wouldn't mind,
start us out by walking us throughwhat the process actually looks like
and what it's aiming to achieve.
Sure. Happy to do. So,
(01:49):
we do strategic planningat PCBB every year.
The strategic planning process, uh,I've always looked at on a three year,
uh, time horizon, but strategicplans need to be continually updated,
especially in today's environment.
The base premise and foundationof a strategic plan is to
(02:09):
provide structure around whatthe bank is doing and to build a
collaborative process that alignsthe organization's direction with its
mission and the market realities therisk associated with the bank and the
opportunities that are out there.
Some of the core steps in buildinga strategic plan is to define
(02:30):
a mission, vision, and thecore values of the company.
The mission is typically done in amission statement and it articulates the
bank's fundamental purpose.
The vision is designed to be a statementthat lays out long-term aspirations
and what the bank strives to become,
and then the core values serves as theguiding principle for decision making and
(02:52):
culture. So that's usually at theforefront of any strategic plan.
Strategic plans, also SWOTanalysis or situation analysis,
which is the strengths, the weaknesses,
opportunities and threatsthat the company has.
Strategic plans are also done incollaboration with management and
(03:12):
with the boards to make surethat there is alignment.
The next item would be settingstrategic goals and objectives.
And this is really importantthat you develop clear,
measurable goals that address marketneeds and reflect the bank's mission and
aspirations. Overall, it shouldfocus on the growth of the company,
risk management, operationalefficiencies and customer experience.
(03:37):
From there,
strategies are developed and actionplans are put together at both the high
level and then at departmentlevels throughout the company. Uh,
you want to have concrete initiativesthat are issued by department and business
lines and have the ability to delegatethe task and establish the timelines and
accountability that's necessary to makesure that the plan is executed upon.
(04:00):
From there, you'd need to alignthe resources of the banker,
which is more or lessthe budgeting process.
You really need to assess thefinancial resources you have,
the technology you have,
and the talent necessary for being ableto meet those objectives. From there,
you put together the budgetand allocate resources,
which are principally thepeople of the organization,
capital and the technology. And then, uh,
(04:23):
those issues must all beprioritized in order of importance.
Next is setting performance metricsand monitoring systems and defining
the performance indicators or KPIs,
key performance indicatorsto track that progress.
And then the bank wouldtypically establish periodic reviews throughout the year
to monitor those outcomes and adjustthe plans as needed. And then, uh,
(04:48):
we've got, uh, the board andtheir role is to review, approve,
and communicate the plan. Overall,
the board review should ensure thatalignment with risk, appetite, capital,
and liquidity requirements areall maintained. And then finally,
the implementation of thatplan and continuous review.
Then today's environment with themassive amount of new technology and AI
(05:11):
and new tools and alsonew and different markets,
there's a different paradigm.
So the planning for bankers today is moreof a challenge than what we've seen in
the past. So that's just the basis of astrategic plan and the components of it.
There's a lot of details to it.
And that's a lot. I mean, if,
if banks truly managetheir strategic process and
(05:34):
incorporate all of thosepieces that you've mentioned,
it's sort of the north star of theorganization and everything of of course,
including taking care of your customersshould center around that strategic plan
for the future. Would you agree with that?
Absolutely. Without a strategic plan,
a company is unable to maintainthe focus and you've got a lot of
(05:56):
areas to manage throughout the bank.
So having that is a north star to keepeverybody aligned and communication
should be constant from thesenior leadership of the bank down to the employees,
making sure everybody has avery strong understanding.
Yeah. Okay.
So we know what we need to do as faras the components of putting together a
(06:17):
good strategic plan.
Let's talk a little bit about thetrends that you're seeing right now.
What should be on the agenda whenyou get the team together in a room?
What are the major things that you'reseeing that are catching your eyes that
should definitely be apart of that conversation?
There are manytrends that are out there,
but number one for meis overall digital, uh,
(06:39):
transformation and technologymodernization throughout the banking industry.
Community banks are increasinglyadopting embedded finance programs and
integrating banking servicesinto third party platforms.
And this is something thatPC BLP is doing as well. Uh,
and this is really viewed as essentialfor capturing new markets and revenue
(07:00):
streams overall. Another trendis real-time capabilities,
instant payments,
faster credit decisioning and seamlessdigital services are top priorities due
to rising customer expectationsand speed for convenience.
AI and automation goeswithout saying is a very, uh,
high priority in thehot trend. Uh, and, uh,
(07:20):
investments in artificial intelligencefor fraud prevention and customer service
and operational efficiencies are kindof all at the forefront of that trend.
And, uh,
banks are embracing this automation tostreamline compliance and be able to
reduce costs overall, and that's verynecessary in order to stay competitive.
And we anticipate needingto continue to reduce costs,
(07:42):
to reduce pricing on many of theproducts in the baking industry. And,
uh, a fourth trend that I'd point tois modernization of tech stacks In
banks,
the banking industry is very mature andmany of the banks have longtime legacy
systems. Sometimes those systemscan be a help or a hindrance.
(08:02):
More than half of the community bankingleaders consider their core technology
is fully modernized,
but many are now recognizing that furtherinvestment is needed to be able to
secure scalable innovation.
The other trends from a competitive andmarket pressure standpoint is we've got
fragmented competition here. NowCFIs are now competing against, uh,
(08:26):
FinTech organizations, uh, digitalfirst banks and niche financial, uh,
providers.
So the success of the CFI isvery much increasingly depends
upon the digital engagement,
wallet share and the relationship depthrather than just the traditional market
share. Another is nichelending opportunities.
(08:47):
Larger banks are scaling back inthe commercial real estate and, uh,
multi-family lending. Community banksare stepping in to fill these gaps,
especially in,
in local markets from the perspectiveof evolving compliance and
the, and the regulatorylandscape. In in general,
there's several trends here as well.
One is the community reinvestmentact is being overhauled.
(09:09):
There's sweeping changes toCRA regulations and pending with new requirements
slated to go into effectin 2026. Another is, uh,
rising compliance costs. Regulatorydemands, especially for smaller banks,
continue to outpace the resources ofthose smaller companies with compliance
costs representing an outsideshare of that expense.
(09:29):
So being able to simplifycompliance process and the regulatory reform are major
industry priorities. And withthe current administration, uh,
deregulating many areas and reallyfocusing on trying to change the
examination process to arisk management process,
we're hoping to be ableto reduce those costs.
And then on the last front here,
(09:52):
trend is data privacy andcybersecurity, uh, is a, a huge trend.
And as we're expandingon the digital services,
data protection and real time fraudprevention on top of this list, uh,
and investments in AI for that threatprotection and customer cybersecurity
education are really high.
And next is product and services.
(10:14):
And they are evolving anddiversifying into wealth management,
treasury services,
high yield savings to be able to competewith larger institutions and attract
new segments. Personalization,
advisory and human touch are still a,
a strong trend for community banks andis where community banks have a laid up
streamlined.
(10:34):
Digital experiences are balanced by arenewed emphasis on relationship banking
to differentiate fromautomated competitors.
There's also workplaceand operational dynamics,
and that's talent and culture.
And I think the trend here isdefinitely attracting younger,
more digitally savvy talent.
Another is the cost pressuresof just overall rising costs,
(10:57):
particularly technology and personnel.
Scalable partnerships and processautomatization are crucial, uh,
for sustainability.
And the next one is financialperformance and economic uncertainties.
Margin expansion is a trend.
Many community banks anticipate risingnet interest margins for 25 and 26
that will offset credit cost. Um,
(11:19):
and super high on my list is creativedeposit gathering strategies and liquidity
stress testing are maybe some of the mostimportant to pay attention to. Lastly,
I'll say that given the shifts in themarket that we're seeing leadership
transitions and long-term successionplanning are ongoing concerns.
So these are the trends I seethat are absolutely imperative,
(11:42):
which is embracing the digital and realtime banking while preserving the unique
relationship driven service thatsmaller banks have been able to provide.
Investing in scalable,
secure technology and complianceframeworks are critical and
everyone has to anticipatea lot of regulatory changes,
especially CRA and proactivelyupdate operational policies,
(12:03):
leveraging partnerships with fintechsand third parties to expand offerings and
innovation capacity focusing on financialhealth, liquidity and risk management,
and a volatile interest rate andcredit environment is critical.
That's an awful lot.
It was great information and we canput together a list of all that you
mentioned so that we canshare that with our listeners.
(12:25):
But please tell me how in theworld do you maintain your
focus while keeping all of thesein mind? How do you manage that?
Well, if you're managingthrough the strategic plan process, it breaks into, uh,
different projects and,uh, and having, uh,
excellent project managementis absolutely key. Otherwise,
(12:47):
you will lose the focus, uh,
on what you're trying toaccomplish because there is a lot.
Yeah.
I know that we could probablyhave a podcast on every one of the topics that you
brought up. So if you've beenassociated with a number of,
of community banks and you'veworked on a number of boards,
what are some of the pitfalls thatwe could share with our listeners
(13:10):
that they should be awareof or look out for to avoid?
You know, I think you just mentioned,you know, one of 'em is, and that's,
you know, losing focus on thedirection that you want to go in.
The other is being able to, uh,
match as we're driving forwardwith new initiatives and new
innovation that is coming in, whetherit's through the products or through the,
(13:33):
uh, delivery systems are,are paramount to keep, uh,
to keep in mind and stay focused with.
Would I be correct in saying thateach one of the strategic initiatives
are basically a project plan?
Yes. Yeah. You, uh, uh,
you need to provide the projectassistance typically to all of the
(13:55):
C leadership team because they'remanaging individual projects.
And then from those projects,
there are often additional projects thatwill come out of that at lower levels
within the company.
So that's why I say that the projectmanagement is so important and when you
make a shift one way or the other,
it needs to be made throughout the entireorganization so people are aware and,
(14:18):
and again, that allowsyou to maintain, uh,
that overall focus that is necessary.
So from,
from where I sit in participating instrategic planning for a number of years,
uh,
one of the things that I think iscommunication and making sure that your
entire team are well informed,they know the North Star,
(14:38):
but also to track progress so thateveryone knows where we are in the process
at at all times.
Is there anything you wanna add to thatas far as keeping people informed and
and tracking the progress?
I would just add that intoday's environment and the way that we're operating at
PCBB in terms of our people that areworking all over the United States,
(15:00):
I think that makes it evenmore challenging in some ways and in some ways much
better in terms of thecommunication process because the
communication needs to be veryintentional and having the participation
from everybody on the leadershipteam is, is critically important.
So I hold that at a really highregard. If we don't do that,
(15:22):
it's really easy to get off the tracks.
That constant communication is importantand allows us to stay very focused and
allows us to report up and to reportdown and to keep the company engaged and
involved with what we're doing.
Right. If I could shiftgears just a little bit here,
because I know that we've been spendinga lot of time on the process around
(15:42):
partnering with FinTech firms.
I also know that there have been banksthat have been very successful at this
and other banks that havenot been so successful,
which share with our audiencewhat approach you feel is
important they take in order to besuccessful with any partnerships
(16:02):
they engage with on the FinTech space.
I think that as you'relooking to advance forward,
I think being able to continuallyinnovate is really, really important.
At the same time, there's riskassociated with innovation.
So I think there's a real balancebetween risk and innovation.
(16:22):
In order to do that reallywell, does require processes.
We have built at PCBBan innovation committee,
which allows us to build out on newproducts and to be able to discuss those
back and forth. So we have a process And,
and when you talk about banks that canget into trouble is because you don't
have a a a plan process.
(16:44):
We've seen many financial institutionsthat have had some regulatory problems or
technological problems or cybersecurityproblems because of not going through
the proper process.
Are there any resources available outthere that our listeners could access if
they wanted additional information onthe topics that we've been talking about
today?
(17:04):
There's many,
many consultants out there that can helpand that's probably the most typical
thing that banks do. Uh,
but really we have this new toolcalled artificial intelligence,
which we've got so much informationat our fingertips that we can now, uh,
uh, obtain and get good informationin a very short time period.
So turning to that resourceis probably my number one.
(17:27):
And then from there, corporate resources,people resources, legal resources, hr,
et cetera, et cetera. Obviously the ICBA,
the A BA and all of ourbanking associations are great sources to be able to get
information from as well.
Okay, thank you. Let's talk a littlebit about technology and banking.
It really feels like it'sconstantly in overdrive,
(17:50):
especially with all the buzz around AIand automation. Um, what's your take?
How should community financialinstitutions tackle tech planning? Uh,
so they don't end up just trying tocatch up all the time. Is there a way?
There is, and it's not easy to do,
but the first role of our business isyou wanna have a strategic foundation and
(18:11):
you really should start with the businessgoals of a strategic plan and then
align the technologyunderneath the business goals.
Make sure that that technology isgoing to be able to support and enhance
the products and servicesfor our customers overall and make sure it's gonna be
sustainable and be able to scale.And that's one of the beauties of,
(18:32):
of the technology and of AI iscompanies are now able to scale
at much faster pace thanwhat they were in the past.
So AI investments should be linkeddirectly to the overall strategy of the
company.
And banks need to really prioritizebank initiatives over routine
maintenance.
'cause so much of the tech spin todaygoes towards routine maintenance.
(18:55):
And really what needs to be looked atis how we're gonna transform the bank,
which requires organizational changes.
I think that most companiesneed to build an AI roadmap,
which is building a long-term planfor AI and being able to identify very
clear and scalable use casesthat move beyond just pilots.
(19:16):
And some of the examples therewould be customer personalization,
process automation, frauddetection and compliance,
which are very keys withthat. AI does very, very well.
And marketing.
And marketing and yeah, theremany, many, many other areas.
Yeah.
I'm just naming a few here.
Yeah. And.
I'm a real fan of the KISSprinciple of keep it simple.
(19:37):
I think that's important because a lotof this can get outta hand and ultimately
if you wanna be able to adopt horizontalplatforms and APIs that support
data integration andfuture AI expansion. Yeah.
You also need to have a focus ondata quality and management, uh,
and treat data as a strategicasset and establish a,
(19:59):
a very robust frameworkfor data ownership,
privacy and availability.
The reality is that in order for to getscale and to be able to grow and to do
it in a very smart fashion, uh,
you're going to need all of that dataand the organization of that data so that
you can be proactive with the data anddrive increased revenue for the company
(20:20):
and drive ROI overall otherareas that it helps is in the
governance and risk management to driveregulatory driven tech enhancements and
to bring the overall efficiencyrate of the company down.
Kurt, you,
you mentioned something to me justthe other day and I think it's worth
mentioning to our audience.You were talking about how, uh,
(20:42):
organizing or consolidating our datawill be much easier or faster now that we
have AI versus if we had doneit two years ago, and I'm,
I'm probably botching the way you saidthat. Do you remember that comment?
Um, I do. The technology wasjust out there a few years ago,
but not very many peoplereally knew how to utilize it.
And now today we can use AIfor coding, for instance,
(21:05):
for documentation of our systems.
So what would take us the old way,
the manual way could taketwo years Now utilizing ai,
we can do this in 90 days and that's Ithe point that I was trying to make is
that we can make decisions much quickerand then we can execute on those
decisions because of the technologicalabilities of artificial intelligence.
(21:28):
Yeah. Also, I think it,
it's a good time to remind our listenersthat we did a podcast with Kendra
Ramez, she's the CEO of KR digital agency,
and it was on harnessing the potentialof generative AI and banking.
So you may go back and listen to thatepisode and she'll go in much greater
detail into ai.
If you're looking at communityfinancial institutions,
(21:51):
what are you seeing as far as wheremaybe they're not spending enough
time and maybe they shouldinvest more time for the
future of their organization to benefitthe future of their organization?
I think the focus from a strategicstandpoint is to be very focused on
innovation that's gonna elevatecustomer experience while strengthening
(22:14):
operational resilience and at thesame time reducing the overall cost.
I think that's the most important thingto be focusing on. And I think the,
the reason this matters is thatbanks face a double challenge.
It's a continued decline in customerexperience and tightening Profitability
driven by various digital competitionand regulations are evolving and
(22:36):
persistent margin pressurescontinue to occur. Uh,
the global markets with customer servicequality is following for the third
straight year,
and Profitability is stillbelow some of the 20,
23 levels. So there's, I think,
some real challenges out there.
And those challenges are gonna beovercome by new product and new product
(22:58):
delivery systems, personal serviceand providing a digitized experience.
And, uh,
what's imperative is we gotta innovatethe customer experience and we've got
to be able to be adaptable andbe ready for change management.
At the same time,
build enterprise risk managementsystems into your overall process so
(23:20):
that you can stay safemaking these major changes.
The key takeaway is focusingon innovation that directly and
measurably improves customer servicewhile maintaining risk management will be
the defining factors that will determinewhat banks are gonna thrive and which
ones are gonna fall behind this year.
Right. And you know,
(23:40):
here at PCBB we believe in thecommunity financial institutions.
They are our lifeblood,uh, of our company.
I just thought I'd ask your opinion onwhat you thought the future looks like.
I think the,
the future is very brightas long as fintechs and
others can continue toinnovate and partner,
(24:02):
because banks are becoming moreand more a technology company,
but most banks are nota true software company.
And in order to continueto to move forward,
it's gonna require these partnerships andunderstanding the risk reward scenario
of each of those partnerships andthe negotiation of that is critical.
Yeah, yeah. Okay. Thank you.
(24:22):
So is there anythingthat would be helpful as
our audience begins at strategic planningfor the year? Or any words of wisdom?
Last thoughts?
Yeah, I, I guess I can close on that.
We need to utilize technologyand AI to find ways to drive the
efficiency of the organization.
(24:43):
I think that is necessary across ourentire industry. Many banks are there, uh,
and they're, they have, uh, uh,
efficiency ratios that are less than 50%and they're in a good, good position.
Some banks are operatingabove the 50% range and for
everybody operating in that range,
that's what we have to solve for andthat's what technology allows us to do if
(25:05):
it's deployed appropriately.
Yeah. Yeah. Well, Kurt,
I wanna thank you so much foragreeing to be on the podcast today.
I think that it was a wealthof information. I think that,
that the bankers go back and check theirplan and their process that they're
going through.
I'm pretty confident they're gonna findsomething we talked about today that may
help them. And uh, Kurt,I hope you'll come back.
(25:28):
Oh, absolutely. Thank you verymuch. And fun to do this.
It's a fun time and, and, uh, and baking,
and I'll just call myself more maturebakers, uh, out there,.
It's a whole lot of fun. Can see thatthe changes that are taking place.
I truly think that our industrywill, will look much different,
but it's going to continue to be better.
(25:49):
And I look forward to the challengesthat are out there and I hope everybody
sees it the same way and, uh,
and embraces the changesthat we're all going through.
Attitude is everything.
That's right.
Thank you, Kurt. We appreciateyou being on the podcast today.
And I did wanted to mention that wewill put a link to a document in the
episode description that will list allthe items that Kurt mentioned here today
(26:13):
on the podcast. And until we meet again,
we thank you very much for tuning inand we wish you all success. Thank you.
Thank you.
Welcome back to Banking OutLoud. I'm Sonya Portwood,
and we're happy you decided to join us.As the banking world keeps evolving,
regulations shifting,
technology advancing andcustomer needs changing,
(00:20):
strategic planning is coming intosharper focus for all of us. Today.
We'll take a look at whatgoes into shaping a strong plan for the future and how
community banks can set themselvesup to stay ahead As 2026 gets
closer. I'm excited tohave Kurt Hecker with me.
Kurt is the executivechairman and CEO at PCBB,
(00:42):
and he spent nearly 40 years in bankingand finance helping institutions
grow and adopt along the way,
he led Intermountain CommunityBank Corp from 40 billion to over
1 billion in assets. So he knows a thingor two about navigating big changes.
Kurt's here to share his insights on howwe can set ourselves up for success as
(01:04):
we look to the future. So, Kurt, we'rethrilled to have you on the podcast.
We appreciate you joining us today.
Thank you, Sonya, and, uh,
appreciate it very much andlook forward to the discussion.
Thank you.
So I thought probably be a good ideabecause we do have a broad range of
bankers on the call. Somehave participated in strategic planning in the past,
(01:27):
and some may have not,
or maybe it's their first time tohave the opportunity to participate.
So I thought it would be a good idea ifwe were to level set our audience a bit.
And if you wouldn't mind,
start us out by walking us throughwhat the process actually looks like
and what it's aiming to achieve.
Sure. Happy to do. So,
(01:49):
we do strategic planningat PCBB every year.
The strategic planning process, uh,I've always looked at on a three year,
uh, time horizon, but strategicplans need to be continually updated,
especially in today's environment.
The base premise and foundationof a strategic plan is to
(02:09):
provide structure around whatthe bank is doing and to build a
collaborative process that alignsthe organization's direction with its
mission and the market realities therisk associated with the bank and the
opportunities that are out there.
Some of the core steps in buildinga strategic plan is to define
(02:30):
a mission, vision, and thecore values of the company.
The mission is typically done in amission statement and it articulates the
bank's fundamental purpose.
The vision is designed to be a statementthat lays out long-term aspirations
and what the bank strives to become,
and then the core values serves as theguiding principle for decision making and
(02:52):
culture. So that's usually at theforefront of any strategic plan.
Strategic plans, also SWOTanalysis or situation analysis,
which is the strengths, the weaknesses,
opportunities and threatsthat the company has.
Strategic plans are also done incollaboration with management and
(03:12):
with the boards to make surethat there is alignment.
The next item would be settingstrategic goals and objectives.
And this is really importantthat you develop clear,
measurable goals that address marketneeds and reflect the bank's mission and
aspirations. Overall, it shouldfocus on the growth of the company,
risk management, operationalefficiencies and customer experience.
(03:37):
From there,
strategies are developed and actionplans are put together at both the high
level and then at departmentlevels throughout the company. Uh,
you want to have concrete initiativesthat are issued by department and business
lines and have the ability to delegatethe task and establish the timelines and
accountability that's necessary to makesure that the plan is executed upon.
(04:00):
From there, you'd need to alignthe resources of the banker,
which is more or lessthe budgeting process.
You really need to assess thefinancial resources you have,
the technology you have,
and the talent necessary for being ableto meet those objectives. From there,
you put together the budgetand allocate resources,
which are principally thepeople of the organization,
capital and the technology. And then, uh,
(04:23):
those issues must all beprioritized in order of importance.
Next is setting performance metricsand monitoring systems and defining
the performance indicators or KPIs,
key performance indicatorsto track that progress.
And then the bank wouldtypically establish periodic reviews throughout the year
to monitor those outcomes and adjustthe plans as needed. And then, uh,
(04:48):
we've got, uh, the board andtheir role is to review, approve,
and communicate the plan. Overall,
the board review should ensure thatalignment with risk, appetite, capital,
and liquidity requirements areall maintained. And then finally,
the implementation of thatplan and continuous review.
Then today's environment with themassive amount of new technology and AI
(05:11):
and new tools and alsonew and different markets,
there's a different paradigm.
So the planning for bankers today is moreof a challenge than what we've seen in
the past. So that's just the basis of astrategic plan and the components of it.
There's a lot of details to it.
And that's a lot. I mean, if,
if banks truly managetheir strategic process and
(05:34):
incorporate all of thosepieces that you've mentioned,
it's sort of the north star of theorganization and everything of of course,
including taking care of your customersshould center around that strategic plan
for the future. Would you agree with that?
Absolutely. Without a strategic plan,
a company is unable to maintainthe focus and you've got a lot of
(05:56):
areas to manage throughout the bank.
So having that is a north star to keepeverybody aligned and communication
should be constant from thesenior leadership of the bank down to the employees,
making sure everybody has avery strong understanding.
Yeah. Okay.
So we know what we need to do as faras the components of putting together a
(06:17):
good strategic plan.
Let's talk a little bit about thetrends that you're seeing right now.
What should be on the agenda whenyou get the team together in a room?
What are the major things that you'reseeing that are catching your eyes that
should definitely be apart of that conversation?
There are many
but number one for meis overall digital, uh,
(06:39):
transformation and technologymodernization throughout the banking industry.
Community banks are increasinglyadopting embedded finance programs and
integrating banking servicesinto third party platforms.
And this is something thatPC BLP is doing as well. Uh,
and this is really viewed as essentialfor capturing new markets and revenue
(07:00):
streams overall. Another trendis real-time capabilities,
instant payments,
faster credit decisioning and seamlessdigital services are top priorities due
to rising customer expectationsand speed for convenience.
AI and automation goeswithout saying is a very, uh,
high priority in thehot trend. Uh, and, uh,
(07:20):
investments in artificial intelligencefor fraud prevention and customer service
and operational efficiencies are kindof all at the forefront of that trend.
And, uh,
banks are embracing this automation tostreamline compliance and be able to
reduce costs overall, and that's verynecessary in order to stay competitive.
And we anticipate needingto continue to reduce costs,
(07:42):
to reduce pricing on many of theproducts in the baking industry. And,
uh, a fourth trend that I'd point tois modernization of tech stacks In
banks,
the banking industry is very mature andmany of the banks have longtime legacy
systems. Sometimes those systemscan be a help or a hindrance.
(08:02):
More than half of the community bankingleaders consider their core technology
is fully modernized,
but many are now recognizing that furtherinvestment is needed to be able to
secure scalable innovation.
The other trends from a competitive andmarket pressure standpoint is we've got
fragmented competition here. NowCFIs are now competing against, uh,
(08:26):
FinTech organizations, uh, digitalfirst banks and niche financial, uh,
providers.
So the success of the CFI isvery much increasingly depends
upon the digital engagement,
wallet share and the relationship depthrather than just the traditional market
share. Another is nichelending opportunities.
(08:47):
Larger banks are scaling back inthe commercial real estate and, uh,
multi-family lending. Community banksare stepping in to fill these gaps,
especially in,
in local markets from the perspectiveof evolving compliance and
the, and the regulatorylandscape. In in general,
there's several trends here as well.
One is the community reinvestmentact is being overhauled.
(09:09):
There's sweeping changes toCRA regulations and pending with new requirements
slated to go into effectin 2026. Another is, uh,
rising compliance costs. Regulatorydemands, especially for smaller banks,
continue to outpace the resources ofthose smaller companies with compliance
costs representing an outsideshare of that expense.
(09:29):
So being able to simplifycompliance process and the regulatory reform are major
industry priorities. And withthe current administration, uh,
deregulating many areas and reallyfocusing on trying to change the
examination process to arisk management process,
we're hoping to be ableto reduce those costs.
And then on the last front here,
(09:52):
trend is data privacy andcybersecurity, uh, is a, a huge trend.
And as we're expandingon the digital services,
data protection and real time fraudprevention on top of this list, uh,
and investments in AI for that threatprotection and customer cybersecurity
education are really high.
And next is product and services.
(10:14):
And they are evolving anddiversifying into wealth management,
treasury services,
high yield savings to be able to competewith larger institutions and attract
new segments. Personalization,
advisory and human touch are still a,
a strong trend for community banks andis where community banks have a laid up
streamlined.
(10:34):
Digital experiences are balanced by arenewed emphasis on relationship banking
to differentiate fromautomated competitors.
There's also workplaceand operational dynamics,
and that's talent and culture.
And I think the trend here isdefinitely attracting younger,
more digitally savvy talent.
Another is the cost pressuresof just overall rising costs,
(10:57):
particularly technology and personnel.
Scalable partnerships and processautomatization are crucial, uh,
for sustainability.
And the next one is financialperformance and economic uncertainties.
Margin expansion is a trend.
Many community banks anticipate risingnet interest margins for 25 and 26
that will offset credit cost. Um,
(11:19):
and super high on my list is creativedeposit gathering strategies and liquidity
stress testing are maybe some of the mostimportant to pay attention to. Lastly,
I'll say that given the shifts in themarket that we're seeing leadership
transitions and long-term successionplanning are ongoing concerns.
So these are the trends I seethat are absolutely imperative,
(11:42):
which is embracing the digital and realtime banking while preserving the unique
relationship driven service thatsmaller banks have been able to provide.
Investing in scalable,
secure technology and complianceframeworks are critical and
everyone has to anticipatea lot of regulatory changes,
especially CRA and proactivelyupdate operational policies,
(12:03):
leveraging partnerships with fintechsand third parties to expand offerings and
innovation capacity focusing on financialhealth, liquidity and risk management,
and a volatile interest rate andcredit environment is critical.
That's an awful lot.
It was great information and we canput together a list of all that you
mentioned so that we canshare that with our listeners.
(12:25):
But please tell me how in theworld do you maintain your
focus while keeping all of thesein mind? How do you manage that?
Well, if you're managingthrough the strategic plan process, it breaks into, uh,
different projects and,uh, and having, uh,
excellent project managementis absolutely key. Otherwise,
(12:47):
you will lose the focus, uh,
on what you're trying toaccomplish because there is a lot.
Yeah.
I know that we could probablyhave a podcast on every one of the topics that you
brought up. So if you've beenassociated with a number of,
of community banks and you'veworked on a number of boards,
what are some of the pitfalls thatwe could share with our listeners
(13:10):
that they should be awareof or look out for to avoid?
You know, I think you just mentioned,you know, one of 'em is, and that's,
you know, losing focus on thedirection that you want to go in.
The other is being able to, uh,
match as we're driving forwardwith new initiatives and new
innovation that is coming in, whetherit's through the products or through the,
(13:33):
uh, delivery systems are,are paramount to keep, uh,
to keep in mind and stay focused with.
Would I be correct in saying thateach one of the strategic initiatives
are basically a project plan?
Yes. Yeah. You, uh, uh,
you need to provide the projectassistance typically to all of the
(13:55):
C leadership team because they'remanaging individual projects.
And then from those projects,
there are often additional projects thatwill come out of that at lower levels
within the company.
So that's why I say that the projectmanagement is so important and when you
make a shift one way or the other,
it needs to be made throughout the entireorganization so people are aware and,
(14:18):
and again, that allowsyou to maintain, uh,
that overall focus that is necessary.
So from,
from where I sit in participating instrategic planning for a number of years,
uh,
one of the things that I think iscommunication and making sure that your
entire team are well informed,they know the North Star,
(14:38):
but also to track progress so thateveryone knows where we are in the process
at at all times.
Is there anything you wanna add to thatas far as keeping people informed and
and tracking the progress?
I would just add that intoday's environment and the way that we're operating at
PCBB in terms of our people that areworking all over the United States,
(15:00):
I think that makes it evenmore challenging in some ways and in some ways much
better in terms of thecommunication process because the
communication needs to be veryintentional and having the participation
from everybody on the leadershipteam is, is critically important.
So I hold that at a really highregard. If we don't do that,
(15:22):
it's really easy to get off the tracks.
That constant communication is importantand allows us to stay very focused and
allows us to report up and to reportdown and to keep the company engaged and
involved with what we're doing.
Right. If I could shiftgears just a little bit here,
because I know that we've been spendinga lot of time on the process around
(15:42):
partnering with FinTech firms.
I also know that there have been banksthat have been very successful at this
and other banks that havenot been so successful,
which share with our audiencewhat approach you feel is
important they take in order to besuccessful with any partnerships
(16:02):
they engage with on the FinTech space.
I think that as you'relooking to advance forward,
I think being able to continuallyinnovate is really, really important.
At the same time, there's riskassociated with innovation.
So I think there's a real balancebetween risk and innovation.
(16:22):
In order to do that reallywell, does require processes.
We have built at PCBBan innovation committee,
which allows us to build out on newproducts and to be able to discuss those
back and forth. So we have a process And,
and when you talk about banks that canget into trouble is because you don't
have a a a plan process.
(16:44):
We've seen many financial institutionsthat have had some regulatory problems or
technological problems or cybersecurityproblems because of not going through
the proper process.
Are there any resources available outthere that our listeners could access if
they wanted additional information onthe topics that we've been talking about
today?
(17:04):
There's many,
many consultants out there that can helpand that's probably the most typical
thing that banks do. Uh,
but really we have this new toolcalled artificial intelligence,
which we've got so much informationat our fingertips that we can now, uh,
uh, obtain and get good informationin a very short time period.
So turning to that resourceis probably my number one.
(17:27):
And then from there, corporate resources,people resources, legal resources, hr,
et cetera, et cetera. Obviously the ICBA,
the A BA and all of ourbanking associations are great sources to be able to get
information from as well.
Okay, thank you. Let's talk a littlebit about technology and banking.
It really feels like it'sconstantly in overdrive,
(17:50):
especially with all the buzz around AIand automation. Um, what's your take?
How should community financialinstitutions tackle tech planning? Uh,
so they don't end up just trying tocatch up all the time. Is there a way?
There is, and it's not easy to do,
but the first role of our business isyou wanna have a strategic foundation and
(18:11):
you really should start with the businessgoals of a strategic plan and then
align the technologyunderneath the business goals.
Make sure that that technology isgoing to be able to support and enhance
the products and servicesfor our customers overall and make sure it's gonna be
sustainable and be able to scale.And that's one of the beauties of,
(18:32):
of the technology and of AI iscompanies are now able to scale
at much faster pace thanwhat they were in the past.
So AI investments should be linkeddirectly to the overall strategy of the
company.
And banks need to really prioritizebank initiatives over routine
maintenance.
'cause so much of the tech spin todaygoes towards routine maintenance.
(18:55):
And really what needs to be looked atis how we're gonna transform the bank,
which requires organizational changes.
I think that most companiesneed to build an AI roadmap,
which is building a long-term planfor AI and being able to identify very
clear and scalable use casesthat move beyond just pilots.
(19:16):
And some of the examples therewould be customer personalization,
process automation, frauddetection and compliance,
which are very keys withthat. AI does very, very well.
And marketing.
And marketing and yeah, theremany, many, many other areas.
Yeah.
I'm just naming a few here.
Yeah. And.
I'm a real fan of the KISSprinciple of keep it simple.
(19:37):
I think that's important because a lotof this can get outta hand and ultimately
if you wanna be able to adopt horizontalplatforms and APIs that support
data integration andfuture AI expansion. Yeah.
You also need to have a focus ondata quality and management, uh,
and treat data as a strategicasset and establish a,
(19:59):
a very robust frameworkfor data ownership,
The reality is that in order for to getscale and to be able to grow and to do
it in a very smart fashion, uh,
you're going to need all of that dataand the organization of that data so that
you can be proactive with the data anddrive increased revenue for the company
(20:20):
and drive ROI overall otherareas that it helps is in the
governance and risk management to driveregulatory driven tech enhancements and
to bring the overall efficiencyrate of the company down.
Kurt, you,
you mentioned something to me justthe other day and I think it's worth
mentioning to our audience.You were talking about how, uh,
(20:42):
organizing or consolidating our datawill be much easier or faster now that we
have AI versus if we had doneit two years ago, and I'm,
I'm probably botching the way you saidthat. Do you remember that comment?
Um, I do. The technology wasjust out there a few years ago,
but not very many peoplereally knew how to utilize it.
And now today we can use AIfor coding, for instance,
(21:05):
for documentation of our systems.
So what would take us the old way,
the manual way could taketwo years Now utilizing ai,
we can do this in 90 days and that's Ithe point that I was trying to make is
that we can make decisions much quickerand then we can execute on those
decisions because of the technologicalabilities of artificial intelligence.
(21:28):
Yeah. Also, I think it,
it's a good time to remind our listenersthat we did a podcast with Kendra
Ramez, she's the CEO of KR digital agency,
and it was on harnessing the potentialof generative AI and banking.
So you may go back and listen to thatepisode and she'll go in much greater
detail into ai.
If you're looking at communityfinancial institutions,
(21:51):
what are you seeing as far as wheremaybe they're not spending enough
time and maybe they shouldinvest more time for the
future of their organization to benefitthe future of their organization?
I think the focus from a strategicstandpoint is to be very focused on
innovation that's gonna elevatecustomer experience while strengthening
(22:14):
operational resilience and at thesame time reducing the overall cost.
I think that's the most important thingto be focusing on. And I think the,
the reason this matters is thatbanks face a double challenge.
It's a continued decline in customerexperience and tightening Profitability
driven by various digital competitionand regulations are evolving and
(22:36):
persistent margin pressurescontinue to occur. Uh,
the global markets with customer servicequality is following for the third
straight year,
and Profitability is stillbelow some of the 20,
23 levels. So there's, I think,
some real challenges out there.
And those challenges are gonna beovercome by new product and new product
(22:58):
delivery systems, personal serviceand providing a digitized experience.
And, uh,
what's imperative is we gotta innovatethe customer experience and we've got
to be able to be adaptable andbe ready for change management.
At the same time,
build enterprise risk managementsystems into your overall process so
(23:20):
that you can stay safemaking these major changes.
The key takeaway is focusingon innovation that directly and
measurably improves customer servicewhile maintaining risk management will be
the defining factors that will determinewhat banks are gonna thrive and which
ones are gonna fall behind this year.
Right. And you know,
(23:40):
here at PCBB we believe in thecommunity financial institutions.
They are our lifeblood,uh, of our company.
I just thought I'd ask your opinion onwhat you thought the future looks like.
I think the,
the future is very brightas long as fintechs and
others can continue toinnovate and partner,
(24:02):
because banks are becoming moreand more a technology company,
but most banks are nota true software company.
And in order to continueto to move forward,
it's gonna require these partnerships andunderstanding the risk reward scenario
of each of those partnerships andthe negotiation of that is critical.
Yeah, yeah. Okay. Thank you.
(24:22):
So is there anythingthat would be helpful as
our audience begins at strategic planningfor the year? Or any words of wisdom?
Last thoughts?
Yeah, I, I guess I can close on that.
We need to utilize technologyand AI to find ways to drive the
efficiency of the organization.
(24:43):
I think that is necessary across ourentire industry. Many banks are there, uh,
and they're, they have, uh, uh,
efficiency ratios that are less than 50%and they're in a good, good position.
Some banks are operatingabove the 50% range and for
everybody operating in that range,
that's what we have to solve for andthat's what technology allows us to do if
(25:05):
it's deployed appropriately.
Yeah. Yeah. Well, Kurt,
I wanna thank you so much foragreeing to be on the podcast today.
I think that it was a wealthof information. I think that,
that the bankers go back and check theirplan and their process that they're
going through.
I'm pretty confident they're gonna findsomething we talked about today that may
help them. And uh, Kurt,I hope you'll come back.
(25:28):
Oh, absolutely. Thank you verymuch. And
It's a fun time and, and, uh, and baking,
and I'll just call myself more maturebakers, uh, out there,
It's a whole lot of fun. Can see thatthe changes that are taking place.
I truly think that our industrywill, will look much different,
but it's going to continue to be better.
(25:49):
And I look forward to the challengesthat are out there and I hope everybody
sees it the same way and, uh,
and embraces the changesthat we're all going through.
Attitude is everything.
That's right.
Thank you, Kurt. We appreciateyou being on the podcast today.
And I did wanted to mention that wewill put a link to a document in the
episode description that will list allthe items that Kurt mentioned here today
(26:13):
on the podcast. And until we meet again,
we thank you very much for tuning inand we wish you all success. Thank you.
Thank you.
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