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Quality in Banking: Los Alamos National Bank
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By William M. Lindsay, Ph.D., P.E
An earlier version was presented at:
3er. Congreso Internacional de Ingeniería Industrial y de Sistemas
ITESM-Morelia Campus
Morelia, Mexico
September 17-21, 2008
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Abstract
A case study of the Los Alamos National Bank, a Baldrige Award winner, provides the
framework for analysis and discussion of quality in service organizations using the Baldrige
The Quality Framework – The Malcolm Baldrige National Quality Award
The Malcolm Baldrige National Quality Award – MBNQA (similar to the Premio Nacional de la
Calidad de México) provides a framework for judging the level of quality and performance
Quality Profile Los Alamos National Bank
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Los Alamos National Bank (LANB) is an independent community bank that provides a full
range of financial services to the consumer, commercial, and government markets in northern
and central New Mexico. With assets in the year 2000 of $650 million, LANB has 167
employees and locations in Los Alamos, White Rock, and Santa Fe. LANB is the primary
financial institution for 66 percent of Los Alamos County residents and is the largest Guaranteed
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average assets has exceeded the national average every year since 1995; earnings per share
increased from $1.20 in 1995 to nearly $2.00 in 1999; dividends per share increased from $.50 in
LANB – Quality in Banking – Case A
Today, Los Alamos National Bank is the largest independent bank in New Mexico. LANB
provides a full range of financial services to consumer, commercial, and government markets in
northern New Mexico. LANB was created originally to address the banking needs of its unique
namesake community, created to house what is now known as the Los Alamos National
Laboratory, site of the Manhattan Project during World War II.
The bank has become an integral component of its community. Nearly 80 percent of Los
Alamos’ 18,000 residents use LANB financial services. Two-thirds of residents consider LANB
An example of commitment to the community was demonstrated dramatically by the response of
Los Alamos National Bank to the May 2000 Cerro Grande fire in the Los Alamos area, which
burned nearly 50,000 acres, destroyed over 280 homes, and forced the evacuation of 20,000 Los
Alamos and White Rock residents. While the primary location in Los Alamos and its branch
office in White Rock were forced to close, bank employees moved its entire operation overnight
to the Santa Fe branch. As a result, customers received uninterrupted service. In addition, the
bank took extensive measures to support the people and businesses of Los Alamos, including:
• Offering zero percent interest loans to anyone in the community (not just customers) who
was affected by the fire
• Doubled the limit on withdrawal limits from automated teller machines
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In an era of banking mergers and acquisitions, LANB capitalizes on advantages earned by
successful “home–grown” businesses. As a locally owned and operated financial institution, it
In its chosen markets, LANB has positioned itself to be a low-cost, full-service provider. For
example, service charges generate less than an eighth of annual income, as compared to about a
Leadership and the Strategic Planning Process
Senior leaders set the bank’s long-term strategic direction and annual corporate objectives,
following detailed analyses of leading and lagging indicators of trends in the economy, markets,
customer behavior, technology, employee skills, supplier capabilities, and other key factors. At
the departmental level, planning becomes an organization-wide activity, involving all personnel.
Corporate objectives are accomplished through action plans that often transcend several
departments. Totaling about 90 in the year 2000, action plans are converted into individual work
goals for all employees, about a third of whom participate on long- or short-term teams.
The form used for the action planning system lists corporate goals, departmental objectives, and
the annual and long-term goals of the employee, which he or she writes in consultation with a
Employee Involvement
Employees are expected to create value for customers, and they are given the authority and
resources to act proactively and decisively. For example, all workers have the authority to
resolve complaints on the spot. Also, high lending limits and flexible underwriting standards
enable loan officers to respond innovatively to loan applicants with special circumstances. Yet,
LANB’s charge-offs for loan losses (measured as a percentage of average assets) have been
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Technology Focus
After a skilled, customer-focused workforce, LANB ranks technology as vital to executing its
strategy of providing low-cost service, achieving high levels of customer satisfaction and loyalty,
and, in the process, sustaining above-average profitability. It credits its client-server information
network and relational database system with enabling the speed, dexterity, and analytical insight
needed to manage risks and to respond rapidly to changing customer requirements and emerging
Using the Malcolm Baldrige National Quality Award (MBNQA) criteria as a framework,
respond to the following questions.
1. Why does Los Alamos National Bank feel a deep sense of commitment to its community?
What role does senior leadership play in establishing the sense of commitment? How does this
impact its focus on quality and performance excellence?
2. How does LANB focus on its employees and reflect this key principle of total quality? Why
is this especially important for a service organization like LANB?
3. How does technology support the bank’s mission? Can it be viewed as a core competency or a
facilitating strategy?
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LANB – Quality in Banking – Case B
Updated LANB Profile for 2007
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By December, 2007 Los Alamos National Bank (LANB) and its holding company, Trinity
Capital Corporation (TCC), reported that total income stood at $13.329 million or $2.03 diluted
earnings per share, an increase from 2006 of 29.27% in net income and 30.13% in diluted
earnings per share. Up until that time New Mexico had not experienced the weakness in our
LANB saw an increase in past-due loans and foreclosures in 2006 and 2007, and began active
monitoring and hedging to protect against a slowing real estate market and uncertain economic
conditions. LANB did not engaged in subprime lending, held limited non-traditional loans and
avoided investments in risky debt instruments. Their focus has been on diversifying their
LANB has a continuing commitment to social responsibility. That commitment has guided the
development of the EcoSmart program. The bank became an early adopter of the electronic
The Genesis of Sustainability – 2007
As part of their commitment to sustainability, LANB sought to create a better way by supporting
eco-friendly programs and building initiatives in the community. The EcoSmart Loan
Program is helping evolve sustainable development in New Mexico. On Earth Day 2006, the
Bank’s EcoSmart Loan Program began with the objective to back environmentally friendly
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Walking the Talk
LANB has adopted environmentally responsible practices organization-wide. The downtown
Santa Fe office now has a water harvesting system used to maintain the office’s landscaping,
with a 25,000-gallon cistern to collect rainwater from the roof and parking lot and save over
100,000 gallons of water per year. LANB is powering its offices with 90% green electricity in
Using the Malcolm Baldrige National Quality Award (MBNQA) criteria as a framework,
respond to the following questions.
1. Why does Los Alamos National Bank feel that a sustainability commitment to its community
is a good business practice? What role does senior leadership play in establishing the new sense
of commitment? How does this impact its focus on quality and performance excellence?
2. How does technology support the bank’s mission and commitment to sustainability? Are these
aligned with the mission and values cited in Case B?
