The Daily Dividend: Industry News

News, notes and insights from around the industry

APRIL 21, 2017
Friday Hot Links
By Mark Loehrke, Editor, Financial Managers Society

Believe it or not, there’s more to read up on this weekend than yet another think piece on airline customer service.

It’s not unusual to hear a banker complaining about a vendor robbing his or her institution blind, but this recent story on Internal Auditor drives that idea a little bit closer to home, while offering yet another timely reminder on the all-around importance of cybersecurity.   

Thinking Small
Toni Lapp of BankNews shares a couple of good examples of community institutions that are capitalizing on the small-business “buy local” trend to win over customers (special shout-out here to FMS member Sue Reid, an SVP at featured Bangor Savings Bank).    

All Aboard
How many customers is your institution alienating or even driving away because of a complicated, disorganized or just overly fussy onboarding process?  Mary Ellen Georgas-Tellefsen of Capital Performance Group has some ideas for making that process less painful, and thus keeping your profits higher and your customers happier. Take that, airlines! (sorry)
APRIL 19, 2017
The Stresses of Retirement
By Mark Loehrke, Editor, Financial Managers Society

While some CEOs seem all too ready for retirement, others are determined to stick around until they’re carried out of the place. 

The real problem, however, tends to be those leaders that fall somewhere in the murky middle, holding their cards close to the vest and leaving their institutions in the dark about their plans for eventually vacating that top post. Because there’s much more at stake in this decision than post-retirement tee times and nap schedules (for the CEO, not his or her staff – one hopes), writes Deedee Myers for CUInsight

It’s not so much, she says, that every organization needs to know the exact exit date for its CEO, but rather that simply having a general idea of the leadership timeline can help an institution plan for this eventuality and thus enjoy a smoother and more measured succession process. At the very least, she notes, organizations should take the time and effort to prepare a plan for when the day comes by proactively addressing issues such as:

Building a team of stakeholders that will help navigate the institution through the CEO transition
Developing internal candidates as potential successors 
Establishing a process for replacing key executive team members who may also depart
By considering these issues well before the CEO decides to actually hang it up, organizations can help ensure that that retirement cake isn’t, in fact, a bitter pill to swallow.
APRIL 17, 2017
Bigger Isn't Always Better
By Hilary Collins, Assistant, Publications and Research, Financial Managers Society

Smaller banks are outperforming larger banks, according to some analysis from Matthew Klein over at the Financial Times. So where exactly is David getting the better of Goliath?

Better net interest margins (almost double)
A better  track record of having avoided losses during the recession
Lower charge-offs
Less debt

Klein hypothesizes that these strengths might be partially due to the ability of smaller institutions to better specialize and find their niche. Even the biggest banks can’t beat the power of truly knowing your unique position in the industry.

APRIL 12, 2017
Persevering Through Crisis
By Mark Loehrke, Editor, Financial Managers Society

The old saw about corporate crises coming down to a matter of “when, not if” is oft repeated, but how many institutions can honestly say they’ve taken the time to really think through and put together a plan for dealing with the ramifications of a significant hit to their reputation or bottom line? 

Particularly in this age of ever-expanding cyber threats, the next corporate crisis could be just around the virtual corner, which is why having a crisis management plan is more than just a Boy Scout kind of exercise in feel-good paper-shuffling – it may, in fact, be the key to an institution’s very survival. And, according to this recent well thought-out piece from author Mike Jacka, internal audit can and should play a key role in putting that plan together.       
The first step is assembling a cross-functional crisis management team, comprising communications/public relations staffers, legal and compliance personnel, a few C-suite representatives and someone from internal audit – not for the purposes of direct decision-making, but rather to ensure the team is addressing the appropriate issues. This team will be responsible for developing the organization’s crisis structure, including:

Crisis identification 

Crisis plan

Communication protocols

Validation and updates


Jacka notes that while internal audit expertise can be particularly helpful in the identification of potential crises – by providing insights from prior audits and work completed in enterprise risk assessments – and the validation of the ongoing plan, IA’s overarching role as observer throughout preparations is crucial.

After all, the only thing worse than a corporate crisis is not being prepared when (not if) one hits.

APRIL 7, 2017
Friday Hot Links
By Hilary Collins, Assistant, Publications and Research, Financial Managers Society

Happy Community Banking Month! Here are a handful of industry stories to celebrate with.

What do stage 4 cancer and financial difficulties have in common? Read Brandon Dewitt’s thoughtful piece to find out what banks can do to help their customers — and a new way to look at ethics in the finance industry.

 Leadership grows with a community mindset, Jim Bouchard points out in his article which says a good leader focuses on sharing – power, responsibility, credit and rewards. Because community isn’t just clientele and customers – it’s coworkers, too.

 And with that in mind, a good community works like a team. Here’s Fortune’s writeup of Theo Epstein and how he built World Series winners from perpetual losers by stepping back from cold statistics.
Have a great weekend!

APRIL 5, 2017
Survey Says: Think Strategically
By Mark Loehrke, Editor , Financial Managers Society

If the Member Spotlight feature in FMS Update has confirmed one thing – besides how willing our members are to share their thoughts and reflections on their institutions and the industry, of course – it’s that many CFOs believe the biggest adjustment in their role over the past several years has been an increased focus on strategic planning.

Further confirmation of this shift comes in the form of the 2017 CFO Survey from Grant Thornton, which found strategic planning occupying an ever-growing share of the more than 400 respondents’ time and attention. As this new aspect of the role continues to expand in prominence, however, CFOs are facing a number of key realities, including:

The increased need to invest in the people and technology needed to support business processes such as budgeting, forecasting and long-term planning
A renewed emphasis on analytics to interpret and manage risks – and the struggle to automate risk systems effectively
The need for new investments in IT, operations and sales/marketing
While only about 15% of the survey’s participants hailed from the financial industry, the findings do seem to reflect many of the challenges facing the CFOs of community institutions.

APRIL 3, 2017
Risky Business Meets the Matrix
By Hilary Collins, Assistant, Publications and Research, Financial Managers Society

Risk – specifically, what it looks like and how to address it – presents a constantly shifting puzzle for institutions, as a new survey from Bank Director explores. The survey, conducted from December 2016 through January 2017, surveyed 167 senior executives at U.S. banks with more than $500 million in assets.
Top Challenges
The most common risk management challenge cited by respondents was keeping up with regulatory expectations, with 65% of institutions saying this was one of their biggest issues, with another 51% citing cyberattacks and 48% taking note of the technology and data infrastructure needed to support risk decision-making as a big concern. Perhaps not surprisingly, smaller institutions found fully implementing ERM more onerous than their larger brethren, and had a similar struggle with finding the necessary in-house expertise. 

26% of survey participants said they had experienced a data breach or some other form of cyberattack since 2015, and an additional 4% said they had experienced a cyberattack prior to 2015. While almost a third of respondents had already been through this unpleasant experience once, 63% had not yet dealt with a cyberattack (the remaining 6% was unsure). 

Smaller institutions did not seem to be as affected by cyberattacks as their larger counterparts – 73% of banks with assets less than $1 billion had never had a data breach. Even so, most institutions are taking the threat seriously and have been proactive in their approach to cyberattacks in the past couple of years. Since 2015, 82% of all respondents said their institutions have invested in technology to better detect and deter cyber threats, 81% had improved training for their staff and 80% had increased the board’s focus on cybersecurity.

Smaller institutions differed in their approach to this threat, indicating that they were less likely to invest in technology to fight cyber attacks and also less likely to increase their boards’ involvement in cybersecurity. In fact, their primary means of cyberattack prevention measures were mostly limited to improving staff training and security controls related to information security.

Meanwhile, 4% of institutions with $1-5 billion in assets are planning to increase their cybersecurity budgets by more than 50% in 2017 – something the larger banks in general are not doing. 82% of all institutions are increasing cybersecurity budgets by some amount this year, with a median of $200,000 budgeted for 2017.

Vendors and Risk
Most of the surveyed institutions are well aware of the risks posed by vendors, with 91% having a procedure in place for dealing with risks posed by current and prospective vendors. Strangely, 5% said they have procedures in place, but only for current vendors, and 1% said they have procedures in place, but only for prospective vendors – an easy-to-fix blind spot for 6% of the institutions surveyed.

Most respondents feel that regulators are open to partnerships between financial institutions and fintech vendors, with 84% considering it a possibility, and only 11% noting that they had received negative comments from regulators due to such a partnership. Smaller institutions were less likely to receive negative comments, perhaps due to a lower probability of having such a partnership.


Mark Loehrke

Danielle Holland

Autumn Wolfer
Director, Membership and Marketing

Hilary Collins
Assistant, Publications and Research