The Daily Dividend: Industry News

News, notes and insights from around the industry

FEBRUARY 17, 2017
Friday Hot Links
By Mark Loehrke, Editor, Financial Managers Society

In between all of the cake, balloons and laser tag to fete our founding fathers this long holiday weekend, be sure to carve out a few minutes to catch up with these solid think pieces from around the industry press.  

Check under the couch cushions
You might not need to read yet another story about net interest margin compression, but a piece like David Sweeney’s for Bank Director – with specific ideas of where on your balance sheet to look for additional basis points – may prove a little more useful.  

Rethinking risk
Over on Banking Exchange, meanwhile, Ed O’Leary uses lessons learned from the Uniform Bank Performance Report (and a pretty creepy little accompanying image) to explain how institutions can take a look at their risk from multiple angles.  

Speaking of risk – and, incidentally, the pursuit of additional margin in the form of loan growth as well – Ancin Cooley offers another reminder of how important it is for institutions to do an honest and complete assessment of their risk appetite in his piece for Banking Strategies.   
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FEBRUARY 16, 2017
Damage Control
By Mark Loehrke, Editor, Financial Managers Society

Most stories on the growing threat of cyber attacks tend to boil down to two main points:

(1) Institutions should do everything in their power to try and prevent them
(2) No matter how well prepared they are, every institution will be a victim at some point

Well, isn’t that encouraging? It’s not that all of these articles are wrong, but they might just as well lay it out as:

(1) Find wall
(2) Bang head against wall
(3) Repeat steps (1) and (2) above

Maybe that’s why a piece like this one from Patrik Heuri of Above Security in the American Banker that lays out some of the do’s and don’ts for institutions after they’ve endured a cyber attack seems like such a breath of fresh air. 

After all, while it’s not terribly fun to envision the day when your bank or credit union falls victim to a data breach or social engineering scam, if the general consensus among the experts is that it really is just a matter of time, then maybe one of the key pieces of advice floating around out there should be how to handle the aftermath of that seeming inevitability. Heuri includes the following suggestions in his piece:

DON’T try to keep it quiet – Slow or less-than-forthcoming communication with customers will result in even more reputation damage

DO stick to the facts – Avoid oversharing, especially where an attack’s breadth is concerned, since having to go back and revise damage estimates is almost always a bad look

DO learn from others’ examples – There are plenty of cyber attacks (both inside and outside the industry) to choose from, so start taking notes on the places that are getting their responses right

DON’T put your customers anywhere but first – Deal with customer concerns first and foremost, reassuring them early and often how you intend to handle this crisis and protect them from future attacks     

The common theme running through all of these suggestions? Be sure your cybersecurity preparations take into account not only how to avoid an attack, but how to deal with what happens if/when one takes place.   

FEBRUARY 10, 2017
Friday Hot Links
By Mark Loehrke, Editor, Financial Managers Society

Whether you’ve been busy this past week either stewing or gloating about your Super Bowl pick, here are some worthwhile stories from around the industry you may have missed. 

Strategic auditing
Few businesses are more attuned to the delicate balance of time and resources quite like a community institution, which is why setting priorities is so crucial. In her recent piece Auditing What Matters, Jane Seago examines how internal audit can do its part in this regard to bring real value to an organization.     

Broad thinking
This recent story on explains how a CFO’s accountability for traditional financial metrics should extend to non-financial measurements as well, in order to better understand how KPIs from across the organization interact with and affect one another. 

What attributes do accounting and finance professionals need to get ahead? According to a recent Robert Half survey – as summarized by Tim Hird on – think less along the lines of long hours at the office and more in terms of “soft skills” like communication and collaboration.   
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FEBRUARY 2, 2017
A Different Approach to Compliance
By Mark Loehrke, Editor, Financial Managers Society

If you’re looking for near-unanimous solidarity on an issue facing community institutions, you’d be hard pressed to come up with a better choice than regulatory burden and the cost of compliance. 

So it may be an instinctive response to begin nodding when Adam Mustafa from Invictus Consulting Group kicks off his recent piece for Bank Director by stating at the outset that “community banks are wasting money on compliance.” Preach on!

But this isn’t just another angry letter-to-the-editor screed. Mustafa doesn’t simply rehash the notion that too much regulation means higher costs for community institutions; rather, he argues that the more critical problem is in how institutions are spending on compliance. To back up his theory, he links to a May 2016 study by the St. Louis Fed that found, in part, the following:

Results presented in this table, overall, appear to be inconsistent with a hypothesis that greater expenditures on compliance activities are necessary to improve compliance performance. Similarly, higher compliance costs at the smallest banks are not necessarily associated with better compliance outcomes. Both inconsistencies suggest that observed variation in corporate governance practices across community banks may not be as critically dependent on direct expenditures as on, alternatively, the ability of management, boards, audit committees and internal auditors to work together to properly focus oversight attention.

In other words, compliance is not something that responds particularly well to simply having money thrown at it. Instead, Mustafa suggests that compliance in community institutions should be viewed as a cultural mindset rather than a checkbox exercise – an integral part of strategic planning rather than a problem to be dealt with. His explanation of how not to do stress testing is a good example of how this might play out in practice.     

Will this type of “cultural” approach completely eliminate the growing costs of compliance? Doubtful, but at the very least it may result in a case of money much better spent.

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JANUARY 25, 2017
The Many Sides of CECL
By Mark Loehrke, Editor, Financial Managers Society

Is it possible that CECL may turn out to be even bigger, costlier and more time-consuming than many institutions have anticipated?

Given the outpouring of hand-wringing and cursing that greeted the new accounting standard when it was first conceptualized several years back and has continued in earnest right up through its official unveiling last June, it hardly seems possible that implementation could be worse than what has long been anticipated. But according to KPMG, that may indeed be the reality staring down institutions that take too narrow a view of CECL.

Specifically, the firm argues in a recent piece posted to FEI, institutions that focus solely on developing allowance and impairment models to align with the new standard – admittedly, a major piece of the puzzle – may be headed for an unpleasant wake-up call when they discover just how much CECL stands to impact other areas of their operations. KPMG recommends that institutions get out ahead of this potential headache by expanding their CECL prep efforts to include areas such as:

◾ Project management and ongoing governance
◾ Data and technology
◾ Internal controls

This is easier said than done for most institutions, of course, but it’s worth considering as CECL creeps a little closer to reality with each passing month.

The good news in all of this? FMS has more resources available to help community institutions get out ahead of CECL than ever before, including a recent webinar from Mike Umscheid and upcoming on-site seminars with Mike in both Philadelphia and Atlanta.

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JANUARY 20, 2017
Friday Hot Links: The ABCs (Assurance, Branches and Cybersecurity)
By Mark Loehrke, Editor, Financial Managers Society

Looking to read something other than inauguration news and analysis today? Check out these three pieces, which not only cover several topics of interest to community institutions, but best of all, feature nary a mention of Washington, parades or swearing of any kind.

Follow the map
If your institution seems to have trouble herding the many cats with their paws in various aspects of governance, risk and control, an assurance map may just be the tool you never knew you needed. This is a good read for anyone involved in ERM at their institutions, or those who aspire to be.

The crystal ball on branches
Opinions on the future of branches are like belly buttons – everybody has one, and most would be better off not seeing the light of day. But as often far-fetched, hyperventilating and contradictory as they may be, branch prediction stories are nevertheless the banking industry’s version of cute animal videos – the irresistible stuff of which late Friday afternoons are made.

Scary top five
There’s nothing like easing into a relaxing weekend with a list of the top five cyberthreats facing your business.

JANUARY 18, 2017
The Mouse That Roared
By Mark Loehrke, Writer/Editor, Financial Managers Society

FMS Daily DividendOK, so that headline is probably a bit of an overdramatic way to describe Scott Butterfield’s mostly genteel post on CU Insight about the challenges facing smaller credit unions. 

Even without any real roar, however, Butterfield does make some solid arguments for the continued vitality of the sub-$100-million community institution, including a number of ideas for how the broader industry can help nurture this important segment and how small credit unions can help themselves by making their voices heard.           


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