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Industry Insights

Featuring thoughts and analysis from some of the brightest minds in the banking world and beyond, Industry Insights is a collection of short, easy-to-digest articles touching on some of the most pressing strategic issues facing your institution.

January 13, 2020
FMS Quick Poll: 2020 Priorities
By Financial Managers Society

After a period of tremendous loan growth and increasing competition, the quest for deposits is clearly still on the minds of community bank and credit union executives heading into 2020, but perhaps not to the degree that it has been for the past several years. Even as deposit growth once again emerged as the most pressing goal or focus for FMS members in 2020 in our end-of-year Quick Poll, it was nevertheless far from the juggernaut from last year’s survey.

December 16, 2019
Paradigm Shift in Fixed-Income Offerings
By Neil Stanley, Founder and CEO – The CorePoint

According to classical economic theory, it is shocking to observe that during a time of relative economic stability, with record stock market levels and significantly robust real estate markets, long-term interest rates on U.S. Treasuries in 2019 have been lower than they were during the worst of the Great Recession.

December 2, 2019
The Economic Realities of Retail Checking in Today's Marketplace
By: Mike Branton, Partner – StrategyCorps

Ask 100 bankers, “Is retail checking profitable?” and you’ll likely get nearly 100 answers.

StrategyCorps tracks over six million retail checking accounts with over 600 million data points – primarily from customers at community and small regional financial institutions – to get our answer to this question. Our analysis is based on householded revenue that includes relationship loans and deposits associated with the checking account holder(s).

November 18, 2019
Simple Is Not Always Better: The Community Bank Leverage Ratio Playbook
By: Adam Mustafa, CEO – Invictus Group

In September, the Federal Deposit Insurance Corporation finalized the Community Bank Leverage Ratio (“CBLR”). Community banks with less than $10 billion in assets can opt into the new capital framework and forgo risk-based capital rules as long as they maintain at least a 9% Tier 1 leverage ratio. The rule is a byproduct of S.2155, adopted in 2018 to roll back much of the Dodd-Frank Act. The bill called for regulators to create a new simpler capital framework for community banks, with a CBLR between 8% and 10%. Predictably, the regulators settled on the midpoint of that range. The CBLR is on track to go into effect on January 1, 2020. Since banks will use their Call Reports to report their capital levels, the framework will first be available on March 31, 2020.

November 4, 2019
You Know Your Customer Better Than Most Banks - You Just Don't Know It
By: Rob Ashbaugh, Executive Risk Management Consultant – Abrigo

Community banks are faced with many regulatory and competitive challenges today, but a byproduct of addressing those challenges is the focus on data. By understanding the benefits of their data and not the challenges, institutions can accurately address both regulatory and competitive challenges.

Community institutions are currently in the process of transitioning to the new current expected credit loss (CECL) standard, a data-intensive exercise. A typical loan has at least 60 data points on a core system, meaning an institution with 7,000 loans can have 420,000 data points each month and more than 5 million annually, assuming no loan growth. Assuming a four-year remaining life, that is more than 20 million data points that could be used to just do a CECL calculation and then report on the calculation.

October 7, 2019
Assessing Your Financial Institution's Culture
By: Scott Baranowski, Principal and Director of Internal Audit Services – Wolf & Company

Financial institutions are constantly searching for ways to increase the success of their business, whether by trying to increase profits and return on capital or simply pushing into uncharted territory. To accomplish this and ensure that there are no surprises, traditional audits usually focus on areas such as asset-liability management (ALM), Bank Secrecy Act (BSA) compliance and information technology general controls (ITGC). However, a bank or credit union’s corporate culture is a factor that is often overlooked and, if evaluated, could prove to be a useful tool in the journey to success.

September 23, 2019
Balance Sheet Optimization
By: Alla Gil, Founder and CEO – Straterix

Balance sheet optimization has been the Holy Grail of companies’ management for many years now. But to quote Fintekminds on the topic, “A lot has been tried and written on the subject, but very few have been able to achieve meaningful results.”

There were attempts to treat institutions’ (and corporate) balance sheets as portfolios of assets, with balance sheet optimization reduced to traditional investment portfolio optimization in a Markowitz mean-variance framework. It works by finding the best expected return (mean) on portfolio assets for each level of risk (defined as portfolio variance).