Perspectives: FMS Quick Polls

October 1, 2018
FMS Quick Poll: Views On Fintech
By Financial Managers Society

Thanks to dozens of think pieces and the OCC’s recent decision to offer a new special charter, fintech may be one of the buzziest issues in the banking industry right now. But when it comes to actually working with or competing against these potential new players, just how many FMS members actually have a fintech bee in their bonnets? If the results from our latest Quick Poll are any indication, the buzz is more of a low hum for now.

Among the 76 respondents to our poll (80% from banks/thrifts and 20% from credit unions, ranging in asset size from $199 million or less to $9.99 billion), 18% see financial technology companies solely as potential partners, 12% see them only as competitors and 61% see them as both potential partners and competitors (Figure 1). Meanwhile, a small segment (8%) says fintech players are neither partners nor competitors, and one respondent wrote it to note, with compelling honesty, that his institution was actually not yet sure exactly how to view fintech players.

FIGURE 1: WHAT IS YOUR INSTITUTION’S VIEW OF FINTECH PLAYERS?



With a cumulative 79% seeing fintech players as possible partners, it is perhaps not surprising that more than one in four respondents (26%) report already working with a fintech firm on some strategic initiative (Figure 2). Another 39% note that while they are not yet collaborating with a fintech partner, they’re interested in doing so and looking for potential opportunities. The remaining 34%, however, have no plans to partner with a fintech company at this point.

FIGURE 2: IS YOUR INSTITUTION CURRENTLY WORKING WITH A FINTECH PARTNER ON A STRATEGIC INITIATIVE?



Whether currently working with a fintech partner or just considering doing so, we wanted to know which areas of the institution were most likely to benefit from a fintech collaboration, and P2P payments (63%) and digital account opening (58%) were the runaway favorites, with mobile banking (34%), mobile bill pay (28%) and online bill pay rounding out the top five (Figure 3). Among the 16% of respondents who selected “other” for this question, several see fintech companies as ideal partners for streamlining or digitizing lending services, while other write-ins included “business intelligence” and “customer/member analytics.”

FIGURE 3: WHICH AREAS DO YOU SEE AS THE MOST LIKELY FOR A PARTNERSHIP WITH A FINTECH COMPANY?



For those respondents already working with fintech partners, when asked what types of initiatives they were focusing on several reported that they are indeed utilizing fintech know-how to streamline and automate their loan processes – from improving loan workflow to building a small business lending portal.

In many respects, FMS members in this Quick Poll echoed the findings from our larger industry-wide proprietary research project from earlier this year. In Community Mindset: Community Bank and Credit Union Viewpoints 2018, nearly half of the 400 community bank and credit union leaders surveyed saw fintech players as both potential partners and competitors, while 32% viewed them only as potential partners and 20% saw them strictly as competitors.

Thank you to everyone who took the time to share their thoughts in this FMS Quick Poll!





June 25, 2018
FMS Quick Poll: CFO Responsibilities

It’s no secret that the role of the CFO in financial institutions has been changing over the past several years. What was once largely a numbers-focused position has grown and evolved to encompass more strategic responsibilities than ever before – not to mention more technology- and compliance-related oversight as well.

To get a better idea of how that broadened focus is manifesting itself in the day-to-day operations of their banks and credit unions, we went out to member CFOs for our latest Quick Poll, asking what their direct and indirect reporting relationships look like these days. More than 130 CFOs (85% from banks or thrifts and 15% from credit unions, representing a broad cross-section of asset sizes largely between $200 million and $2.5 billion) took time out from their increasingly busy schedules to give us a clearer picture.

In terms of direct reports (see Figure 1), 29% of our CFOs are overseeing corporate support areas such as human resources, facilities and administration, while 27% are directly responsible for risk management components like BSA, compliance and internal audit (in addition to the 11% who directly oversee ERM in their institutions). Operations for loans and deposits come under the direct purview of around 19% of the respondents in our Poll, while 8% wrote in an option of direct responsibility for IT. While these results weren’t necessarily surprising, they are nevertheless instructional in getting a better understanding of just how far afield today’s CFOs range from the traditional finance tasks of yore.

FIGURE 1: DEPARTMENTS REPORTING DIRECTLY TO THE CFO



But it’s not just direct reporting responsibilities that are taking up more and more of the CFO’s time these days. A follow-up question asking about indirect reports in these same functional areas yielded fewer responses overall (likely owing to the fact that those with direct reports in these areas passed on the question), but largely fell in line with the general trends from the direct reporting question. Of the 83 respondents who weighed in here, 56% have indirect reports in corporate support areas, 44% in risk management and 41% in operations (Figure 2). The one significant jump in terms of indirect over direct oversight was in the area of business lines (including lending and branches), where 25% of CFOs have indirect reports, compared to just 2% with direct oversight of these functions.

FIGURE 2: DEPARTMENTS WITH INDIRECT REPORTS TO THE CFO




These expanding responsibilities – direct and indirect – have led to a wider range of concerns for CFOs as well. In our final question, we asked respondents to identify the business challenges they expect to most significantly impact their institutions in the coming years (see Figure 3). While they were allowed to choose up to three of the presented options, it’s clear that the ongoing push for deposits and liquidity is foremost on the minds of CFOs, as their institutions try to keep up with the continued steady demand for loans amid an increasingly competitive industry. Accounting changes, too, are high on the list of formidable challenges to come, especially as the implementation deadline for CECL continues to bear down in the coming years.

FIGURE 3: GREATEST PERCEIVED CHALLENGES IN THE NEXT TWO YEARS



Thanks again to all of the CFOs who took the time to participate in our latest FMS Quick Poll!







February 26, 2018
FMS Quick Poll: Tax-Inspired Raises and Bonuses
By Financial Managers Society

In the weeks following passage of the Tax Cuts and Jobs Act last December, it was rare for a day to go by without a bold headline trumpeting how another company was passing a small portion of its sudden tax windfall along to its rank-and-file employees in the form of a wage increase or one-time monetary bonus. But the news was decidedly more muted for FMS members.

In our latest Quick Poll, we asked members whether the tax changes were inspiring their institutions to give out raises or bonuses. The resounding sentiment among the 125 members (86% from banks or thrifts and 14% from credit unions, representing a broad cross-section of asset sizes) who responded to the survey? Nope. While 6% of respondents were indeed paying out one-time bonuses and 2% were raising their minimum wage and 7% were working on some combination thereof, the overwhelming majority of 85% were opting to take a pass on the notion of passing along any tax largesse (Figure I) – although 17% of these were at least taking the issue under consideration.



Lest the hard numbers suggest that these institutions are either thoughtlessly spendthrift or somehow anti-employee, the explanations of their answers from 57 of the poll respondents provide a window into the thinking behind these decisions, highlighting the fact that not every business is in exactly the same position, and no tax cut affects every organization in exactly the same way.

For example, one respondent whose $569-million bank was giving $1,000 bonuses to each of its 60 employees felt justified in distributing a small piece of the estimated $1 million the institution was expecting to save from the tax cuts. Meanwhile, a $126-million bank opted to look longer term rather than pay out one-time bonuses, with the CFO reasoning that “the tax benefit gives the company the ability to increase wages to better match our peers and help retain talent.”

But even some of those institutions who answered the poll question “no” were still planning to reinvest in human capital in less direct ways, with one CFO of a $956-million bank noting that his institution was using its tax savings to hire on more employees rather than paying out raises or bonuses to those already in the organization.

On the other hand, many of those standing pat on raises and bonuses stood by their decision, with a number of respondents pointing out that they already had robust wage and bonus structures in place prior to the tax cuts, and therefore saw no reason to make additional moves at this time. Others explained that in forgoing payouts they were simply making a business decision based on the reality of how the tax “cut” had impacted them.

Several members noted, for instance, that the deferred tax asset (DTA) revaluation included in the tax bill had resulted in a substantial end-of-year hit on their balance sheets, making it difficult to justify paying out raises or bonuses. Still, one CFO remarked that her $1.1-billion bank managed to reward its employees for the year despite its DTA setback: “We had a DTA revaluation that would have killed the regular bonus, so we excluded it and maintained our traditionally attractive bonus payout.”

Thanks again to everyone who participated in our latest FMS Quick Poll. If you didn’t have a chance to complete the poll, be sure to weigh in with your views on social media or on FMS Connect!






November 29, 2017
FMS Quick Poll: Audit, Risk and Compliance Committees
By Financial Managers Society

How do FMS members stay on top of risk, audit and compliance in their institutions without getting bogged down by an overly complex or redundant reporting structure?

In yet another example of a relatively straightforward peer-to-peer post that first garnered interest on FMS Connect, our latest Quick Poll on risk, audit and compliance committees proved an equally popular question among the broader membership, with 133 members (83% from banks or thrifts and 17% from credit unions) weighing in on how these important areas are accounted for within their institutions.

Of the three possible configurations offered in the poll, 51% of respondents utilize only an audit committee, to which both risk and compliance report (Figure I). Meanwhile, maintaining separate audit and compliance committees or having separate audit, compliance and risk committees each tallied 19% of the vote. The remaining 11% of respondents opted for other arrangements, including separate audit and risk committees with compliance reporting to risk, a combined audit and compliance committee with risk reporting or separate audit and compliance committees with no specific risk function.



While the results of our follow-up question asking whether the specified arrangement of audit, risk and compliance oversight was working were extremely lopsided – with 94% of respondents answering in the affirmative (Figure II) – some of the explanations behind those responses weren’t quite so uniform.



Several respondents noted that splitting these functions into separate committees was the only way to stave off meeting durations that were quickly getting out of hand. Also favoring multiple committees, a number of members noted that these areas are becoming so specialized and complex that only separate, devoted committees can properly address the specific issues of each.

Those with combined committees also made the case for why their arrangement works, noting in several instances that the three areas are very interrelated and should therefore be addressed together. Others were more pragmatic, citing their smaller asset sizes or favorable examiner feedback as the reason behind their preference for combined committees.

Finally, the explanations from the handful of “no” votes to this question were equally telling – and often right in line with the explanations of why a different approach was working for some of their peers – with a few members dealing with combined committees bemoaning the length of meetings, the lack of risk focus and the overwhelming amount of information to be covered. And one CFO of a $640-million credit union with only an audit committee summed up her thoughts on coming up with a better arrangement with a simple suggestion: “We need ERM.”

Thanks again to everyone who participated in our latest FMS Quick Poll. If you didn’t have a chance to complete the poll, be sure to weigh in with your views on social media or on FMS Connect!






September 10, 2017
FMS Quick Poll: ALCO Composition
By Financial Managers Society

Who gets invited to the party?

Our latest Quick Poll on who gets a seat at the table in the asset-liability committee meetings of FMS institutions was inspired by a question initially posed by a member on FMS Connect: who is on your ALCO? Among the 185 responses (147 from banks and 38 from credit unions, representing a cross-section of asset sizes), we of course found a heavy emphasis on the usual suspects – CEO, CFO, senior loan officer, etc. – but a number of less common attendees as well, including a representative from HR at one institution and an ALM model analyst at another.

The options provided in our multiple-choice question were fairly straightforward, but their uniform ALCO participation wasn’t necessarily so (Figure I). While President/CEO (97%) and CFO (96%) checked in as near-unanimous selections, an ALCO invitation wasn’t nearly as much of a sure thing for senior retail officers (59%) or controllers (43%), and CIOs found themselves on the outside looking in more often than not (20%).



One of the driving forces behind the original query posted to Connect was the notion of Board members attending ALCO meetings, and the response in our Quick Poll was decidedly mixed on the topic. Just over half of respondents (54%) noted that a director or other Board representative was regularly present for ALCO meetings. However, some poll participants clarified this position in the “other” category, where several respondents, for instance, noted that their full Board is on board for ALCO.

A number of common choices helped round out the rest of the write-in candidates in the “other” category of our poll, with the chief operating officer, chief risk officer, chief credit officer, treasurer and heads of marketing all receiving multiple votes (Figure II). Some of the other one-off ALCO participants offered in this section included branch managers, risk management officers, financial analysts and VPs of finance, deposits and service delivery.



In addition to asking poll participants who comes to ALCO meetings, we also wanted to know how often those meetings take place (Figure III). While quarterly (50%) and monthly (42%) were the most popular intervals, a number of other write-in scheduling options were proffered, ranging from bimonthly to twice a quarter – as well as four respondents who favor weekly ALCO meetings.

Thanks again to everyone who participated in our latest FMS Quick Poll. If you didn’t have a chance to complete the poll, be sure to weigh in with your views on social media or on FMS Connect!

FMS Quick Poll




June 15, 2017
FMS Quick Poll: Succession Planning
By Financial Managers Society

What will become of your community institution when the current senior leadership decides to call it a career and head to the golf course? Is there a CEO-in-waiting ready and able to take the reins in a seamless transition? Is your next CFO just down the hall? Will you have to go outside your bank or credit union to find the talent needed to keep the institution growing?  

Those are the questions we had in mind when we went out to the FMS membership with our latest Quick Poll. Among the almost 140 responses received, we found that succession planning is certainly an item on the agenda at most institutions, but where it ranks on that to-do list – and why – varies quite a bit.   

Of the 137 respondents in the poll – 117 from banks and 20 from credit unions – 49% characterize the level of concern around succession planning at their institution to be “significant,” viewing it as one of their top concerns in the near term, while 13% see it as a “critical” issue in need of immediate attention (Figure I). Meanwhile, 28% have succession planning on their radar, but only as a lower-level priority for the coming years, and 10% of poll participants see it as a lukewarm issue that can fall in line behind other more pressing areas of concern.  

FMS Quick Poll

So how much work do they have to do to address their succession planning issues? That is, where do their efforts currently stand? Most respondents are at least headed in the right direction, with 60% reporting they have a strong plan in place already and another 31% noting they’re in the process of formatting a plan; the remaining 9%, however, don’t have in a place and have yet to take steps toward getting started (Figure II).

FMS Quick Poll

These results align closely with the responses from 400 community institution leaders in “Community Mindset: Bank and Credit Union Leadership Viewpoints 2017,” a recent FMS research survey of the industry. Responding to the same question, more than half of respondents (57%) said they have a strong plan in place for succession, 33% noted they were working toward a plan and 10% reported that they did not have a plan.

Those 52 institutions in the Quick Poll still in the early stages of trying to pull a plan together are encountering a number of challenges, including a lack of qualified internal candidates for leadership positions, the absence of an in-house program or track for grooming such candidates, a lack of urgency from the board to get a plan in place and, most of all, a lack of time and resources, as other priorities take precedence (Figure III).

FMS Quick Poll

When they do find the time and motivation to get down to the serious business of putting together a plan, those institutions can take a lesson from the 82 respondents who are further down the road as they hone their efforts. Among those institutions with a strong plan in place, having a clear process for identifying and cultivating internal talent and having a solid written plan both ranked highly as key elements toward a good succession plan, while buy-in from leadership and the board also came into play (Figure IV).

FMS Quick Poll

Thanks again to everyone who participated in our latest FMS Quick Poll. If you didn’t have a chance to complete the poll, be sure to weigh in with your views on social media or on FMS Connect!




DECEMBER 13, 2016
FMS Quick Poll: Biggest Challenge in 2017 
By Financial Managers Society

As the New Year approaches, many FMS members are likely grappling with one or more specific challenges facing their institution in 2017. And if their situations are anything like the more than 130 members who participated in our recent Quick Poll, chances are the single biggest challenge they have in mind is somehow tied to the quest for higher margins and additional income.   

Of the 132 respondents in the poll – 113 from banks and 19 from credit unions – a whopping 47% saw the task of increasing margins and generating income as number one on their to-do list for 2017. In a distant second place (and, in all likelihood, closely aligned with margin concerns anyway) was interest rate risk and uncertainty, checking in as the biggest challenge for 14% of poll respondents. Compliance and regulatory concerns, always a perennial favorite, logged a respectable 11%, while increased competition from both traditional and non-bank entities, cybersecurity issues and the cost and pace of technology advancements rounded out the major categories at 9%, 6% and 5%, respectively.    

FMS Quick Poll

Responses were fairly consistent between both banks and credit unions, as well as across all asset levels, with a few notable exceptions. For example, increased competition seemed to be a bigger concern among credit unions, with 16% of those respondents identifying it as the top challenge, compared to just 9% of banks. On the other hand, credit unions don’t appear to view technology demands or cybersecurity threats as a major concern, with none of the 19 respondents identifying either category as their top challenge for the year ahead. 

In terms of asset size, meanwhile, responses were once again fairly uniform, although perhaps not surprisingly compliance and regulatory demands represent a much more formidable challenge for the smallest institutions, with 24% of those in the sub-$250 million crowd tabbing regulatory burden as their number one concern for 2017 (compared to 11% for all respondents). Also, interest rate risk and uncertainty was seen as a bigger challenge among those institutions in the $250-$499 million and $500 million-$1 billion ranges at 18% and 20%, respectively, than to those on the lower (sub-$250 million) and higher (greater than $1 billion) ends of the scale, at only 9% each.      

Of course, not every survey participant saw his or her greatest challenge among the six outlined in the Quick Poll.  Among the 8% of respondents who chose to think outside the box and select “other,” some of the additional challenges they expect to face heading into 2017 include:

◾ Merger integration 
◾ Succession planning
◾ Expense containment
◾ Organic growth
◾ Branch structure rationalization
◾ Deposits and funding

In addition to identifying their greatest challenge, many participants took the time to explain why they opted for the choice they did, and this is where the responses in each category took on some added color. Among the more illuminating comments were the following: 

“Trying to place a bet in the budget on the way long rates will go as post-election noise quiets down is a guess at best. We were optimistic with the Fed move last year and budgeted for a modest increase in rates in '16. We know how that story played out. As a result, tight margins are still going to be a challenge heading into '17.”
CFO, $813 million bank

“I could have easily chosen the quest for higher margins and additional income or the increased competition from bank and non-bank entities, but the resources we now commit to compliance and regulatory demands continue to be our biggest challenge.”
CFO, $406 million bank

“The spread continues to be a challenge, especially with the potential for a rising-rate environment coupled with the cost and pace of technology advances and compliance and regulatory demands.”
CFO, $215 million credit union

“We’ve had tremendous loan growth and anticipate the same for 2017, but we have not had the same growth in core deposits. We will be looking for creative deposit-gathering initiatives and using wholesale funding sources more than we have in the past.” 
CFO and SVP, $605 million bank

“It is becoming difficult to compete just by growing organically. In order to grow, we will have to acquire a bank.”
EVP, COO and CFO, $278 million bank 

“Mitigating cybersecurity issues is a constant battle and you never know if you’ve covered all of your bases, so you need to just keep throwing resources at the problem and keep your fingers crossed that it is enough.”
SVP and CFO, $951 million bank

“I really wanted a box for ‘all of the above.’"
CFO, $1 billion bank

Thanks again to everyone who participated in our latest Quick Poll.