Perspectives: FMS Quick Polls

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.

OCTOBER 17, 2016
FMS Quick Poll: Social Media
By Financial Managers Society

What constitutes a “community?”

Whereas a clear designator such as geographic proximity might have definitively answered that question in the past, the notion isn’t quite as clearly cut these days. The explosive growth of social media has redefined both what a community is and where it is – shifts that are proving profound for personal and business relationships alike.

What is the impact on a community institution, for example, if the community it serves begins to migrate to the virtual world of social media? How does a bank or credit union continue to reach out to its community to connect, communicate and engage when those customers are more likely to log on than walk in? We were curious as to how FMS members were using social media and how it was affecting engagement with their customers. With close to 125 responses in our latest Quick Poll, it certainly appears as though members are attempting to reach out to their customers via social media, but the details lie in the degree to which they are committed to that effort.

Of the 122 respondents in the poll – 104 from banks and 18 from credit unions – 56% consider their institution to be either a highly active (multiple posts per week, dedicated staff, regular interaction with customers) or somewhat active (a post at least every week, occasional interaction with customers) social media user (see Figure I). Meanwhile, 21% of poll participants maintain a social media presence but don’t consider themselves particularly active, and 23% aren’t on social media at all, for reasons ranging from compliance concerns to lack of resources to a belief that their customers just aren’t interested.

FMS Quick Poll

For those who have chosen to maintain a social media presence, has the effort proven fruitful in terms of engaging their communities? The answer is somewhat, but perhaps not as much as they would like. Only 7% of respondents describe the level of interaction with their customers via social media as vibrant, while 36% consider their social media efforts worthwhile but not a terribly high priority, and another 30% note that their customers rarely engage with the institution on social media (see Figure II).

FMS Quick Poll

In terms of where FMS members spend their time and resources on social media, Facebook is far and away the most frequently utilized platform at 44% among poll respondents (see Figure III), followed by LinkedIn (24%) and Twitter (19%). Members see far less value, however, in posting photos to Instagram or videos on YouTube (6% each).

Across these and other platforms, poll respondents are clearly trying to highlight their standing in their communities, with 36% frequently sharing local news and events (see Figure IV). Another common social media use is posting basic announcements regarding branch hours, closings, etc. (29%), while less common uses include product promotions (20%) and personal finance advice/articles (14%).

FMS Quick Poll

Responses across asset sizes were fairly consistent, though larger institutions ($500 million and up) reported greater levels of social media interaction with their customers than their smaller peers. It is interesting, however, that even among the larger institutions a “vibrant” level of engagement was hard to come by.

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 in the comments section below or on FMS Connect!

AUGUST 22, 2016
FMS Quick Poll: Using Derivatives to Manage Interest Rate Risk
By Financial Managers Society

For our latest FMS Quick Poll, we decided to revisit a polling question that we last took to the membership almost three years ago, asking how many of our member institutions are using derivatives to help manage their interest rate risk and, if so, what types of strategies they’re employing.

Given the fact that only 90 individuals participated in the 2013 version of this poll – compared to well over 200 this time around – any apples-to-apples comparison of the results would be somewhat skewed. However, the general notion one can draw is that not much has changed – for the most part, FMS members still aren’t diving into derivatives.

Of the 236 respondents in the current poll, only 16% are currently using derivatives, with another 23% indicating that while they’re not doing so now, they are considering it (see Figure I). The remaining 61% of poll participants aren’t using derivatives now and don’t expect to anytime soon.


 In 2013, meanwhile, 23% of respondents were using derivatives and 31% more were considering the possibility, with 45% steering clear altogether (see Figure II).


Back in the present day, the decision to use or not use derivatives was fairly consistent across both banks and credit unions in the current poll, with the exception of those not currently using derivatives but considering them, where 40% of credit unions were thinking about the possibility, compared to only 17% of banks. In terms of asset size, the poll shows that in general, the larger the institution, the more likely it is to be using or considering using derivatives to manage interest rate risk (see Figure III).


 In terms of which derivatives strategies FMS members are utilizing, interest rate swaps stood out as by far the most popular choice, with caps a fairly distant second (see Figure IV). These results, too, were fairly similar to the strategies members were favoring back in 2013.


Is your institution considering derivatives to manage interest rate risk? If so, why are you moving in that direction? If not, what is holding you back? Share your thoughts on this Quick Poll in the comments section below or on FMS Connect!

MAY 27, 2016
FMS Quick Poll: Investment Portfolios
By Financial Managers Society

With interest rate uncertainty continuing to flummox many community institutions and growth prospects still in short supply, questions surrounding how to manage balance sheets in this challenging environment have rarely been more critical.

In a pair of recent articles for the FMS Upda... and an ensuing white paper, we asked several ALM experts to share their thoughts on how community institutions should be positioning their balance sheets right now. So it only made sense that our next step would be to take the question directly to the membership in an FMS Quick Poll.

Asked what percentage of their balance sheet is currently in their investment portfolios, about one-third of the nearly 240 respondents indicated 11-20%, while an almost identical number put the percentage at 21-30%. While both the 0-10% and 31-40% ranges also garnered double-digit responses just above 10% each, every specified range above the 40% level registered 5% or less.

In terms of how members classify the investments making up those portfolios, the results were overwhelmingly and not surprisingly in favor of available-for-sale (AFS) over held-to-maturity (HTM), with nearly two-thirds of respondents indicating that 91-100% of their portfolios are AFS instruments and 70% noting that HTM issues make up only 0-10% of their investment portfolios.

In terms of demographics, respondents were equally represented across the asset size spectrum, with roughly one-quarter of participants from each of four categories – under $250 million, between $250 and $499 million, between $500 and $999 million and over $1 billion. Banks and thrifts made up 80% of poll respondents, while credit unions comprised the remaining 20%.

Investment portfolio trends were fairly consistent across both banks and credit unions, with a few notable exceptions. For example, while 30% of banks under $250 million reported having 0-10% of their balance sheets in the investment portfolio, the corresponding figure for credit unions in this asset category was 0%. On the opposite end of the spectrum, 20% of the largest credit unions ($1 billion +) reported HTM securities making up 80% or more of their investment portfolios, while their banking counterparts at this asset size were steering completely clear of HTM issues at 0%.

In some areas, meanwhile, asset size proved to be a diverging factor regardless of charter. For example, while 22% of institutions under $250 million had 0-10% of their balance sheet in the investment portfolio, only 12% of those $1 billion and more and 7% of those in the $500-$999 million range kept a similarly low percentage in their portfolios.

Thank you to all of those FMS members who participated in this Quick Poll.