The Daily Dividend

News, notes and insights from around the industry

JANUARY 19, 2018
Friday Hot Links
By Mark Loehrke, Editor, Financial Managers Society

Friday Hot LinksWhat’s been happening around the industry this week? Glad you asked…

Community Concerns

In its latest FDIC Quarterly, the agency breaks down third quarter results for the banking industry, and takes an in-depth look at community bank mergers since the financial crisis to evaluate how acquired community banks have compared with their peers over that period.  

 

Being Heard

For its recommendations to carry weight and earn full consideration, internal audit must act as a trusted advisor, establishing and demonstrating a mindset of cooperation and collaboration – not an adversarial relationship. 

 

Return to Insurance

Given the time and resources they’ve spent building up trusted relationships to provide critical risk management and life-planning capabilities, does it now make sense for community institutions to reconsider insurance as a new line of business?
 

JANUARY 18, 2018
The Importance of the Front Line
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

The Importance of the Front LineFrom the call center staff to the teller line, your front-line staff is that essential connection between customers and your organization – solving problems, providing service and being the smiling face or warm voice with which people can connect. Just how essential can be harder to quantify, but new research from the Harvard Business Review provides some insights.

Customers who interacted with an organization over social media were more likely to recommend the organization and willing to pay more to stay with the organization – even if the interaction was a complaint and even if the response didn’t resolve their issue. However, responding to customers who had something positive to say was even more effective in increasing their willingness to pay more.

 

While almost any response raised customer loyalty, the speed of the response played a huge part in most customers’ satisfaction. For example, when an airline responded to a tweet within five minutes, the customer would pay almost $20 more to fly with that airline in the future; and the drop-off after five minutes is steep – customers who got a response within twenty minutes were only willing to pay $3 more to fly with that airline. Here again, the response didn’t have to resolve the customer’s issue for it to increase good will; it seems that simply being acknowledged is the heart of the issue.

 

The detail that sealed the deal was humanizing the interaction by having the customer service representative sign his or her response with a name, or even just initials. Customers had no response to unpersonalized tweets, but would pay $14 more to fly with an airline whose representative signed his or her name.

 

In the end, it seems that as more and more customer service interactions move online, it may be the little things that keep customers coming back.
 

JANUARY 17, 2018
Top Risks for Top Dogs in 2018
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Top Risks for Top Dogs in 2018Many of the biggest challenges in running a business these days transcend location and industry. It seems everyone is struggling with uncertain economic futures, the pace of change and digitalization, and the dangers that come with conducting so much of our business and personal lives online. Protiviti, in conjunction with North Carolina State Poole College of Management’s Enterprise Risk Management Initiative, conducted a survey of board members and executives from different industries and countries about what risks they thought were mostly like to impact their organization in the coming year.

The speed of disruption was the biggest strategic risk for 2018, with 67% of respondents saying it would have significant impact. Start-ups, automation and other major changes are rapidly transforming customer expectations and core business models, leading this risk to jump from #4 last year to the top concern. Another related top risk was resistance to change. Whether such resistance is rooted in a cultural comfort with the way things were or a lack of time and money to implement sweeping changes, holding on to the past can be dangerous. These top two risks combined – the speed of disruption and resistance to change – can render an organization obsolete.

 

The remaining eight of the top ten risks will also sound familiar to bank and credit union executives – from the pitfalls of handling regulatory burden and managing cyber threats to ensuring privacy and information protection and utilizing data successfully. In fact, three of the top risks are steeped in the concern that organizations will simply not be able to keep up – that internal culture will prevent them from staying ahead of risk issues, that faulty succession planning will leave them with insufficient talent and that their existing operational structures will weigh them down.

 

There were discrepancies between respondents about the severity of these risks. Board members found more major risks to fear than the C-suite executives in the survey, where CEOs were less concerned than CFOs. Board members were especially concerned with the consequences of a continuing low interest rate environment, while CEOs were more concerned with the lack of organic growth opportunities; CFOs, on the other hand, feared increases in labor costs and disruptive innovations. This lack of common ground on which risks pose the greatest danger signals that perhaps in-depth conversations between the board and the C-suite are more necessary than ever.

 

JANUARY 16, 2018
FMS Webinar: ALM for the Board of Directors
By Mark Loehrke, Editor, Financial Managers Society

FMS Webinar: ALM for the Board of DirectorsWith so much happening in the economy in general and the banking industry in particular, gone are the days when a board member could get by with little or no knowledge of the nuts and bolts of how his or her institution actually operates (if those days ever actually existed).  

Jim Clarke knows what it’s like to sit on a bank board, and in his FMS webinar ALM for the Board of Directorson Tuesday, January 23, he’ll provide an overview of what board members need to know about the ALM processes of the institutions under their governance – from interest rate risk management to deposit strategies.

 

This webinar is one week from today and is complimentary for FMS members, so be sure to reserve your spot now. (Not a member? Join today!)
 

JANUARY 12, 2018
Friday Hot Links
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Friday Hot LinksThe chilly, quiet, post-holiday stretch of January is a great opportunity to take some time and do some reading you were too busy for just a few days ago.

Consider the state of bank M&A

Supplement your 2018 M&A forecast in the January/February issue of FMS forward with a look back at 2017 – a relatively quiet year for M&A with no mega-mergers, as all but the top five deals came in under $1 billion. Mergers were more focused on thoughtfully expanding footprints than building giant banks.

 

Consider the state of non-cash payments
Following the meteoric rise of e-payment platforms like PayPal and Venmo, major banks created Zelle – their own cashless way to pay. However, while there’s no arguing with the popularity and convenience of payment apps, the latest Fed payments study (conducted in 2016) estimated that $1.6 trillion in cash was circulated that year. In other words, even if cash isn’t a hot topic, it’s not cooling off either.

 

Secure your smartphone
Sure, it’s great to be able to check your work email on your cell phone (or is it?) but if you’re conducting any business from your phone, you’d better make sure it’s secure. Setting strong passcodes, encrypting data and regularly backing up your device are essential steps toward keeping your organization – and your personal information – safe and sound.
 

JANUARY 11, 2018
Digital Difficulties
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Digital DifficultiesIn today’s internet-centric world, community institutions are often getting bypassed by online lenders as more and more people rely on Google to research their mortgages. A new survey from ABA gives a glimpse into how digital lending is changing the landscape and how banks are adapting to these seismic shifts:

·         The biggest challenges in consumer lending were efficiency (72% said it was a challenge) and cost (62%) – problems that some hope digital lending can solve.


·        
The biggest challenges associated with offering a consumer digital lending experience were integration with core systems (60% saw that as the biggest roadblock) and compliance (57%).


·        
82% of respondents said they already use a digital/online origination process for mortgage loans, and 58% said they used one for consumer loans.


·        
96% of respondents said they already offer online loan applications to customers, though that includes everything from a PDF that can be filled out to a fully automated process. Nearly one in five (19%) offer instant credit decisions online, and almost half (47%) offer document uploads.

 

One final note: most of the respondents in the survey (74%) were from community banks with less than $1 billion in assets, proving that digital lending isn’t just for the big banks anymore.

 

JANUARY 10, 2018
2018 To-do List
By Mark Loehrke, Editor, Financial Managers Society

2018 To Do ListYou may be diving into the New Year with a vow to lose weight, eat healthier or watch more television. But according to law firm Akin, Gump, Strauss, Hauer & Feld, if you happen to be sitting on a board of directors, any and all of those otherwise worthwhile pursuits should take a back seat to cybersecurity.

The firm’s list of board priorities heading into 2018 notes that in light of another round of widespread and high-profile attacks in the past year, shoring up a company’s defenses and response procedures should be a crucial area of focus in the coming twelve months. Other topics that the firm thinks will be topping board agendas in 2018:

Corporate social responsibility

Corporate strategy

Managing five generations of employees

Board composition


As this list was largely completed prior to official passage of the recent tax reform package, this topic merits only a speculative “bonus mention” in the report. But given the impact of the approved changes for many companies, taxes will undoubtedly warrant a considerable share of every board’s attention in 2018 as well.
 



Contributors


Mark Loehrke
Editor and Director, Publications and Research
Email: mloehrke@FMSinc.org 



Danielle Holland
President/CEO
Email: dholland@FMSinc.org 




Hilary Collins
Specialist, Publications and Research
Email: hcollins@FMSinc.org