The Daily Dividend

News, notes and insights from around the industry

FEBRUARY 22, 2019
A Quarter for Your Thoughts
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

A Quarter for Your ThoughtsIt may be a winter of massive storms and polar vortexes, but things are looking mostly sunny for the nation’s federally insured banks. As reported in the FDIC’s Quarterly Banking Profile for the fourth quarter, net income and deposits were up while problem banks and charge-offs were down as we wrapped up 2018. Here are some of the major takeaways from the report:

Net income rose $33.8 billion from the fourth quarter of 2017, a year-over-year jump of 133% (when, adjusted for changes to the effective tax rate, would be more in the neighborhood of a less eye-popping but still impressive gain of 18.5%). Full-year net income for 2018 grew to $236.7 billion (up 7%), driven by growth in net operating revenue and lower income tax expenses. 

Net interest income was also up, with growth in interest-bearing assets and wider net interest margins boosting this number by $140.2 billion (8.1%) from the fourth quarter of 2017, as 82.6% of banks reported year-over-year increases.

Total deposits increased by $292.6 billion (2.2%) from the third quarter of 2018, the largest quarterly dollar increase since the fourth quarter of 2012.

The number of banks in the doghouse is down, with the “Problem Bank List” shedding 11 institutions for the period. There were no bank failures in the fourth quarter, and loan-loss reserves and equity capital rose from the third quarter of 2018.

Net charge-offs were down 4.6% from the fourth quarter of 2017, declining by $605.9 million – the first time in three years for a year-over-year drop. Noncurrent loans have dropped below 1% for the first time since 2007.

Community banks also performed well for the quarter, posting a gain in net income of $6.8 billion – a growth of 65.1% (11.2% when adjusted for tax changes). Small loans to businesses were on the rise as well, growing 3.1% over the same period in 2017, while net interest margin climbed to 3.78%. However, noninterest expenses continued to rise, driven largely by salary expenses.

FEBRUARY 21, 2019
Boston Financial
By Mark Loehrke, Editor, Financial Managers Society


CECL implementation.

Profitability analysis.

How many of these topics is your bank or credit union grappling with on a regular basis? In most cases, the answer is probably all of the above – which is why you need to be in Boston this June for the 2019 FMS Forum

Our recently released schedule of topics and speakers for this highly anticipated event includes some of the brightest minds in the industry covering a wide array of the biggest issues facing financial institutions today – including those you see here. So whether you choose to build your Forum around one specific educational track – be it finance, accounting, risk management/internal audit, strategic issues or profitability – or mix and match from among the various sessions, you’re sure to come away with some great ideas to take back to your institution.      

Don’t miss out – reserve your spot today!

FEBRUARY 20, 2019
Master the Disaster
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Master the DisasterThe past two years have brought record-smashing hurricanes and wildfires to the U.S., and mounting natural-hazard losses can end up testing the CFO of any business impacted by these types of events. For executives at financial institutions, managing the ways in which disasters can impact daily operations – from company reputation to potential growth opportunities to shareholder confidence – is part of the job description. Kevin Ingram offers advice on how senior financial executives can weather the storm.

Prepare for interrogation
When business takes a hit from a natural disaster, it’s the CFO – not Mother Nature – who ends up having to answer for the damage. But for many organizations, the resources allocated for disaster preparedness and risk management will prove insufficient when a storm actually strikes. The unpredictable nature of natural disasters may put CFOs in the hot seat to explain why such losses weren’t preventable.

Prepare for the unpredictable
Knowing that he or she will be the one left to provide an explanation when a storm impacts earnings, the CFO should invest in protection against the potential damages from hurricanes, wind storms or floods. For example, research suggests that every dollar spent on hurricane protection prevents $105 in business disruption and property loss. Now that’s a bang for your buck.

Prepare through a valuation perspective
CFOs should reevaluate operations and risk through a valuation-based model, which offers a clearer picture of the total financial impact of a natural disaster, minus any insurance recoveries. Since CFOs are in a better place than risk managers to analyze gaps in a resilience strategy, they should take the lead in protecting the institution’s profitability.

FEBRUARY 19, 2019
FMS Webinar: Balance Sheet Strategy
By Mark Loehrke, Editor, Financial Managers Society

FMS Webinar: Strategic Implications of CECLFor years, institutions have been positioning their balance sheets to be ready for the seemingly inevitable rise in interest rates from their historic lows. But even as the Federal Reserve eventually started to slowly raise rates and it looked as though the long-anticipated steady climb was all but certain, there are subtle signs beginning to emerge that the Fed may now in fact hit the brakes on that strategy, or perhaps even head in the opposite direction. So what do those plans look like now?    

Join us for an FMS webinar on Tuesday, February 26, as Scott Hildenbrand of Sandler O’Neill + Partners discusses the emerging theme of down-rate risk and its impact on the community banking landscape in “Balance Sheet Strategy: Protecting Against Potentially Decreasing Rates.” You’ll come away with some great ideas for tactical balance sheet repositioning, off-balance sheet hedging and liability restructuring, among other ways to potentially approach this developing challenge.   

As always, this webinar is complimentary for FMS members. (Not a member? Join today!)


FEBRUARY 18, 2019
Out on a Limb
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Out on a LimbFinancial institutions are investing plenty to build better digital faces, but comparatively few are putting the same time, effort and resources into their branches – even as data shows that many customers still prefer face-to-face interactions for some transactions, especially opening new accounts. What should financial institutions do when customers demand both a seamless digital experience and a personalized physical experience?

Move away from a transactional mindset
Branches can’t focus on the simple deposit-withdrawal model of yore. Customers coming into a brick-and-mortar building should be met with a teller who operates as a concierge and advisor, rather than a larger, talking version of mobile deposit.

Use the physical space differently
Branches can be used as community outreach. One expert mentions throwing a viewing party for a local sporting event as just one suggestion for how to make the branch an inviting place where people feel connected.

Building in-person trust enables digital innovation
Using the branch to advise and connect helps build the kind of relationships with customers that allow major digital changes to unfold seamlessly. Digital transformation requires using data in new ways that can be worrying to skeptical customers, but when institutions make the effort to build strong trust-based relationships, customers will be more willing to roll with even major changes.

FEBRUARY 15, 2019
Lemons to Lemonade
By Mark Loehrke, Editor, Financial Managers Society

Lemons to LemonadeFrom surveys to pundits to simple gut feelings, there’s a general consensus from a number of corners that the remarkable economic expansion of the past decade is winding down, and that 2019 may present challenges that banks and credit unions haven’t had to deal with in quite some time. While those predictions (and certainly the gut feelings, which as Dickens once noted “may be more of gravy than of grave”) may not come to pass, the growing chorus of mild pessimism can nevertheless serve as a timely reminder that the good times don’t last forever.

And whether that end comes next week, next quarter or next year, it certainly can’t hurt to be prepared for the day when it inevitably arrives. Jim Trautwein from Cornerstone believes that now, in fact, is a great time for institutions to be reviewing various aspects of their technology to make sure they’re ready for when a downturn does, in fact, materialize. Here are four things he recommends doing now:

Head to the clouds
Those institutions that haven’t already done so may want to start looking to move some of their in-house technology infrastructure to cloud applications to take advantage of potential cost savings and other efficiencies.

Hit refresh
Once a slowdown hits, tech updates are likely to take a backseat to seemingly more pressing matters. But keeping an institution’s systems up to date is vital to both ongoing competitiveness and security, so it may make sense to take care of those updates now before the purse strings tighten.

Mind the minimums

Many technology contracts have minimum revenue commitments and cost of living increases owed to vendors – now is the time to review and recession-proof all contracts and agreements to ensure that the institution is getting a fair shake in these arrangements.

Maximize your leverage

If any major tech contracts are up for renewal – especially auto-renewal – be proactive in seeking out the most favorable terms and adjustments for the next agreement. Nothing will be more refreshing amid a coming downturn than knowing your bank or credit union is paying a little bit less or maybe getting a little better treatment thanks to the foresight of working out a solid negotiating strategy well before things went south.

FEBRUARY 14, 2019
Recognizing Excellence
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Recognizing ExcellenceIt’s that time of year again to express your appreciation for someone (or more than one someone) by nominating them for the annual FMS Awards and Scholarship Program. Our aim is to recognize and honor all of the good work our members are doing in the financial industry.

We’re looking forward to acknowledging industry leaders for their dedication and passion through awards such as the FMS Member of the Year, the FMS Chairman’s Award and the FMS Chapter Leader of the Year. We also want to recognize those groups that have made meaningful contributions to their customers, members and communities with the FMS Financial Institution of the Year, the FMS Chapter of the Year and the FMS Community Excellence Award. Finally, we’re reaching out to the next generation of leadership with the FMS Finance and Accounting Scholarship, which will be awarded to an exceptional college student majoring in accounting or finance.

We’re excited to hear about the great work your institution is doing and the bright people responsible for doing it. So start thinking about those around you who deserve to be celebrated and let us know by the nominating deadline of Friday, April 19, 2019.


Mark Loehrke
Editor and Director, Publications and Research

Danielle Holland

Hilary Collins
Specialist, Publications and Research