The Daily Dividend

News, notes and insights from around the industry

FEBRUARY 16, 2018
Planning for Success[ion]
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Planning for Success[ion]Succession planning is a critical part of most strategic plans, but the potent combination of a candidates’ market and the impending retirements of Baby Boomers right now could leave some institutions with more than one pair of big shoes to fill. Here are some tips to help you build a successful succession plan:

1. Have a deep bench

Treat everyone around you like they could be the next leader. Apple’s chief executive Tim Cook said that he sees it as part of his job to prepare as many people as possible to succeed him as CEO. Part of the beauty of this approach is that not only will you have plenty of qualified options when the time comes for top leaders to move on, but this ingrained mentality will ensure that your team shares your passion and understands your strategy on a deep level.

 

2. Don’t set it and forget it
People change plans, of course, but just as importantly the road map for organizations changes all the time. By tapping a few of the best people at your organization and then not thinking about it again until someone suddenly quits or a leader retires, you may find that your short list no longer reflects the best people for the job. Continual coaching and scheduled reassessment means that you’ll always have a well-prepared and well-considered roster of potential successors.

 

3. Plan ahead – way ahead
Give yourself the time to reassess what’s needed from the position, pass on institutional knowledge and clearly communicate the transfer. When you start looking for a successor, be sure to consider how the position has changed over the years and don’t necessarily look for someone just like you. It’s easy to assume that the degree you got and the career path you took are the best qualifications, but take a long, hard look at how the industry has changed. Then when you find the right person, take the time to pass the baton – leaving them with the skills, knowledge and well-honed team they deserve.
 

FEBRUARY 15, 2018
Optimistic, But On Guard
By Mark Loehrke, Editor, Financial Managers Society

Optimistic, But On GuardProfessional services giant EY is out with the 2018 edition of its annual Global Banking Outlook, a wide-ranging look at the state of the banking industry, and the firm pulls few punches when it opens the executive summary of the survey results as such:

“Ten years after the global financial crisis, the banking industry has regained its health and the mood of bankers is more buoyant. They should enjoy it while it lasts.”

Yikes – you can practically hear the ominous “duhn-duhn-DUHN” playing along as you read that last sentence. So why the heavy focus on the clouds to which the silver lining is attached? Building around the statistic that 85% of banks in the survey cite implementation of a digital transformation program as a business priority for 2018, EY points out that such aspirations are easier said than done, and, in fact, that such a transformation is more than a nice goal to have – it is the only way for institutions to survive in a future led by technology and innovation. Among the key highlights to emerge from the survey of 221 financial institutions from around the world:

Balance sheet growth
Despite rising costs, the vast majority of banks expect revenues and profitability to improve over the next three years. Such optimism sounds familiar.

New risks, new focus
Recruiting, developing and retaining key talent was seen as a top business priority by 83% of respondents. Reacting to the realities of the current risk environment, banks intend to focus on cyber skills as they bring on new talent, but EY notes that these efforts shouldn’t shift focus away from looking for the necessary business and risk skills as well.   

Digital maturity 
A goal of digital transformation is one thing – actually getting there is something else. In terms of becoming “digitally mature,” only 19% of respondents expect to be there by 2018, but the number jumps to 62% by 2020.

Tech focus
While 70% of survey respondents plan to invest in technology to strengthen their competitive positioning and build market share in the coming three years, only 37% intend to develop that technology internally. And while enhancing cyber and data security is the top priority for banks, just 58% of respondents are planning to invest in technology to mitigate cyber threats.   
 
Competitive pressure
Adoption of fintech providers for money transfer and payment services rose from 18% in 2015 to 50% in 2017.
 

FEBRUARY 14, 2018
FMS Perspective: Auto Lending at a Crossroads
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

FMS Perspective: Auto Lending at a CrossroadsOne of the 18 for ‘18 topics featured in the January/February issue of FMS forward is the state of auto lending at the nation’s credit unions, with Charley McQueen opining that the renewed growth is likely not sustainable and therefore lending should be closely monitored, if not actively reined in.

Piggybacking on that notion, Alec Hollis from ALM First comes in with similar reasoning for all financial institutions who are counting on auto loans as an important piece of their balance sheets in his new article for FMS Perspectives, “Auto Lending at a Crossroads”. Hollis offers up some hard facts and figures about the rising risks for 2018, noting that auto lending can only be a strong part of a portfolio if the process behind it is equally strong and well considered.

 

So take our latest piece for a spin and learn how your institution can avoid a costly fender-bender in 2018!
 

FEBRUARY 13, 2018
I (Heart) CECL
By Mark Loehrke, Editor, Financial Managers Society

I (Heart) CECLWhat better time than the eve of Valentine’s Day to offer up a timely reminder of the coming accounting standard that everybody just flat-out loves?

While it may be hard to read that sentence without one’s eyes rolling right out of their sockets, love it or hate it CECL is a reality that every institution is going to have to confront sooner or later (preferably sooner). So why not make the task a little bit easier by getting up to speed with some of the best thought leadership that’s been published over the past several months? CECL Central is the convenient and comprehensive warehouse of CECL expertise, information and commentary for FMS members, featuring dozens of terrific articles and resources – including the just-added white paper CECL Threatens Bank Total Risk-Based Capital Levels.

 

As your institution’s preparations continue to gain steam, be sure to check CECL Central often for additional insights like this one. And for even more information on the new standard and what your institution needs to do to be prepared, make plans now to join FMS and Sageworks in Dallas this April for CECL Implementation: Are You Ready for 2018?
 

FEBRUARY 12, 2018
Getting The Worm
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Getting the WormWe all know the early bird gets a coveted prize. But in the case of the upcoming FMS-AMIfs 2018 Annual Conference, we have some better in mind – in lieu of a worm, we’re offering premier educational programming at a discounted rate!

If you’re planning to join us in Tempe, Arizona April 18-20 for this great event, now is the time to get moving, because you have only a few more days to register at our preferred rate – that’s $100 off if you register before Friday!

 

Looking ahead, if you have June 10-12 marked on your calendar for The 2018 FMS Forum in Orlando, Florida, the countdown until that early bird rate expires has begun. You have until March 11 to get our lowest price for this year’s event, where we’ll celebrate our big 70th anniversary and roll out a huge educational slate in the warm Florida sun. So don’t wait – register today!
 

FEBRUARY 9, 2018
Squeezing the Little Guys?
By Mark Loehrke, Editor, Financial Managers Society

Squeezing the Little Guys?While most M&A experts are forecasting a continuation of the steady but unremarkable pace of the past several years for banks and credit unions in 2018, one group of institutions may find the predictions a little more ominous than most.   

Given the driving forces behind most of the deals in the community banking space these days – including competitive pressures, technology demands and succession planning issues – some observers believe those institutions with less than $200 million in assets stand as the most likely to be absorbed or merged away. As it stands, the number of banks in this range has already been more than cut in half over the past dozen years.

This is a trend that was reflected as well in the 2017 FMS industry research study Community Mindset: Bank and Credit Union Leadership Viewpoints, wherein the smallest institutions in the survey – those in the $200 million to $499 million asset range – were the most likely to see the possibility of a merger or acquisition as “very important.” One possible explanation for their interest – in the FMS survey, this group included institutions that were also the least likely to have a solid succession plan in place. In other words, for some small institutions, in many cases a deal to merge or be acquired is the most readily available succession plan to be had.  

 

FEBRUARY 8, 2018
Grounding Cyber Threats
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Grounding Cyber ThreatsFinancial institutions have been fighting the good fight against spammers, scammers and other cybersecurity hazards with employee training, customer education, heightened technological firewalls and myriad other defenses. But a new method for handling cybersecurity advocates blocking threats before they can cause meaningful trouble.

Comparing this to the TSA’s “no-fly list” is an apt metaphor, as it involves analyzing digital traffic for known threats – IP addresses or other identifying factors that in the past have been associated with malicious activity. By gathering intelligence on threats, institutions can address any interlopers with knowledge that goes beyond face value. An email or login attempt that seems relatively harmless can more easily be exposed for the threat it is if it comes from an identified bad actor.

 

This approach has its difficulties, however. One is that the amount of data that must be examined to determine threats is almost overwhelming, and far more than any small organization could hope to manage, although there are platforms and analysis available that can be tapped to kick off a cyber “no-fly” program. The other big problem is similar to one facing the actual no-fly list: a lot of people who don’t belong there can be added thanks to a bad algorithm or a sloppy profiling decision. Theoretically, an innocent customer whose IP address trips a trigger could get locked out of his or her account, then have emails blocked as well when they try to reach out to solve the problem.

 

Despite these pitfalls, a study showed that 80% of cybersecurity experts use this no-fly method in their daily monitoring and protection. In fact, within hours of recent attacks, these kinds of intelligence providers sent out clear and helpful information that allowed organizations to safeguard from viruses and ransomware. Much like the real no-fly list, time and participation could make this method increasingly effective. As cyber threats find ways around existing defenses, companies will continue to try and find new ways to stop them in their tracks.
 



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