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Published by fmsdesign, 2018-04-22 16:52:18

FMS forward: May/June Issue 2018

FMS forward: May/June Issue 2018

MAY/JUNE 2018 | FMSinc.org

A PUBLICATION OF THE FINANCIAL MANAGERS SOCIETY

TOP-DOWN
ANALYSIS

CEOs REFLECT ON THE
CHANGING ROLE
OF THE CFO

IN THIS ISSUE
Make the Most of Your CECL Data
Basics of Blockchain

REACH. INFLUENCE. IMPACT.

WELCOME TO

THE

FORUM

JUNE 10 - 12, 2018

Hyatt Regency Grand Cypress - Orlando, FL

EDUCATION AND
NETWORKING AWAITS YOU.

Experience quality education hand-selected by
FMS members within the areas of

FINANCE
ACCOUNTING
RISK MANAGEMENT/INTERNAL AUDIT
STRATEGIC ISSUES

This tailored approach will not only address the
challenges you face daily but provide executives

like you with the solutions you need.

1948 2018

ANNIVERSARY

Contents MAY/JUNE 2018 | VOL. 2, ISSUE 3

forward, a publication of the 12
Financial Managers Society
1 North LaSalle Street 28 THE FLIPSIDE OF CECL
Suite 3100 Gathering historical data for CECL is
Chicago, IL 60602-4003 22
FMSinc.org | 800-ASK-4FMS a huge undertaking – here are three
Features strategic ideas for making the most of it
FMS EDITORIAL STAFF
DANIELLE HOLLAND 12 TOP-DOWN ANALYSIS 30 THE DIGITAL DYNAMIC
President and CEO Member CEOs discuss the changing Maintaining the retention benefits
MARK LOEHRKE
Editor and Director, role of the CFO and what they’re and cross-selling opportunities
Publications and Research looking for in their top finance of customer relationships in an
CHERETTA CLERKLEY people today increasingly digital world
Consultant, Branding Marketing
HILARY COLLINS 18 THE LEAST WE CAN DO 34 EXIT STRATEGY
Specialist, Publications and Research The recent tax bill inspired Exit interviews are dreaded by all but
LYNDSEY WARNER CAULKINS
Layout and Design many institutions to raise their have the potential to bring enormous
minimum wage, but such a value to an institution
2017-2018 decision is far from universal
FMS EXECUTIVE LEADERSHIP Departments
DARRELL E. BLOCKER, CPA 22 BASICS OF BLOCKCHAIN
Chairman Ignore this emerging technology 6 MEMBER SPOTLIGHT
STEVEN M. FUSCO, CMA, CFM
Vice Chairman at your peril – every institution will Meet Jessica Cummins of Security
JOHN WESTWOOD be feeling its effects in the not-too- Federal Bank
Immediate Past Chairman distant future
8 70TH ANNIVERSARY
Copyright© 2018
Financial Managers Society, Inc. Get to know four FMS members who
All rights reserved.
have been around for more than half
of our 70 years – and take a look at a
list of those working toward that goal

38 SUMMER SCHOOL

Excited about the Forum? Here’s an

exclusive look at what to expect!

42 CHAPTER AND VERSE

Mark your calendars for the East Coast

Regional Conference in Hershey,
Pennsylvania this September

42 ON THE HORIZON

See what’s around the corner

FMS forward | MAY/JUNE 2018 | 3

FROM THE CEO

BY DANIELLE HOLLAND FMS celebrates our 70th anniversary this year. As a
professional membership organization, we enable
our 1,800 members from banks, thrifts, credit unions,
and vendor partners, from across the country to
provide you with a variety of specialized education,
information and networking opportunities.

Whether your winter was mild or fierce, has a diverse membership and our goal is
summer is a great time of year. I am always to provide something for everyone to push
intrigued to learn about everyone’s personal you to be your best and to give you the
goals related to the rugged endeavors they tools you need to grow in your career. Be
plan to tackle during this season. You may be sure to check out the upcoming educational
excited to climb mountains or go on a long bike offerings we have planned on our website.
trip, while others are training for marathons
and triathlons. For all these adventures, it Lastly, I’m so excited that we kicked off
seems that the common denominator is a April with officially welcoming our AMIfs
quest to get better or to at least push out of a members into the FMS fold with the FMS-
comfort zone. AMIfs Annual conference. Not only was
it a great event, but more importantly it
In many respects, I feel FMS has the same solidified that together with FMS we are
approach. During the past several months able to offer members access to more of
during our 70th anniversary year, we have the benefits they love. Personally, I enjoyed
seen a lot of changes in our quest to get getting to meet AMIfs members and hear
better and provide premiere education to their ideas and ways that we can help them
our valued members. In March we held become more engaged with FMS. FMS has
two seminars, The Call Report for Banks progressed in many ways over the last 70
focused on giving attendees an advanced years. Through our dedicated members’
competency in reporting requirements incredible effort and discipline, we have
and essential insights into exactly what built a solid reputation for very high-quality
regulators will be looking for. The other, work, combined with exceptional customer
5300 Call Report Basics for Credit Unions, service. These traits are easy to talk about,
identified the latest tips and insights to but much harder to deliver on a consistent
help you file accurately and efficiently. FMS basis. We couldn’t do it without you! §

4 | FMS forward | MAY/JUNE 2018

EDITOR’S LETTER

BY MARK LOEHRKE A regular feature in FMS forward is our hire them, manage them and rely upon them
Member Spotlight, which each issue gives on a daily basis – their CEOs. In our cover
one of our members a chance to reflect on story this issue, we’ve brought together
his or her work, from the joys and challenges a roundtable of five CEOs representing
of community banking to the general state a variety of institution types and asset
of the industry. Over the course of its run, sizes to offer their perspectives on what
this getting-to-know-you feature has not they’re looking for from a CFO today. Those
surprisingly featured a number of CFOs, Member Spotlights have given us a good
and one of the recurring themes that has idea of what the CFOs are thinking – now
emerged from these profiles is just how we get to hear from their bosses.
much their position has evolved over time.
Speaking of changes and evolution in the
When asked how their role has changed industry, elsewhere in this issue we’re
in the last five years, more and more of exploring the pros and cons of institutions
these CFOs are coming back to the same raising their minimum wage in a tight labor
word that Jessica Cummins hits on in this market, trying to get a handle on blockchain
issue’s Spotlight: strategy. No longer just before it’s knocking at the front door and
the “numbers person” or “bean-counter,” looking for a few productive uses for all
the community institution CFO of today of that CECL data you’ve been amassing
is being asked to do much more of the (beyond the requirements of the new
strategic heavy lifting, and to demonstrate standard itself, of course). We also have a
more than ever how those all-important preview of the terrific education slate for
numbers tie in to the institution’s broader the upcoming 2018 Forum, as well as a 70th
goals and initiatives – from technology to anniversary hat-tip to some of our longest-
the investment portfolio. tenured FMS members.

In other words, CFO in many institutions Finally, be sure to visit FMSinc.org/Research
is not the same job that it was just a this month to check out the data and trends
few short years ago, and the skills and underpinning many of these stories in our
characteristics it takes to succeed in this just-released research study, Community
updated version of the position are likewise Mindset: Bank and Credit Union
not necessarily the same as they’ve always Leadership Viewpoints 2018.
been. Other than the CFOs themselves,
nobody has a better grasp of the expansion As always, thanks for reading – we’ll see
of this changing role than the people who you in Orlando! §

FMS forward | MAY/JUNE 2018 | 5

FMS MEMBER SPOTLIGHT

Bio in Brief

Jessica Cummins

Title: CFO
Institution: Security Federal Bank –
Aiken, South Carolina
Asset Size: $869 million
Years in current position: 4
Years as an FMS member: 5+

There is a family dynamic in community
banking that makes coming to
work every day a little easier.

6 | FMS forward | MAY/JUNE 2018

What is the single biggest banking is our strong commitment to the surround yourself with people who are
challenge facing your institution community. We value relationships and smarter than you so you’ll always be
right now? support our local businesses, families and learning and challenged to improve.
We are experiencing a tremendous amount of initiatives. Employees are typically actively
competitive pressure for loans and deposits – involved in the community, which makes What do you like best about being
not only from local community banks but also them better equipped to truly understand an FMS member?
credit unions and online banks. As you can and meet the needs of their customers. I love FMS Connect. It’s wonderful to have
imagine, the result is a compressing margin. Our bank specifically is designated as a an easy forum for interacting and sharing
Certified Community Development Financial with peers, especially when there are so
Security is another big challenge. From Institution, which means at least 60% of many members who are willing to share!
managing cybersecurity risks to trying to our products and services are provided to
protect our customers from fraudulent wire individuals or businesses that are located in Where do you see the banking
scams and debit/credit card fraud, security underserved markets. It feels good to be a industry in 5-10 years? How do you
keeps us busy. part of something that really improves lives see it changing/developing?
in the community. Technology is changing so rapidly it’s hard
How has your role changed over the to say. I think branches will continue to
past five years? I also love the challenges associated with evolve, probably moving away from teller
My role has become more and more being the little guy. We have worked lines and individual offices to universal
strategy focused. At a small institution, really hard to provide the same technology bankers and remote chatting. There will
management gets to wear a lot of hats. I
spend less time on financial activities and The challenge for community banks is to
reporting and more time on overall strategic find a balance between brick-and-mortar
planning for the bank. for the older generation of customers
while also keeping up with the technology
Where do you expect to be needed for the younger generations.
focusing most of your attention in
the next two to three years? services the big banks can offer but with a probably be more joint arrangements with
Developing ways to grow revenue and much more personal touch. coffee shops or other vendors as well.
control costs, including ways to attract new Fintech companies will continue to enter
customers. We are in a challenging interest What advice would you offer to the market as competition, and we will
rate environment with historically low someone entering the banking have to be ready to adapt. The challenge
margins. Coupled with consumers looking profession, particularly at the for community banks is to find a balance
for cutting-edge technology at no cost to community institution level? between brick-and-mortar for the older
them and rising fraud costs, it becomes a Find a mentor within your organization and generation of customers while also keeping
necessity for us to constantly find new ways learn as much as you can! Take advantage up with the technology needed for the
to increase efficiencies on the cost side and of the open culture. younger generations.
bring in new streams of revenue.
What is the best (or worst) Community banks will hopefully see some
Oh, and of course I’ll be focused on CECL. professional advice you’ve ever regulatory relief in the next year or two, but
received? that might just be wishful thinking. §
What do you like best about The best advice I’ve ever received is to
working in a community institution?
There is a family dynamic in community
banking that makes coming to work every
day a little easier. The structure and culture
is more open than a larger bank; every one
of our employees has access to interact
with the CEO or President if they wish.

Another ingrained part of community

FMS forward | MAY/JUNE 2018 | 7

LONG-TERM PERSPECTIVE70TH ANNIVERSARY

As FMS turns 70 this year, we’ve been
looking back at various pieces of our storied
history – from some of our hilariously
dated publications and collateral to our
one-time hieroglyphic logo. But through
every era, FMS has been, and continues to
be, about its members – the community of
finance and accounting professionals who
share, collaborate and network with one
another to help enrich their careers while
strengthening the foundation of community
banks and credit unions.
While none of our current members can
claim to have been around for all 70 years,
there are plenty of devoted members who
have been an integral part of FMS for
several decades. You’ll find a full list of
those long-timers on the last page of this
piece (you may even find your own name),
but we also want to put an extra focus on
– and extend an extra-special thank you to
– four of our active members who have been
living the FMS mission longer than most.
Here are their stories.

8 | FMS forward | MAY/JUNE 2018

42 41
YEARS YEARS

JOHN FOFF ALAN RENFROE

RELATIONSHIP MANAGER EVP, CFO
Federal Home Loan Bank of Pittsburgh First Federal Savings and Loan Association

Pittsburgh, Pa. Pascagoula, Miss.

John Foff has been a relationship manager for 14 years at the Joining FMS back in 1977 wasn’t exactly going out on a limb for
Federal Home Loan Bank of Pittsburgh and a member of FMS for Alan Renfroe – in his recollection, if you worked for a savings and
42. His story will sound familiar: just hired as a controller at a small loan in the finance or accounting areas back then, it was just what
savings and loan in Philadelphia, the president asked if Foff would you did. But, with the encouragement and complete support of his
attend a dinner meeting with other controllers. That dinner meeting institution, he took to the experience more than most.
was his introduction to FMS.
After several decades as an active and engaged member at both
“I wanted to continue interacting with the other controllers,” Foff the national and chapter levels, Renfroe decided to get more
says. “I thought they could help me with my new duties and that involved by serving on the FMS Board of Directors – a ten-year
they would be a great source for learning how to do the job.” stretch that culminated in his selection as FMS Chairman in 2014.
It was during this period of service that he gained a renewed sense
Looking back over his experiences with FMS, Foff finds that of appreciation for the qualities and characteristics of the FMS
networking and sharing knowledge with his peers has been the membership that initially drew him to the organization years before.
most rewarding and memorable part of his tenure.
“It was a privilege to observe the passion and dedication that the
“I’ve met people from all across the country and we all face the members of the board have, not only for their own jobs but also
same issues,” he says. for FMS,” he recalls. “It is truly a special group of people, and I
was grateful to be able to refer to them not only as fellow board
Foff has also served FMS as a chapter officer, a national committee members, but also as friends.”
chairman, a national officer and director, and he says the more
involved he became the more understanding he gained. During his Over the course of his long career, Renfroe has seen plenty of
42 years, Foff has seen substantial changes, especially in terms of upheaval in the financial industry – much directly impacting
how sophisticated and portfolio-diverse institutions have become. community institutions in particular. But, in spite of all of the
difficulties they’ve endured – as well as the many challenges
“Institutions both large and small use to specialize in one type of undoubtedly to come – he believes community institutions will
lending or one type of deposit,” he says. “The focus of the business continue to thrive in the years to come, providing the latest and
was simple, centered on the local market and what you did best.” greatest products and services to customers with the personal
touch for which they’ve always been known. And he thinks FMS will
Now he says even smaller institutions usually need a much more continue to be a big part of helping them to do so.
complex business model to be sustainable. Asked to gaze into his
crystal ball, Foff sees the number of institutions continuing to shrink “I am a firm believer that in order for community financial
as competition intensifies and institutions move further and further institutions to remain relevant, the next generation of bankers
away from the simpler times he remembers from his early days must be more talented and more knowledgeable than the bankers
with FMS. However, he has high hopes that the Society will stay of this or previous generations,” he explains. “FMS will have
true to its roots as a provider of the best education for financial the opportunity and will be perfectly positioned to provide that
professionals, and thus be to others what it was to him in 1976 – a knowledge.”
place to learn from his peers.

FMS forward | MAY/JUNE 2018 | 9

40 39
YEARS YEARS

FRANK STROMBERG MARY LOU SCALESE

VP, CFO EVP, CHIEF AUDITOR
Community Savings Bank Customers Bank
Wyomissing, Pa.
Chicago, Ill.
Finance and accounting professionals join FMS for a number of
Frank Stromberg found FMS through his local chapter in Chicago reasons, including access to top-flight industry education and
in 1978. Brought on as a controller at Community Savings Bank, he thought leadership. But perhaps the number one member benefit
started his career simultaneously with his FMS membership – he’s that most come looking for and many cite as their compelling reason
been a part of both for forty years now. to stay is the ability to network and interface with a community of
like-minded peers.
“The president at the time thought that FMS was something that
would be worthwhile for me to be involved in, so I went to some That’s what Mary Lou Scalese was looking for when she joined the
local chapter meetings,” says Stromberg. Philadelphia chapter at her CFO’s suggestion back in 1979 – a group
of auditors who spoke her language and understood the day-to-day
If the president of his bank got him in the door, FMS kept him coming issues she was facing in her work. Nearly forty years later, she
back. still finds those connections through FMS to be among the most
significant and rewarding of her career.
“I thought the education FMS offered was very good, timely and
thorough, and of course the chance to interact with peers and “I’ve met so many great internal auditors through FMS over the
develop a network of associates was excellent,” says Stromberg. years, many of whom have become friends,” Scalese says. “Getting
out there and networking with other auditors and attending the
His favorite memories are of the annual Forums. He enjoyed the educational events really helped me to expand my knowledge.
chance to visit a new place and get away from the desk for a few I also got more involved in the chapter and on the internal audit
days, coupled with a rigorous educational lineup. But even more council, which helped me to develop my leadership skills – that was
than that, Stromberg has used these meetings to eliminate blind invaluable for me.”
spots.
As the industry has undergone such dramatic changes over the
“I always thought that was a good way to check that I wasn’t past decades – from rapid technological expansion to the decline
missing anything,” he says. “If I went and listened, if there was of physical branches to the explosion of new regulation – and
something critical on the horizon that I wasn’t aware of, I would find new risks have emerged, Scalese has found the education and
out about it.” peer networking she gets through FMS to be even more essential
to staying on top of it all. And as the changes continue to mount,
Now CFO at Community Savings Bank, Stromberg continues the whether centered on artificial intelligence or data analytics, she’s
tradition of sending his controller to the Forum almost every year. sure that FMS will continue to serve its members and provide that
But while that part of the job remains the same, he sees regulation crucial outlet for professional education and networking.
as a heavy burden that dogs everyone in the industry.
“FMS started out as an organization mainly for thrifts, but as the
“When I started here, there was one examination – Safety and industry shifted it started to encompass commercial banks and
Soundness,” he says. “Now you have to spend so much time on credit unions as well, which was an important change designed to
compliance that it gets in the way of you really being a banker and keep it relevant and viable,” she says. “So I have no doubt that as
being able to bring new products to your customers.” technology continues to impact the industry, FMS will again adapt to
meet the changing needs of its members.”
Over the next few years, Stromberg expects the industry will see
more consolidation as smaller institutions struggle with the costs of
doing business. But not all change is bad – Stromberg now enjoys
checking FMS Connect as another way to check in with peers and to
make sure he’s looking out for more potential blind spots.

10 | FMS forward | MAY/JUNE 2018

CELEBRATING MILESTONE MEMBERS

• 40+ Years • Robert Erdely Frank Atalig Jessica Cummins Melissa Hiestand Jamie McReynolds Jim Shaw
Paul Feeley David Atkinson David Cunningham Holly Hobson Christy Merecka Kelly Shore
Victor Caputo Raymond Ferneding Peter Badger Dustin Cuttriss Brian Hoggatt Richard Meyer Linda Sim
John Foff Brian Finneran Nancy Balzer Cindy Dabney Mark Hollar Bennett Meyer Ellen Simpson
David Gray Daniel Gildea Christopher Bannwolf Ricki Dagosta Emily Hollis Brad Michelsen R. Lamar Simpson
Marvin Hiddleson Amit Govil Susan Barker Alicia Davis Shea Hooten Linda Milkowski Randy Sizemore
Timothy McCue Rick Greezicki Travis Barkve Toni Lee Davisson John Hopkins Michelle Miller Stephanie Smith
G. Edward Oliver Roger Harbeson Ronald Baron Joseph De Vito Lynn Hopkins M. Paige Miller Jeffrey Smith
Alan Renfroe Michael Harleman Peggy Barsten Brett Decker Kenneth Horton Melvin Miyamoto Kelly Smith
David Rinehart Shawn Honan Todd Battle Linda Deen Dan Hosler Joseph Mizerak Steven Smith
Frank Stromberg Brenda Hudson-Nelson Carrie Beahlen Sondra Del Mastro Charles Howell James Montagne Sidney Smith
Michael Trokey Daniel Hunter Douglas Bean Marcia DeMino David Hrycko Fred Moore David Solis
Dwight Wilson Michael Indiveri James Beaver Debra Dennis Steve Huber Brian Moore John Spanich
Mark Ingalls Maureen Beilman Edwin Depenbrok Charles Hughes Kimberly Moyer Valerie Spindler
• 30+ Years • Jeff Isom Michael Benson Paul Deponte R. Clay Hulette Patricia Muldoon Aris Stathis
Ronald Jasion Bruce Benyshek Gregory Derderian Jennifer Humcke Lauren Murphy J. Donald Steele
Stephen Anglin George Johnston Randy Bernard James Derrig R. Boyd Hunter Tom Nakano Teri Stelly
Richard Barker Robert Kafafian Tony Bernardi Robert DesMeules Kevin Hunton Cynthia Nelson Kenneth Stephon
William Bocek Mark Kellett John Bevenour Patricia Diedrich Stephen Hyde Katherine Nemes Bruce Stevens
Robert Bogenschutz Bonnie Klein Jill Billingham Christopher Dinwiddie Joey Ingman Cuong Nguyen Jim Stevenson
Richard Burgart William Kline Sherri Billings Deborah Donaldson Aniceta Jackson William Niemczura Courtney Stiven
Michael Deelo Curt Kollar Kirk Billingsley Gregory Doner John Jacoway Cindy Nierode Michael Stocko
Mary Ellen Doster Bret Krevolin Leslieanne Black Randall Dozeman Susan Janus Andrea Noonan Mark Stroud
Mark Edwards Janice Latulippe Stephen Blake Doug Drury Marie Jefferson Daniel O’Brien Dan Stubblefield
James Genoy Dennis Marlo Terri Blanton Kyle Duckers Melissa Jerry C. DeWayne Olive Douglas Sturges
Judith Gonsch William Martin Matthew Blejwas Sonia Dumbleton Thomas Johnson Melissa Ott Joseph Sullivan
Gary Heaton Kevin Martin Gina Bloomfield Rohan Edwards Dawn Johnson Richard Padula Jan Summers
Ronald Holbert Deborah Maw Karen Boccaleri Anthony Eramo G. Eliot Jones Tim Peacock Monica Swaagman
Thomas Kemly John McCormack Mark Boehmer Richard Erickson Ann Jones Jeff Peatrowsky Leonard Szwajkowski
Percy Keynton William McGuire Ronald Boehnlein Maria Mercedes David Jurczynski Christine Piano Todd Tallman
Robert Lowry Bradley Meredith Robert Bogart Escotet Maria Kachmar R. Michael Poland William Tawney
Ferdinand Martino Sara Mikuta Steven Bohn Robert Falso Thomas Keenan Manav Prasad Todd Taylor
Ralph Nakatsuka Glen Miller Mike Boisvert Ginger Fennell Michele Keith Philip Prescott Shawna Thomas
Albert Rietheimer Rita Myers Robert Bond Robert Fertitta Joseph Kennedy Jeff Price Robert Tissue
Rick Rosinski Alfred O’Connell Louise Bonvechio Brenda Fiorante Robert Kenney Darrell Rains Robert Tobben
Mary Lou Scalese Glen Olpin Douglas Borchardt John Fleener Ross Kerns Lauren Ranalli Diana Tone
Mark Schreiber William O’Neil Vince Bordano Katherine Floit Michele King George Rapp Carlo Toscano
Doug Schrock Gerard Perri Rita Bostick Jean-Marie Florestal John Klimowich Sue Reid Karen Trainer
William Taylor John Peters LaRee Bounds Rachel Foley Kimberly Kling Marcia Reid-Grant John Udvare
Donavon Ternes Richard Plummer Thomas Bowers Timothy Foreman Wendy Koford Orly Reif Kathryn Underwood
Kellie Veneman Jane Rey Lisa Boylen Norman Fradley Dave Kohlmeyer Wendy Reiter Kurt Van Kalsbeek
Karl Zalazowski Donald Reynolds Sharon Boyles Michael Frederick Stephen Komir Francie Reppy Paul Van Zee
Richard Rowe Janet Brandtonies Thomas Frese John Kopecky Robert Rey Wes Veach
• 20+ Years • Cindi Rupp Rand G. David Brewer Susan Frye Charlie Kopycinski Gary Rhodes Pamela Verkler
Paul Rutkowski Herbert Brinkman Steven Fusco Bruce Kotarek Linda Richardson Laurie Vitzthum
Alberto Alemany John Sabol Gary Broady Romuald Gac William Kragh Brad Richardson Ronald Wagner
Douglas Allen Paul Sanchez David Brock Eric Gardey David Krause Jeanne Richter Jill Wagner
Laurel Allenbaugh James Sarvela Jeffrey Brotherson Michael Gargaro Stacy Krempasky Bryan Ridgway Brian Watterson
Lisa Ammon Jeffrey Schnorbus Dean Brydon Sydney Garmong David Kudo Lynn Riley Lynn Wehner
Jeffrey Beerman Glenn Schwarz Neil Burke Michael Garrett Joseph Lamendola Jane Rogocki Robert Weidler
Kathleen Bernards Donald Sherman Karen Burnett Edwin Garside Dennis Leahy Diane Rosler John Westwood
Randy Bjork Robert Shula Kevin Burson James Gasior Stan Leicester Troy Rusniak Thomas Whitaker
Darrell Blocker James Speranza Wendy Butler Fred Gennari Kenneth Levey Tim Ryan Amy White
Ron Bowden Jeffrey Stopko Tom Caldwell Erwin Gerbavsits Mary Beth Liddle Lisa Saenz Lee Whitehead
Raffaele Branca Ronald Thigpen Denise Carbone Lisa Gethers LeRoy Lindenfelser Leo Sagan Michael Willhelm
Daryl Cady Diane Turner Russell Carothers Kanwal Ghaey Jeffrey Lorentson Randal Sahm Brenda Williams
Domenick Cama Kevin Tweddle John Carrozza Alen Gibbons Sharon Lorman Kamil Sakici Julie Wilson
Christopher Cleven Ferdinand Viaud Douglas Ceto Troy Gilstorf Renee Lovell Matthew Salfer Amanda Wood
Jeff Coats Richard Wagner Christine Chabot Marsha Gingue Kathleen Luzik Catarina Salgado Steven Woodard
Joseph Coderre Kenneth Walter Charlene Chadwick Linda Girard Kenneth Mackenzie Jerry Salinas Tanda Woods
Christopher Cook Dale Zehring Irene Chavez Robert Glazier Ann Main Michelle Salvadore Jeff Wright
Ron Copher Daniel Zona Loretta Chory John Glynn Robert Malehorn Bonnie Sands Limin Wright
Brad Crain Stephen Cimo Dean Goewey Maura Malo Tunisia Santos Kenneth Wuebker
Robert Currie • 10+ Years • Nicholas Clark Eric Golden Jose Marina Joseph Sapienza Catherine Yankello
Stephen Davenport Julie Clausing Laurie Grabow Rosalinda Marquez Tim Saracini Eric Zimmer
Mark DeBiasio A. Richard Abrahamian David Cohen Jeff Green Josie Marquez Wes Schaefer List supplied by
Terri Degner Sharon Adams Kelly Coletti David Greenfield Bryan Marshall Tony Schoen member database.
James Dellinger Tell Alessio Dennis Connolly R. Randy Guemple Gus Mattia Timothy Schoettmer Not on this list and
Robert DiBella Traci Allen Chris Cooper Craig Hahn Gregory Matuson Michele Schuh should be? Email
Dennis Doolin Brian Amundsen Rex Copeland David Hale Tom McCarthy Gary Sears [email protected]
Jon Eberle Audrey Amundson Laura Criscione George Harris William McCarthy Mark Secor to let us know. §
Paul Eckroth James Anderson Karen Critelli William Harvey Clyde McFarland Robert Segal
Kirk Emerich Jon Ansari Michael Crofts Todd Heilman Frank McFarland Richard Seibel
Dan Arndorfer Graciela Cruz-Beyer Barbara Heinemann Anne McKenna Robert Selitto
William Cuellar Thomas Helfrich David McNab John Servos

FMS forward | MAY/JUNE 2018 | 11

COVER FEATURE

TOP-DOWN ANALYSIS Community bank and credit
union CEOs discuss the changing
role of their top finance people,
and reflect on the skills and
characteristics that today’s CFOs
need to bring to the table.

“Yes, and…” is a hallmark strategy of improvisational comedy,
wherein a performer is encouraged to take what his or her partner
has supplied in terms of setting, mood, parameters, etc., and then
build upon it to keep the scene moving forward. A similar line of
thinking could be applied to the current state of the CFO.

Long seen as simply “the numbers person,” the CFO is almost
certainly something much more in most community institutions
these days. The basic blocking and tackling of the balance sheet
still takes top priority, of course, but the “yes, and…” for CFOs
now likely extends just as much into areas such as organizational
strategy and technology.

In light of this significant shift in the scope and responsibility of the
position, we decided to revisit a roundtable format from several
years back for a refresher on what constitutes a good bank or credit
union CFO in the eyes of the people hiring and managing them. What
do CEOs see as the “yes, and…” for their CFOs? If the numbers are
a given, what are the other skills, characteristics and competencies
that CEOs are looking for from their top financial people in an
evolving industry?

FMS sought to find out by canvassing a panel of member
presidents and CEOs to get their views on the changing role of
the CFO.

12 | FMS forward | MAY/JUNE 2018

FMS forward | MAY/JUNE 2018 | 13

JON CONKLIN How have your expectations for the where you’re just dealing in numbers and not
CFO role changed over the last five always sure how the business is affected
President and CEO years? How has the job changed? or how those numbers are being driven. The
Woodlands Bank – Williamsport, Pa. CFO certainly has to do the things that are
JON CONKLIN: Having occupied the necessary for the purposes of the SEC and
$402 million in assets CFO position a little over five years ago, reporting, but I think the nature of how we
my expectations of the position are not get the numbers is more important for a CFO
ROBERT FERTITTA much different than they were then, in today than just reporting on the numbers
that I have always expected the position themselves. The CFO needs to play a role
President and CEO to be flexible and to evolve along with in helping the business lines to accomplish
Navigator Credit Union – Pascagoula, Miss. the environment in which we operate. things, not just by saying what we need, but
The job will always be one that provides by helping them figure out the pathways to
$344 million in assets the financial framework to what we do build our business.
every day and to the strategic initiatives
BILL KOEHLER employed in order to achieve continued KATHRYN UNDERWOOD: Over the
growth and profitability; the change is in years, the CFO role has evolved from the
CEO the type of knowledge and understanding traditional responsibilities of asset- liability
AllSouth Federal Credit Union – Columbia, S.C. necessary in order to make those financial management and managing financial reports
projections, analyses and reporting to being more of a strategic partner in the
$808 million in assets accurate and relevant when utilizing them organization. Changing regulations continue
in an ever-evolving industry. to place greater demands on the CFO, who
ANTHONY LABOZZETTA now needs to have a greater understanding
ROBERT FERTITTA: Just as our business of other departments in the bank, systems
President and CEO models are rapidly changing from market and the external environment. The CFO of
Sussex Bank – Franklin, N.J. disruption and regulation, the role of the yesterday’s backroom is far more externally
CFO is changing as well. It is becoming focused today working with shareholders,
$956 million in assets increasingly important that not only does regulators, auditors, community members
the CFO have to manage the changes and other employees.
KATHRYN UNDERWOOD that affect his responsibilities on a day-
to-day basis, but he or she also needs to What skill set and personal
President and CEO identify strategies in coping with emerging characteristics are you looking for in a
Ledyard National Bank – Hanover, N.H. technologies that will continue to change CFO these days?
the way we do business. Simply put, CFOs
$482 million in assets have to be more knowledgeable about JON CONKLIN: The ideal skill set for a CFO
changes in regulations and technology just in my opinion is one that is not an easy one
14 | FMS forward | MAY/JUNE 2018 to keep pace. to find. Obviously, he or she would need to
have the requisite education and experience
BILL KOEHLER: My overall expectations in order to be able to do the job. The difficult
of the CFO have increased significantly over part is finding someone whose personality
the last five years. Prior to the financial characteristics are such that they possess a
crisis, operating a financial institution unique combination of left-brain and right-
was a lot less complicated. Today’s CFO brain thinking. There needs to be the ability
has to possess a strong understanding to be rigid and rules-based but also at the
of accounting guidelines, regulations, same time an ability to think outside the box
technology and operations. As with most and to be creative and innovative in his or her
industries, the banking industry is changing thinking. There also needs to be that ability
rapidly and it’s challenging for the CFO to to focus on the day-to-day reporting and
keep up with the evolving landscape. management aspects of the job, while at the
same time being able to envision where the
ANTHONY LABOZZETTA: The job is company needs to be 10 or 15 years down the
evolving. Five years ago, I think I had a road in order to stay relevant and successful,
different expectation from being a former and to see the broad strategic goals that
CFO myself. The CFO role today I think is need to be achieved in order to pave the road
more of an enabler position than what some to that destination.
might call a bean-counter or autopsy position

ROBERT FERTITTA: Some of the most important personal With the growth in regulation,
characteristics have not changed – the CFO must continue to technology and our investment
demonstrate the highest levels of integrity, honesty and trust. portfolio, our CFO is taking
However, there is little doubt that CFOs need to be more in touch on a greater role in managing
with advancements in payments, regulations and technology, as other areas of the organization.
well as in developing organization-wide communication skills.
Increasingly, more CFOs are filling vacant CEO positions; therefore, Kathryn Underwood,
the CFO needs to have a better understanding of the organization Ledyard National Bank
across all business units.
KATHRYN UNDERWOOD: Our CFO needs to be able to collaborate
BILL KOEHLER: I expect the CFO to have a college education with with me and other senior team members, manage risk, be a strong
a degree in accounting and several years of experience working strategic thinker and be entrepreneurial. He needs to be credible
for a financial institution. I also like to see CPA certification both inside and outside of the organization, as he is often talking
and several years of experience auditing financial institutions. with shareholders. He also needs to understand investments and
In addition to these professional qualifications, the CFO needs the complexities in driving effective return from this portfolio, as the
to be cooperative and team-oriented, and should possess the use of derivatives and more complex investments has proven to be a
communication skills necessary to carry out his or her duties and strong revenue generator for the bank. 
accomplish our strategic objectives.
Do you believe the CFO role has become more strategic?
ANTHONY LABOZZETTA: First and foremost is content of
character. I want someone who truly believes in a set of values and JON CONKLIN: Absolutely! I view the CFO position as one that
guiding principles, and someone who’s all in – there’s no time for can provide the financial framework for success. He or she should
half measures. A CFO is my right arm, so we need to be on the same be the one to take a new or innovative idea for success and figure
page in terms of how we run the organization and what we do. out a way to employ that idea within the financial and regulatory
framework in which the company operates. In order to do this,
Finance people tend have a personality that’s more detail-oriented this individual needs to be able to understand the strategy behind
and more structural or analytical, but I want a CFO who has some the idea in the first place and to be able to see clearly what we’re
of the more outbound and people-oriented skills as well. In our looking to achieve by the strategy being deployed. This will allow the
culture we want to treat our employees the same way we treat CFO to add his or her own ideas that could ensure a greater level of
our customers, so we have to have people in leadership roles who success at the end of the day.
think of the employees as clients and try to make that connection
to create a great experience – it’s no different than what I would An example that comes to mind in our company would be the
expect my business development people to do on the outside for creation of and introduction of a high-interest rewards checking
our customers. I want someone who thoroughly gets what we’re product in the prior year. Our CFO was intimately involved in every
trying to accomplish in terms of the customer experience, and who aspect of the project – from the initial evaluation to the product
understands how integral that is to the success of our business. design to the technical component to marketing, employee training
and roll-out. His involvement and deep understanding of the product
The CFO needs to play a role and its objectives was critical to the success of the project.
in helping the business lines
to accomplish things, not just ROBERT FERTITTA: From a technology perspective, the CFO needs
by saying what we need, but to develop long-term strategies for dealing with our short-term, ever-
by helping them figure out the changing market, and to prepare for more changes in the near term as
pathways to build our business. well. Additionally, I can’t help but think that with the ever-increasing
regulatory burden, CFOs are being distracted from strategic thinking,
Anthony Labozzetta, Sussex Bank and having to devote more time and effort to tactically adhering to
changes in accounting standards and regulations.
Having someone who is linked along the way, and who doesn’t
operate the finance area as a silo is a critical attribute as well. Of BILL KOEHLER: The CFO role has definitely become more strategic
course, you want someone who can incorporate all of these things in our organization. The CFO plays a key role in developing,
with a great financial mind, solid leadership skills and a vision for implementing and monitoring our liquidity plan, investment policy,
where the institution needs to go – that’s what makes for a very asset-liability management policy, annual budget and financial
powerful and compelling CFO. forecasts. These responsibilities require a thorough understanding

FMS forward | MAY/JUNE 2018 | 15

of our organization, and have a significant impact on our future to achieve efficiencies in operations, to constantly improve the

direction and performance. customer experience and to fight the daily battle of protecting

the company and customer assets and information in terms of our

ANTHONY LABOZZETTA: Aside from CEO, there is no role cybersecurity initiatives.

that expressly dictates that you have to be the strategy guy –

ultimately your capabilities either will or won’t make you that. But ROBERT FERTITTA: As the previous CFO, my responsibilities

the CFO I’m looking for is someone who has that vision and has included IT for several years, and therefore it was a more involved

that strategic thinking. role in technology beyond that of typical accounting/finance/

payments. With our chief information officer currently being part

Sometimes the business lines have a difficult time linking what of the executive leadership team, there is better and continuous

we’re doing all the way through to the numbers and the returns and high-level communication across all of the executive leaders of

the values, and what it all the business units. Hence,

means. A CFO who is more I can’t help but think that with every member of the ELT
entrepreneurial and who plays a more important role

understands the softer side of the ever-increasing regulatory in technology decision and
things can link all the planned burden, CFOs are being distracted initiatives.
vision back to how it rolls up

into the ultimate delivery of from strategic thinking, and BILL KOEHLER: In our
value to our shareholders. In having to devote more time organization, the CFO is
addition, a good CFO knows involved with technology
and effort to tactically adhering
not to lead with numbers. to changes in accounting decisions, but most of the
Numbers on a piece of paper standards and regulations. responsibility falls on our CIO
mean nothing – you have to who reports to the CEO.
build those other things and

illustrate that vision, and the Robert Fertitta, Navigator Credit Union ANTHONY LABOZZETTA:

numbers will follow. When the Our IT department reports to

CFO starts to recognize that, the CFO, but it’s not because

he or she becomes a wonderful strategist and partner. we said it belongs to the CFO – it’s because of the person we have

in that role. If it was someone who didn’t have the attributes and

KATHRYN UNDERWOOD: In my absence, our CFO is the go-to entrepreneurial sense that our CFO has, then we probably wouldn’t

person in times of urgent need. We look to him to help control have it set up that way.

costs and to help identify profitable sources of revenue growth.

For example, he serves on both our new product and IT steering IT has evolved so much. Banks aren’t just places with money in a

committees, and he is directly involved in exception pricing for vault and people walking in to get it – we’re basically moving things

corporate relationships and all product pricing.  around with computers and smartphones. So you need someone

who understands that paradigm shift, and having the CFO in that

With the growth in regulation, technology and our investment role is powerful because they really get the critical nature of the

portfolio , our CFO is taking on a greater role in managing other spend. If you don’t have a CFO who’s really linked to the business

areas of the organization.  lines and knows what they need, you could fumble around with

some poor investments that are done for purposes of financial

How much of a role does your CFO play in technology consequences as opposed to business needs. My CFO gets that – he

decisions and initiatives? can tie those IT needs back to the organizational vision and make a

better determination than just how much something costs.

JON CONKLIN: Because we are fortunate to have an extremely

talented CIO in our organization, the involvement of our CFO in KATHRYN UNDERWOOD: Our CIO reports directly to the

those decisions and initiatives may not be as involved as they CFO, which requires him to become more tech savvy and to

would be in other organizations. However, the two positions understand the impact of technology on our organization – including

work together closely when it comes to allocating the resources cybersecurity. His skill set is needed to help manage risk, manage

necessary to the technology effort in order to continue to adapt costs, manage projects and to identify ROI on tech investments. §

16 | FMS forward | MAY/JUNE 2018

TChFe OPatTh fOromCEO Four of the CEOs on our roundtable weren’t and other financial professionals helped
just speaking from the perspective of prepare me in developing the organizational
managing and working with their current communication skills necessary for the
CFOs – they were that CFO at one time in CEO role. However, what has really served
their careers. So how do they believe that me well as CEO has been my early work
experience ultimately helped prepare them experiences in the retail industry, college
for the top job? studies in management, professional
development and many publications on
JON CONKLIN: I was a CPA in public management and successful organizations.
accounting for ten years prior to getting Let’s face it – working in consumer finance,
into the financial services industry, which we are really in the retail business. So what
exposed me to many different types other experience would better serve us in
of organizations across many different consumer finance?
industries. I was able to see the good, the
bad and everything in between, which was BILL KOEHLER: I worked in public
invaluable when I came into the community accounting for six years auditing financial
banking arena as a CFO. institutions before taking a job as a CFO
with a financial institution. My CFO
I always tell people that finance and experience was invaluable and played a
accounting is the backbone of all business, critical role in preparing me for the CEO role.
and that a strong understanding of both is a As CFO, I was exposed to a broad range of
ticket to do whatever a person wants to do new experiences working with the different
in the business world. In the role of CEO, it departments and participating in decisions
is imperative to make informed and rational that impacted the overall organization.
decisions, and I strongly feel that having that
solid foundation in accounting and finance ANTHONY LABOZZETTA: You don’t
is critical to gathering and processing the prepare to be a CEO – there’s no one
necessary information, and then being able to playbook to follow. My overriding message
decisively and confidently act and execute on to CFOs is that the day you become CEO, you
that information in the proper fashion. have to be your own person. You can learn
things from other CEOs, but you cannot
It seems like we’re seeing more and more follow somebody else’s playbook and expect
CEOs rising to that position from the CFO to duplicate that success. A CFO can make a
ranks, and it makes complete sense to good CEO, a chief lending officer can make
me given the increased complexities of a good CEO – it’s more about the individual
navigating the financial and regulatory desiring the role and understanding the role.
landscape – although I fully admit to being It’s about who you are and how you think.
just a little bit biased.
The CFO can be in a prime position to move
ROBERT FERTITTA: While my degrees into the CEO role, but you have to have a
included an emphasis in finance, my desire to be something different than a CFO.
background and experience was in You have to be more abstract and have more
accounting. Just a few months after cognitive sense and have more adaptability
being hired as accounting manager, I was as a CEO – in the finance world, things tend
promoted to CFO and served in that position to be more structured and repeatable. For
for 15 years. While there’s no doubt that that reason, it can be difficult to go from
we are all a culmination of our work and life CFO to CEO, which is why I think it’s helpful
experiences, I’m not convinced that serving to have a steppingstone like the COO role in
as CFO in and of itself prepared me for my between. Some might see that as a lateral
role as CEO. move, but the skill set that you get as a
COO is really helpful for someone looking to
Interacting with the board of directors, staff become CEO.

FMS forward | MAY/JUNE 2018 | 17

WE CANTHE LEAST DO

IN THE WAKE OF A MAJOR TAX CODE OVERHAUL, MANY FINANCIAL INSTITUTIONS
ARE CHOOSING TO BOOST THE MINIMUM WAGE FOR THEIR ENTRY-LEVEL EMPLOYEES.

18 | FMS forward | MAY/JUNE 2018

We got a pretty extraordinary
response internally. We raised
the minimum wage to $15 and
we gave out one-time bonuses,
and I received a lot of notes
that were absolute tear-jerkers.
You see what a difference it
makes. It was very gratifying
and very eye-opening and
I’m very glad we did it.

Jim Engel, President and
CEO – Aquesta Bank

On December 20, 2017, President Trump signed the subject of debate for a long time, In the banking sector, $820-million Inland
into law the first major overhaul of the U.S. tax predating the tax reform bill and extending Northwest Bank (INB) joined the party
code in more than thirty years, reforms that far beyond the banking world. At the earlier this year, raising the minimum wage
significantly lowered the corporate tax rate for beginning of 2018, 18 states and 20 cities to $15 an hour for its employees throughout
many businesses across the nation. raised their minimum wage, with the Washington, Oregon and northern Idaho.
rate in Maine jumping by a full dollar. President and CEO Russell Lee says the
In the wake of these cuts, many institutions Washington, meanwhile, raised its minimum wage move was a change the
turned around and passed those savings minimum wage to $11.50 per hour, which is company was mulling over long before the
along to their employees, seizing the the highest in the nation. tax bill, but the reform provided the money to
opportunity to invest in the talent behind finally move forward.
the organization. Some gave out one- Among those companies that have raised
time bonuses. Others reduced employee their minimum wage for hourly employees “Minimum wage has been a hot topic in
insurance premiums, increased their 401(k) recently, Wal-Mart, Target, Costco, and Washington for a while,” Lee says. “I think
contributions or pledged increased resources CVS stand as some of the most prominent the fact that companies are voluntarily
to employees’ continuing education and names, with some taking the action in addressing it is a good thing. The response
development. And some raised their wages response to the tax bill and some having has been very positive for us, both internally
for hourly employees, with several bumping had worked on the issue for years before. and externally.”
their minimum wage to $15 an hour. Wal-Mart’s move was made early in 2018
after the tax reform bill passed, while the Jim Engel, president and CEO of Aquesta
THE BARE MINIMUM company also expanded employee benefits Bank, says his $400-million community
and handed out bonuses. institution in North Carolina had a similar
Raising the minimum wage has been

FMS forward | MAY/JUNE 2018 | 19

experience when it was able to give back to “In the near term, raising the minimum retain good talent long enough that they can
employees in the wake of the tax bill. wage should bolster retention and service afford to stay with us for a while and progress
quality,” says Anirban Basu, an economist through the company,” he says. “I’m pretty
“We got a pretty extraordinary response and the chairman and CEO of Sage Policy sympathetic to how difficult it is to be a teller.
internally,” he says. “We raised the Group. “This has certainly been the story You have to be really patient and hang in
minimum wage to $15 and we gave out at Wal-Mart. Bonuses and other forms of there to get some traction in the business.”
one-time bonuses, and I received a lot of enhanced compensation support retention
notes that were absolute tear-jerkers. You and recruitment.” Lee further notes that raising retention and
see what a difference it makes. It was very lengthening tenures isn’t just a positive
gratifying and very eye-opening, and I’m In the case of Aquesta Bank, the institution internally.
very glad we did it.” has been focused on expansion, and its
decisions in the wake of the tax bill were “Customers benefit too,” he explains.
“We hope in the long calculated to attract new talent, as well as “They’ll get more consistency on the front
run that this will help us to keep the good employees it already had. line and a better customer experience.”
retain good talent long
enough that they can “We need to have good, experienced people A BOUQUET OF OPTIONS
afford to stay with us and we want to pay them accordingly,”
for a while and progress Engel says. “It’s becoming more and more Broadly, the tax bill has been hailed as a
through the company. difficult to hire the right people with the boon to banks, but not every institution has
I’m pretty sympathetic right skill sets.” seen the same results or shares the same
to how difficult it is to be circumstances. While many banks suddenly
a teller. You have to be It certainly makes sense that banks like found themselves in a position to reward
really patient and hang Aquesta and INB are open to paying new their staff, others didn’t see the same
in there to get some hires more as employment reaches record surplus, while others may have found some
traction in the business.” heights – it’s a candidate’s market, after wiggle room on the balance sheet but are
all, and finding and keeping good hires is still debating on the best way to utilize it.
Russell Lee, President and difficult. No institution wants to lose all of
CEO – Inland Northwest Bank its best tellers to Wal-Mart. For their parts, INB and Aquesta both
bumped their minimum wage to $15 at
At a minimum, this kind of move can foster “The greatest source of scarcity today is about the same time, but took two different
a tremendous amount of goodwill between human capital,” Basu says. “Bonuses and approaches to the increases. INB raised
an institution and its front-line employees, other forms of enhanced compensation wages on a progressive basis, bringing the
as well as telegraph to the community of support retention and recruitment. minimum to $15 an hour, but also adjusted
potential customers and employees that it’s Importantly, among the most likely people the wages of their hourly employees who
an organization that cares about its own. to leave an organization are the most were already making $15 or more.
talented – the people with the best outside
“It’s not the kind of impact that’s options. Therefore, increasing compensation “We’ve had employees who received raises
measurable, but I believe it’s a message – whether by paying a bonus or simply by from a little over three bucks an hour to about
that resonates and can provide benefits raising hourly wages – represents a sensible 25 cents,” says Lee. “But if you were already
that we’re not really able to track,” Engel option in the current economic environment.” making $15.50, you weren’t left out.”
explains. “I think it does send a good
message, both internally and externally.” “It helps us attract talent at the entry level, Aquesta’s raise, on the other hand, did
and hopefully it will help us retain talent at not use the same gradient to adjust for
POINT OF ENTRY the entry level,” INB’s Lee agrees. “It’s not differences in wages, but Engel says he
a surprise that the turnover rate at the entry hasn’t gotten any negative reactions.
For all the positive press and warm feelings level of banking in general is pretty high, but
that passing on savings to front-line hopefully this will lower that rate a little bit.” “We haven’t gotten any pushback along
employees can inspire, however, there are those lines at all, and I’m really happy
certainly strategic factors in play as well. Lee is especially sympathetic to his front- about that,” he says. “I think everyone
line staff because that where he started his understands that having motivated and
20 | FMS forward | MAY/JUNE 2018 career – as a teller. He knows personally engaged Aquesta people serves the best
how hard it can be to tough out those first interest of all of us. I would say there are
years and get a toehold in the industry. no downsides at this point.”

“We hope in the long run that this will help us Other institutions paid out one-time bonuses
but didn’t make any changes to wages. Basu

says that for many, this is a better option. in the absence of a higher minimum wage,” biggest competitors, the local credit unions.
Basu says.
“Once an organization raises its minimum “There are regional variations in all categories,
wage, it is difficult to reduce it, even during For some institutions that haven’t seen including in terms of compensation,” Basu
times of economic stress,” he explains. substantial gains in the wake of the tax bill, says. “Historically, the northern U.S. has
“It may make more sense to grant one- these types of moves just aren’t doable. For been more closely aligned with unionization.
time bonuses instead of raising minimum a public company in this boat, for example, Union members tend to make more money
wages because that preserves operational INB’s situation before the tax bill passed than others in their occupational categories,
flexibility into the future. Moreover, when will sound familiar. even holding constant for education and other
an organization raises minimum wages, characteristics. Areas with more unionized
compensation goes up for everybody, even “Raising the minimum wage was something workers will therefore tend to be associated
the least productive workers. Bonuses allow we talked about lot prior to the tax changes, with higher wages overall since non-union
companies to reward their most productive but we’re in a pretty competitive business in firms have to compete more aggressively
workers disproportionately.” banking,” Lee says. “Margins aren’t very big, for workers. Policymakers on the coasts also
and it was a really tough thing to figure out tend to be more willing to place restraints and
DIFFERENT STROKES how to implement that without impacting conditions on business, including by supporting
our shareholders too much. When the tax higher minimum wages.”
As Basu points out, while raising the gains came, we thought it was a great
minimum wage has many benefits, way to reinvest them. We finally had the Whatever the reason behind it, institutions
including a competitive advantage in financial capacity to do it.” in areas where competitors or the state
hiring, improved retention and a positive government are raising wages may be feeling
message for an organization’s staff and Each institution’s region and market also the pressure. Basu says that if he were leading
the community, that choice isn’t right for plays into the decision to raise wages, pay a $500-million community bank right now,
everyone. Besides limiting operational bonuses or do neither. Washington has the he would not be raising his minimum wage –
flexibility, this kind of move can result in a highest minimum wage of any state, which but he would be handing out bonuses if the
PR backfire if the situation has to change undoubtedly influenced INB’s decision to raise balance sheet was strong enough to support it.
when times get tough. its entry-level wages to stay one step ahead.
Lee also acknowledged that the tax rate “I would be rewarding my most productive
“In times of economic stress, this can lead helped the company to stay abreast of their workers in particular,” he says. §
to more layoffs than would have transpired

A Closer Look

In a Quick Poll earlier this year, FMS asked our members if their institutions were handing Is your institution giving raises or bonuses
out raises or bonuses inspired by the tax bill. A mere 2% of poll respondents were following to employees spurred specifically by the
in the footsteps of INB and Aquesta in raising their minimum wage, while 6% handed out recent tax law changes?
one-time bonuses and 7% did both. An additional 17% had yet to do anything, but were still
mulling it over. 68% No
17% Not at this time, but the issue is
But while the majority of respondents (68%) said no, their underlying explanations truly
ran the gamut. It became clear, for example, that while much has been made of those under considerations
businesses that have raised their minimum wages this year, not everyone was enjoying 7% Yes, one-time bonuses and
the same tax kickback and therefore didn’t have the opportunity to share the wealth.
Some members noted that the tax bill had not changed their situation at all, while several minimum wage raises
others explained that they had actually sustained a major hit because of the changes 6% Yes, one-time bonuses
to deferred tax assets. Others were proud of their existing compensation, bonus and 2% Yes, minimum wage raises
incentive programs, and therefore did not feel the need to reevaluate things in the wake
of tax reform. FMS forward | MAY/JUNE 2018 | 21

These results serve as a reminder that though the press largely focused its tax cut coverage
on those businesses that were saving money and raising wages, that reality was not quite
universal. For many institutions, the situation is much more complicated.

BasicBsloofck chain

This emerging technology may
not be affecting your institution
today, but chances are it will be
in the not-too-distant future

22 | FMS forward | MAY/JUNE 2018

As Bitcoin celebrates its tenth birthday this October, fans, detractors specifically to be used with Bitcoin and other cryptocurrencies, a host
and doubters alike of the nascent cryptocurrency can reflect on a of additional uses for the technology are beginning to emerge, with an
decade of countless news articles and hot takes, spanning a range army of innovators laying the groundwork that they hope will lead to
of harsh criticism from the likes of Steve Forbes and Jamie Dimon on blockchain enabling faster, safer and cheaper ways to transfer money,
the one hand and enthusiastic buy-in from the likes of Microsoft and store data and negotiate contracts.
Dimon’s own JP Morgan Chase on the other. But the real story coming
out of those ten years may not be the rise of Bitcoin itself, but rather BEYOND BITCOIN
another technological upstart to emerge in concert with it – blockchain,
which many see as the real game-changer in this digital revolution. In his research, Drew Boecher, a managing director at Darling Consulting
Group, has come across four main uses for blockchain technology:
For those with only a passing familiarity with this new world, digital currency, smart contracts, securities and recordkeeping.
blockchain is often seen as simply an element of Bitcoin, but the
two are not synonymous. While blockchain was indeed designed Digital currency is what blockchain was created to support – Bitcoin,
Ethereum and other cryptocurrencies. Major players such as Wells

FMS forward | MAY/JUNE 2018 | 23

“I think bankers will find, while cryptocurrencies get the vast majority of
media attention, recordkeeping has significant promise for the banking
industry now. I can see major potential in being able to prove data
permanence, and that’s what this recordkeeping technology would permit.”

Drew Boecher, Managing Director, Darling Consulting Group

Fargo and Goldman Sachs, meanwhile, have dipped into the world for recordkeeping is years away, but Boecher thinks its eventual
of smart contracts and securities via blockchain, but overall these arrival is a certainty. The promise blockchain holds for industries
uses have gotten little widespread traction thus far. However, it’s like financial institutions and healthcare, where records are of
the fourth use – recordkeeping – that Boecher thinks holds the most paramount importance, is too compelling to remain unexplored.
promise for financial institutions.
DRAINING THE HONEY POTS
“I think bankers will find, while cryptocurrencies get the vast
majority of media attention, recordkeeping has significant promise One of blockchain’s most appealing aspects, whether it’s being used
for the banking industry now,” Boecher says. “I can see major for cryptocurrency or data, is its security. Boecher says the security
potential in being able to prove data permanence, and that’s what measures he encountered while setting up a digital wallet for
this recordkeeping technology would permit.” himself inspire a high level of confidence.

Blockchain works as a peer-to-peer decentralized digital ledger, “I think if you opened a wallet, you would convince yourself that it’s
where transactions or data transfers are time-stamped and way more secure than any bank account you have,” he says. “You
irreversible. The same technology that permits transparent and swift have twelve different passwords and they explicitly tell you to write
online transactions would create a recordkeeping system that not them down and not screenshot them, to safeguard against hackers.”
only permanently tracks when records were uploaded, but keeps up
with every edit made and every access granted. Blockchain’s strongest security feature isn’t firewalls, however, but
a fundamental restructuring of incentives. When hackers look for
High-quality data is increasingly important to leaders of financial identities to steal or accounts to hack, they’re looking for honey
institutions, as data-driven strategies and CECL implementation top pots – large stores of data in one place, such as social security
to-do lists this year, and blockchain has the potential to ensure data numbers or debit card information. Most databases are set up
permanence and quality. Boecher compares it to an electronic notary like bank vaults, which have millions of dollars in one massive
confirming and authenticating one’s data at every step. safe. Blockchain’s strength is that it’s set up as millions of little
safes with one dollar in each. It’s not that the safes are any more
“It’s important to the front line as loan underwriters, it’s important difficult to break into – it’s just that the incentive to do so is no
to the risk managers who check the work of the underwriters, longer compelling.
it’s important to validators checking the models, it’s important to
auditors and it’s definitely important to regulators,” he explains. “Could a hacker get in?” asks Boecher. “Sure. Is the payoff worth it? Not
“Most financial institutions would jump at the chance to have this really. The risks are still there, but it’s just not as beneficial for criminals
kind of e-notary.” to break in. Most hackers are going to be too lazy. I can imagine a world
in which the institutions that don’t use this technology are way more
Even for the largest banks, successful implementation of blockchain vulnerable to being hacked than those that do. A decade from now,
customers won’t choose a bank that leaves them overexposed.”

24 | FMS forward | MAY/JUNE 2018

the birth of blockchain...................

In October of 2008, Satoshi Nakamoto is, the paper that made him famous Nakamoto envisioned blockchain as a
published a white paper titled “Bitcoin: is only nine pages long and relatively solution to these ills, with transactions
A Peer-to-Peer Electronic Cash System.” straightforward. His argument for based on “cryptographic proof instead
The following January, Nakamoto released blockchain and Bitcoin is centered on the of trust,” and eliminating the need for
the software and the first Bitcoins. notion that while the current banking and financial institutions as intermediaries.
Straightforward enough, right? Not quite. payment systems function “well enough He called it a network “robust in its
Mystery seems to have been built into the for most transactions,” there are some unstructured simplicity” – a way of
DNA of blockchain from the day it was downsides to the paradigm. In the current processing payments as an uninterrupted
created. system, transactions are never entirely and irreversible chain of transactions. As
irreversible, leaving merchants exposed, long as honest networkers outnumber
After the paper was published, there was a while the cost of transacting means that attackers, and as long as basic escrow
scramble to find out who exactly Nakamoto small transactions are limited or denied, protections are in place, he believed his
was. It turns out no such person exists. and fraud is seen as part of the cost of new technology could render financial
Almost ten years later, the Nakamoto’s doing business. However, in peer-to-peer institutions obsolete.
identity remains a mystery, and the inventor transactions without the trusted third party
of what many think may be an innovation on of financial institutions, online transactions All quotes are from Satoshi Nakamoto’s
the scale of the internet is an unknown. run the risk of double-spending – using white paper, “Bitcoin: A Peer-to-Peer
the same digital currency twice or more, Electronic Cash System,” available online at
Regardless of who the mysterious writer because of the ease of copying digital files. bitcoin.org.

THE WILD WEST OF THE WORLD WIDE WEB gone over poorly. Earlier this year, South Korea made an effort
to regulate cryptocurrency, sparking protests and a petition that
However secure it may be, many still associate blockchain with swiftly reached the number of signatures that necessitate a
mystery, anonymity and (less charitably) weirdos on the deep web. formal response from the government. As of this writing, South
So who’s overseeing the development of this technology? Korea had affirmed its commitment to enforcing anti-money
laundering processes and other new regulations, but clarified
“Right now we’re in a regulatory wild west,” Boecher notes. ”There that it is not currently interested in shutting down cryptocurrency
are very few, if any, U.S. regulations today, and personally I think exchanges altogether.
that’s a good thing. We’re all glad that regulators didn’t intervene
in the early days of the internet, or we wouldn’t have a lot of the Though U.S. blockchain and cryptocurrency regulation isn’t likely to
technology that we take for granted today.” arrive within the year, it’s certainly coming. Blockchain and Bitcoin
have questionable reputations and extraordinary potential that
Boecher doesn’t foresee any moves to regulate this field anytime governing bodies are likely to want to oversee.
soon in the United States, and since cryptocurrencies have yet to
be officially recognized by the government and the IRS, there are “You’re going to periodically see people saying Bitcoin is for
no existing tax implications. In other words, the Wild West will criminals,” Boecher says. “I think, as a currency history expert,
probably remain wild for the time being. criminals like cash, they like prepaid store accounts, they like
any kind of currency. The anonymity associated with Bitcoin is
“Candidly, this is difficult for legislators to get their heads around, somewhat concerning, but I think the FBI is starting find that if you
so I think it’s unlikely that we’ll see any regulation in the next year,” can get a warrant and connect someone to a Bitcoin account, there’s
he says. “And I don’t see them regulating recordkeeping uses of a permanent record of everyone they’ve ever transacted with.”
blockchain – it’s just too new. It’s like regulating Tesla throwing a car
into space. You just would have never thought to do it, and you can’t THE FUTURE OF BLOCKCHAIN
regulate something you’ve never thought about.”
Blockchain is in its incipient stages, and financial industry leaders
In fact, attempts to regulate blockchain in other countries have are just now digging into what it could do for their organizations.

FMS forward | MAY/JUNE 2018 | 25

“I’ve heard from others that the top fifteen banks or so are starting
to form research and development teams to work with blockchain,
but they’re still very much in the beginning stages,” Boecher says.

Those financial institutions investing in blockchain have found one
of the major challenges to be a dearth of hirable experts. Boecher
notes that many blockchain and cryptocurrency experts aren’t the
type of people who emerge as model hires at major players like
JP Morgan Chase, and the feeling is mutual – many of the experts
working in this area are the kind of people who shun corporations
and were attracted to blockchain and Bitcoin for their promise of
bypassing the major financial players.

“The explicit goal of the blockchain
developers was to eliminate banks as
a middleman in currency transactions.
As a banker, if a new technology is
explicitly trying to cut me out, that
would motivate me to learn about it.”

Drew Boecher, Managing Director,
Darling Consulting Group

“A lot of the experts are the kind of people who think of banks as
‘the man’,” Boecher explains.

At the moment, Boecher sees central banks as the biggest threat to
cryptocurrencies like Bitcoin. If a digital currency gains widespread
adoption and international popularity, the Federal Reserve may feel
the need to step in and develop a digital currency of its own, thus
causing other cryptocurrencies to swiftly lose value in the light of a
nationally recognized version.

“I think it’s going to happen, but I think most banks can wait it out,”
says Boecher. “They don’t need to get involved now. They can see
how this plays out first.”

However, waiting to see how the blockchain story plays out
doesn’t mean just ignoring it. Now is the perfect time for leaders
at community institutions to educate themselves about blockchain
and to look into the ways it could streamline operations at
their organization. After all, there’s no telling exactly what the
competitive landscape will look like when Bitcoin turns twenty.

“The explicit goal of the blockchain developers was to eliminate
banks as a middleman in currency transactions,” says Boecher. “As
a banker, if a new technology is explicitly trying to cut me out, that
would motivate me to learn about it.” §

26 | FMS forward | MAY/JUNE 2018

Blockchain 101. . . . . . . . . . . . . . . . . . . . . . . . .

What is blockchain exactly? transparent (you can see every transaction Block: a group of transactions
that has ever occurred) and indelible (you
Imagine James owes Amy $20. In our cannot change or reverse any information in The block is broadcast to mining
traditional banking system, James might the chain), it’s both open and secure. nodes: a network of computers
write Amy a check, initiate a bank-to-bank
transfer or perhaps use a peer-to-peer Once Amy receives the Bitcoin from James, Miners solve proofs of work
payment system like Venmo or Paypal. she can convert it into U.S. dollars using to authenticate the block
Using blockchain and a cryptocurrency a variety of online exchanges. The most
like Bitcoin, however, James and Amy can successful ones are Coinbase and Gemini, but Once the block is approved, it’s added
transact without going through any financial another option is to apply her cryptocurrency to the chain with a hash to reference the
intermediary. to a Visa card. There are websites that will block before it. All the transactions in the
take your Bitcoin and convert it to U.S. dollars
When James initiates a Bitcoin payment on a prepaid Visa that they mail to you, and block are now complete.
to Amy, that transaction is grouped with once you have the card, you can quickly and
several other transactions done within the easily transfer Bitcoin to your card and use it
same timeframe into a block. The block is as U.S. currency within seconds.
then broadcast to all of the mine nodes in
the blockchain network, and the miners in As an important final note, remember that
the network approve the block if it’s valid. while blockchain was invented to transact
The miners approve the transaction by with Bitcoin and scenarios like the one
doing a mathematical proof, called proof presented here are often the simplest
of work (POW). While the math is more way to explain it, blockchain isn’t just for
accessible than might be expected, the cryptocurrencies. Blockchain can also be
final piece of approval requires a random used to store and transfer records and
number generator that makes the solution data, as well as transact with securities
more difficult. The miner that solves it first and carry out smart contracts. In the case
in the longest chain is the one who “wins,” of data, one would be able to easily share
and their solution is added onto the chain. health or financial records with a strong
Miners are rewarded for their proofs and sense of security with blockchain, as the
approvals with Bitcoin. use of validation and transparent and
indelible history of access provides a sense
What is this chain? The chain is a long, of protection. Also, the fact that blockchain
interconnected and unchangeable string of cuts out a middleman reduces the number of
blocks, each block referencing the one before times one’s information is exposed to other
it with a hash. Once the block containing parties, while also eliminating stockpiles
James’s transaction is approved and added of similar data that may be attractive to
to the chain, the payment is complete and hackers and thieves.
the Bitcoin equivalent of $20 will move
from his digital wallet to Amy’s. The chain This is the ideal for blockchain technology
itself is a huge part of what makes Bitcoin – to be the safest, fastest and most
so innovative. Because the blockchain is trustworthy way for people to transact.

FMS forward | MAY/JUNE 2018 | 27

TFHELIPSIDE

OF CECL

Few people, it seems, have anything good says Caragher, a senior product manager in PROFITABILITY
to say about the Current Expected Credit the Financial and Risk Management Solutions Institutions that are doing net interest
Losses standard, the FASB mandate department at Fiserv. “That’s the first margin (NIM) analysis will look at the
that will usher in an entirely new way of thing they want to do – just make sure the contribution from the branch or cost
calculating reserves for credit losses. With requirement is taken care of and satisfied. center or loan officer. However, Caragher
the first round of compliance now less than But beyond that, we’ve heard from many believes that many institutions may be
two years away, many institutions either institutions that want to use this data for looking at lending, for example, from an
have realized or are now starting to realize strategic purposes beyond CECL. They see NIM perspective – and rewarding their loan
just how much data they’re going to need
in order to come up with the “reasonable While (institutions) may do some of these
and supportable” assumptions that will be things to a degree already, the amount
used to calculate the life-of-loan losses that of data they’ll be capturing in one place
CECL demands. With seven to ten years as part of the CECL process potentially
worth of historical data set as the general makes this easier and more powerful.
target, it quickly becomes apparent why
complimentary comments about CECL are at Tom Caragher, Senior Product Manager – Financial
a premium. and Risk Management Solutions, Fiserv

It would be a pretty long limb for one to the potential for that CECL data to give them officers accordingly – without just as closely
venture onto, then, to suggest there may be a much better view as to how their institution looking at the credit exposure side of things,
an upside to the extraordinary new demand will behave in different environments, and and marrying these two angles together
on institutions’ already strained time and a better idea of how certain areas of the in a meaningful way to get a better handle
resources that the CECL data-gathering institution are actually performing.” of the true profitability behind their loans.
exercise will require. But Tom Caragher is The depth of data emerging from the CECL
willing to go there, arguing that as long as As Caragher sees it, there are three main process can help make that connection.
institutions are already digging deep for strategic areas where the treasure trove
CECL, they might as well make the most of of data unearthed in preparation for the “All of this information would align with
that effort by looking for other beneficial new standard can provide a host of other looking at a Funds Transfer Pricing (FTP)
uses for all of that data besides finding the benefits for institutions willing to think process,” he explains. “And when you look
historic loss rates to be used to calculate outside of the CECL box. at that NIM contribution, if you overlay the
their reserve amounts.

“Initially, I think everybody is looking at CECL
in terms of just meeting the requirement,”

28 | FMS forward | MAY/JUNE 2018

credit cost that that person has brought With seven to ten years of data, an requirements of the new standard.
to the institution, the contribution is institution will be able to see how its “While they may do some of these things
somewhat diminished, and a more truthful balance sheet and loans behaved in to a degree already, the amount of data
and well-informed decision around the different interest rate environments and they’ll be capturing in one place as part
branch or cost center or loan officer can be market conditions. So in looking at the of the CECL process potentially makes
made – based on true performance and the CECL process alone and trying to apply this easier and more powerful,” he says.
impact to the institution.” qualitative adjustments, the institution “When they see the wide range of data
can look at the forecasts and see where available through this process, they’ll likely
Caragher adds that an institution will ideally in the past it has had a similar event, and find new fields and factors where they may
be tracking its net charge-offs and recoveries can move the history to that part and get want to dig deeper. So I would recommend
on a monthly or quarterly basis already, as the loss rate for something that is more not settling on a definitive list of things
well as its non-performing balances each comparable in that environment. that you can use for CECL, but instead
month. With the benefit of additional data, grabbing everything you can. Once you’ve
however, it can begin to ask the questions that “They’ll get a better view because they found something in the data-gathering
get more deeply to the heart of profitability. have more and more history, and they can process, putting it into storage doesn’t cost
align where they’re going to take their life- you anything. If you don’t use everything,
“What’s the migration from performing to of-loan loss rate,” Caragher says. you don’t use it, but at least you’ve given
30, 60 and 90 days out?” he asks. “What is yourself the opportunity.”
the average cost per loan group for disposing BUDGETING AND PLANNING
of an asset or liquidating something or going The budgeting and planning process at most THE STATE OF CECL PREP
through the bankruptcy process with a institutions can be something of a chicken-
client? Does some of this change in different and-egg scenario. Is it better to do the More than half (56%) of the 400 respondents
environments? These types of data points budget first and then stress test, or should recently surveyed by FMS believe that their
would be good to start to track.” you stress test first and get the budget institution’s CECL preparations are “orderly and
out of that because you’ll find the path right on schedule,” while 29% consider their
FORECASTING AND STRESS TESTING that’s most likely? The deeper data dive for preparations to be “somewhat disjointed, but
Caragher says if an institution segments CECL can give an institution the historical proceeding well.”
its loan portfolio by factors such as branch information it needs to do a better job in this
and loan officer and FICO, it can create the area, from budgeting and forecasting at the Source: Community Mindset: Bank and Credit Union
same chart of accounts in its asset-liability cost center or branch level to tracking where Leadership Viewpoints 2018 – FMS Research
management system and forecast at those those expenses are going or coming from, as
same levels, allowing a look at the forecasted well as other income. What an institution does with that opportunity,
non-performing, forecasted charge-off and however, is another matter entirely. After all,
forecasted recovery at each of those account “If an institution has a few branches that good intentions only go so far, and for many,
levels. This will allow it to stress test those serve a certain employer base, in certain CECL itself will be daunting enough.
areas in a much better way. economic conditions maybe there’s a pretty
big impact there,” Caragher notes by way “The goal for most institutions is probably
“All of that history that an institution is of example. “The history will show that, so to use their CECL data in a strategic manner,
capturing for CECL will give it a better idea you’ll be able to budget for those different but how quickly they get there is a different
of how in those stressed environments it cost centers based on the expectation that question,” Caragher says. “Because first
can expect the balance sheet to behave,” it’s either going to ramp up or slow down they’re going to want to make sure their
he explains. “For example, if in the past, because of the forecasted economy. Maybe auditors and examiners are satisfied with
as unemployment has gone up – say those resources could be better allocated the process they have in place. And even if
from 5% to 8% – what has happened to somewhere else, where you expect things they say they want to go beyond that, the
certain portfolios? Has the institution had to shift – that data will give you a better reality is it will add a few hours and needed
increased defaults? Have collateral values idea of how to budget those things, but also resources to the process. I may want to take
dropped? What have been the relationships? where to lay those resources because you piano lessons, but I don’t have the time. It’s
Institutions can forecast those things as well. know the behavior.” the same thing here – they may want to do
So if they’re doing a forecast in their asset- this, but they may not be able to find the
liability management solution, they can layer INTENTIONS V. ACTION time or resources.” §
these things in to their target balances and Caragher says that if an institution thinks
forecasts and create strategic plans that will it may want to make use of its CECL data FMS forward | MAY/JUNE 2018 | 29
help them mitigate the risk and protect the for any of the above added purposes, it
earnings and income of the institution – and should be sure to go into the process with
remain or become more competitive.” a perspective that goes beyond just the

THE DIDGyITnAamLic

30 | FMS forward | MAY/JUNE 2018

It’s mid-morning at the local branch and opening accounts online. Ally Bank doesn’t
a customer strolls into the lobby. She’s have any branches and they have plenty of
greeted warmly by the teller, with whom customers – most of whom are price-driven
she’s on a first-name basis. They chat CD customers, by the way.”
about the customer’s upcoming vacation
as she makes a deposit, and the teller One thing that hasn’t changed just yet is
makes sure to share information about that front-line staff members are still central
how her debit card will work overseas. to successful customer interactions. These
The customer then goes over to discuss a days, however, they’re just as likely to be
potential auto loan with the banker, who’s interacting over the phone or through a
already familiar with her situation and computer screen, as opposed to a teller line.
long-term goals and thus is able to offer
targeted, personalized advice. Fifteen “The greatest gift we can give
minutes later the customer walks out of another human being is to
the branch, her business complete and her let them know that they have
sense of value as a customer confirmed. been heard, acknowledged and
understood. We need to get
Record scratch. Freeze frame. While this underneath all of the banking
scenario probably still plays out every day stuff and address the core
in many branches across the country, it’s human need.”
not news to anyone that it nevertheless
represents a model that is fundamentally Joe Sullivan, President and CEO,
changing. Customers are increasingly Market Insights
interested in conducting their business
remotely, via website or phone, and “The greatest gift that we can give another
institutions are increasingly likely to respond human being is to let them know that
by undergoing a digital transformation as they have been heard, acknowledged
they rethink their branch structures. and understood,” says Joe Sullivan, the
president and CEO of Market Insights. “We
While the advantages of this digital need to get underneath all of the banking
transformation are well documented, it stuff and address the core human need –
may be worth asking what community they want their banker to hear that they’re
institutions are losing when customers are having financial troubles or that they need
more likely to phone into a call center or log capital to expand their business, and they
on to a chat function than walk in the door. want that banker to hand them something
How can institutions keep the retention besides canned platitudes or a sales pitch.”
benefits, the cross-selling opportunities,
and yes, the warm fuzzy feeling of human As customer interactions move to remote
connection when their interactions move and digital avenues, customer service
from IRL to digital spaces? representatives will need a new skill set.
For example, tellers may have traditionally
THE HUMAN CONNECTION gotten by with politeness, cheer and
Despite the evidence, both anecdotal and efficiency, while waiting for conversational
research-based, that customers still like cues to lead to cross-selling opportunities.
going to the branch, the trend is clear – But those talents alone are no longer as
more and more people are interested in effective when shifted to the digital realm.
opening an account online, and almost Sullivan says that front-line staff members
everyone expects to be able to complete the need training in connection skills, such as
vast majority of their transactions digitally. empathy and active listening.

“It took eighteen years for the ATM to get “Empathy is our ability to put ourselves in
to 50 million users, and this is similar,” the shoes of the customer,” he explains.
says Jeffrey Marsico, the executive vice “Be curious and don’t give scripts or
president of the Kafafian Group. “The
norm will start to be more and more folks FMS forward | MAY/JUNE 2018 | 31

platitudes. Ask about their kids or business COLD, HARD FACTS part of onboarding they know exactly what
with genuine interest. Cultivate the Making digital connections feel as that customer is likely to be interested in in
connection by asking good questions, pleasant as chatting with a favorite teller terms of additional products and services,”
really listening and telling your own story is a byproduct of imagining new ways of Marsico says.
as well. These skills are channel-agnostic. building that customer-banker relationship.
They will work over the phone, in a branch While some customers will open an It sounds simple, but good onboarding
or over chat.” account online, even more will come to the can be a delicate business. In some cases
branch to open an account and then never translating data into conversational topics
These personal connections and soft skills come back. Whether you never get the can be difficult without coming across as
are built from bones of processes and chance to have a face-to-face conversation intrusive. For example, a representative
strategies. Having a system in place that or if you only get one, the onboarding may be able to see that a customer just
takes purely online customers and gives process is crucial to establishing trust and put a down payment on a house and
them a “home” is the way to start building a lines of communication. want to reach out about mortgages, but
connection that rewards both the institution being able to do that in a seamless and
and the customer. Just because someone “When [your institution has] unobtrusive way can be challenging.
opens an account online and transacts a clear purpose, you help Even if the representative is simply
entirely from a mobile app doesn’t mean customers and employees trying to strike up a conversation about
that they shouldn’t be able to access a find you because you’re doing a customer’s kids or business, it can take
human representative. something that’s bigger than on a different vibe when coming from a
banking. It attracts people who chat window or phone speaker instead of
“When someone fills out an online resonate with your purpose, a smiling face in a branch lobby. Sullivan
account application, that account and it helps your customers feel suggests that sincere curiosity and a knack
should be automatically attributed to aligned with you.” for asking the right questions can help
the closest branch and that person overcome this hurdle.
should automatically be assigned a Joe Sullivan, President and CEO,
representative,” says Marsico. Market Insights “It goes back to training front-line staff in
connection and empathy skills, and not just
At the account opening, that “A much more sophisticated onboarding waiting for cues in conversation,” he notes.
representative should reach out to the process than currently exists in the “They should be asking questions that allow
new customer as part of the onboarding community banking space is the way to a door to be opened.”
process. Whether an email or a phone call, go to make personal connections with
this outreach serves the purpose of letting customers that make them stickier – to bring Marsico agrees, pointing out that even if it
the new customer know that if they have in more business from that customer and to may be awkward, a customer is likely to be
any problems, they have someone at the foster loyalty,” Marsico says. won over if the representative is handling
institution ready to talk. it well.
The kind of process Marsico has in mind
Besides building personal connections and will use a variety of touch points, from “You definitely have to overcome the creepy
people skills, financial institutions should automatically assigning an online customer factor,” he says. “But once you do, I bet your
also have a very clear purpose and identity. a banking representative to creating a customers will appreciate knowing that
Sullivan worked with a small community detailed follow-up plan based on what their institution offers mortgages that might
bank that staked its identity on being as the institution knows about the customer. be right for them, instead of letting them go
simple and easy to bank with as possible, If a customer opens a checking account online and put their mortgage out to bid to
saving customers time and stress. Another online and asks for a small attached bankers they don’t even know.”
small community bank based in a rural area line of credit, the institution will have
hit hard by the recession built its identity on instant access to their credit score, their Another potential hazard of digital
helping customers reach a level of personal outstanding credits and a variety of other communication is falling into the
financial security. data points. traditional cross-selling rut. Even data-
driven opportunities can fall flat, and
“When you have a clear purpose, you help “They should tailor offers to that new digital channels tend to make sales
customers and employees find you because customer, either via online messaging, direct pitches even more obvious. Institutions
you’re doing something that’s bigger than emails or informing their representative, so can learn from the missteps of the
banking,” Sullivan explains. “It attracts people that when they make that initial contact as a aggressive sales tactics from other
who resonate with your purpose, and it helps organizations and offer a quick and
your customers feel aligned with you.” frictionless process that focuses on

32 | FMS forward | MAY/JUNE 2018

customers accomplishing their objectives. loss of a key long-term teller that often has
“Back away from cross-selling and ask the most negative and disruptive impact on
instead how to connect with customers,” a branch.
Sullivan says. “If we feed their need to
be heard, we set a foundation of trust. “Some customers only come in
From there, cross-selling opportunities will occasionally, but they see John the teller
happen naturally and bankers are uniquely every time, so they have that comfort of
trained and qualified to point those out, and knowing John,” Marsico explains. “It’s like
it will be much more accepted.” the ‘Norm’ effect when you’re walking into
Cheers. When John leaves, the branch is
Institutions that really get to know going to get negative feedback because
even their online customers during people miss John.”
onboarding and prioritize connection above
cross-selling will get the cross-selling In fact, institutions will benefit from
opportunities once they’re doing a good job understanding that more and more,
in the other areas. And a part of knowing branches are like comfort food for many of
the customer – even those you don’t their customers.
see – is identifying the most profitable
customers in each branch and ensuring “A much more sophisticated
they’re receiving top-tier service. onboarding process than
currently exists in the
“In each branch, maybe 50% of the community banking space is
customers are unprofitable,” Marsico says. the way to go to make personal
“There are techniques to raise these people connections with customers
up to be profitable, but those who are low that make them stickier – to
balance and high transaction customers, bring in more business from that
or who are far away from that profitability customer and to foster loyalty.”
hurdle – the institution needs to learn how
to efficiently serve them. Those that are in Jeffrey Marsico, Executive Vice President,
the top 20% of profits should be receiving The Kafafian Group
white glove service, even if they’re digital-
only customers.” “I don’t want a cheeseburger and fries to
disappear off the face of the earth, even if
COMFORT FOOD I only eat them once a year,” says Marsico.
Institutions with a strong handle on digital “I may never use my local branch, but it’s
relationships have created a strong sense comforting to know that it’s there. My bank
of identity and have a sophisticated puts the name and phone number of my
process and well-trained staff members customer service representative from the
who can translate data research into nearest branch at the top of my statement.
warm, helpful conversations that don’t In effect, they realize they’re comfort food
feel like sales pitches or bare-bones and they’re okay with that. They know you
transactions. But Marsico points out that probably won’t call, but it’s there if you
the vast majority of deposit accounts are want to.”
still opened in a branch, no matter how
digitized the rest of banking or human life To customers, the chat window and their
in general is becoming. smartphone may be the salad they pack for
lunch every day, and the institution wants
“I think financial services are still a very to be sure that meal is easy to get and
personal thing for people,” he says. “I think enjoyable to eat. But it’s just as important
that’s just a cultural norm in the United that they know that the branch – their
States.” occasional cheeseburger – is ready and
waiting whenever they want it. §
Similarly, he’s found that though you’d
expect a branch manager to be the main
touch point for customers, it’s actually the

FMS forward | MAY/JUNE 2018 | 33

EXIT STRATEGY

BREAKING UP IS HARD TO livings trying to uncover. By taking the time honest feedback. Following this template,
DO, BUT WITH A STRONG to connect with exiting team members, employees often hold back or outright lie
EXIT INTERVIEW PROCESS, organizations can build relationships and gain because they’re afraid of retaliation in the
FINANCIAL INSTITUTIONS knowledge that will benefit them long after form of bad references, they don’t want to
CAN ENCOURAGE those employees have moved on. incriminate coworkers or they are simply
RETENTION, IDENTIFY overwhelmed by the challenge of having
BLIND SPOTS AND CREATE TWO FATAL FLAWS such a difficult conversation when they
LIFELONG ORGANIZATIONAL have nothing to gain from it.
AMBASSADORS. The statistics about exit interviews are
telling. (See callout box on opposite “No one’s going to say, ‘My boss is a jerk,’ on
No one enjoys an exit interview – not page.) If so many organizations are in fact their last day, especially if their boss is the one
the interviewer, and certainly not the conducting exit interviews, where are they conducting the interview,” says John Sullivan,
interviewee. Even the most amicable splits going wrong? The exit interview system has a professor of management at San Francisco
can be awkward, and asking a departing two major pitfalls that are closely related State University and an HR thought leader
employee about his or her time there on the – the first is that departing employees do in Silicon Valley. “And a lot of people will
way out the door can be an uncomfortable not feel that they can really be honest with send the intern in [to conduct the interview],
exercise. Many would prefer to rush through the interviewer, and the second is that even because no one wants to do it, and the odds
and forget it as soon as possible – if not when they are honest, the institution is of someone telling that intern the truth are
skip it altogether. unwilling or unable to convert that honest almost zero. The logic of the exit interview is
feedback into action. that people are going to be honest and spill
But a thoughtful and consistent exit interview their guts, but they just don’t.”
process is a huge value to an institution, A quick Google search for exit interview
delivering insights and revealing weaknesses advice uncovers many articles urging As far as the second pitfall, employers
that many consultants earn handsome employees to parrot polite platitudes are just as eager to conceal the truth as
in exit interviews instead of offering
34 | FMS forward | MAY/JUNE 2018

employees. Though the vast majority of “Leaders of small institutions may assume OF THE 80%
organizations conduct exit interviews, they know each of their departing employees’ OF LARGE
many treat them as box-check exercises. perspectives, but people are complex,” says ORGANIZATIONS
When exit interviews are completed Everett Spain, head of the department of THAT USE EXIT
only to be forgotten, they’re wasted time behavioral sciences and leadership at West INTERVIEWS, 90%
at best and an exercise in concealing Point, who has conducted extensive research BELIEVE THESE
information that the organization doesn’t on employee retention. “We always have INTERVIEWS
want to address at worst. ideas to offer that are both unknown by PROVIDE USEFUL
others and very valuable. Institutions that INFORMATION,
“Employers often don’t take action – they’ll skip out on exit interviews miss opportunities BUT ONLY ABOUT
take the exit interview and literally put it that in our ultra-competitive world could be 50% ACTUALLY
in a file,” Sullivan says. “No one looks at it. the difference between thriving and barely USE THAT
It doesn’t even go to the manager in many surviving.” INFORMATION.
cases. I think exit interviews are one of the
worst managed programs in HR because in ENCOURAGING OPENNESS Source: Dr. Brooks C. Holtom
many cases literally nothing happens.”
There are many ways financial institutions negative repercussions.
If those are the two major flaws of the can create a setting where departing
system, another mistake is opting out of employees really open up about their “When you do research on this, the answers
exit interviews altogether. Small community experience and point of view. Employees for why people leave change by 40% if you
institutions may think they can skip this step are more likely to offer their honest opinion wait a period of time,” says Sullivan. “So
because they know their employees and when the culture at the organization ask them the questions on their last day, but
coworkers so well, but they could be missing has proven it values transparency and also ask if you can reconnect with them in a
out on crucial information. welcomes critique, when they’ve already couple months.”
seen examples of exit interviews creating
positive change and when the system is set In a digital world, institutions may be
up to make it easy for them to be open with tempted to conduct both exit interviews and
their feelings and observations. post-exit interviews by online survey, but
that’s a mistake – according to Sullivan’s
Taking the last point first, resetting the research, around 70% of recipients will
process to allow honesty means having the simply ignore it. Spain suggests that
right person conducting the interview. That employers let the departing employee
person should not be their manager, nor choose how, when, where and with whom
should it be an unlucky intern. they’d be most comfortable conducting
the exit interview. Also, the simple move
“Organizations that truly value accurate of making the feedback anonymous – and
information often hire an outside consulting explicitly letting the employee know that –
firm to collect the data,” says Brooks Holtom, can help clear the air.
a professor in the McDonough School of
Business at Georgetown University, whose AN HONEST ENVIRONMENT
research focuses on how organizations
acquire, develop and retain talent. “Departing No matter how much effort an organization
employees often feel more comfortable
saying what they really think when they
perceive the interviewer is unbiased. At the
very least, HR should do the interview rather
than a direct supervisor.”

Sullivan is an advocate for post-exit
interviews – a phone call revisiting the
questions after a couple of months have
passed. The waiting period allows people
to settle into new jobs and approach the
exit interview questions without the fear of

FMS forward | MAY/JUNE 2018 | 35

puts in to try and make the process you’re still getting the same watered-down “I’m not suggesting institutions use this
conducive to candor, if the culture is not responses in all of your exit interviews. method for acting on exit interview data
transparent, respectful and accountable, it’s The first step is to approach all feedback exactly, but the point is that GE established
unlikely employees will suddenly find it in without defensiveness. a mechanism with teeth to collect and
their hearts to open up in the exit interview. “Organizations should look at the reasons consider employee ideas,” he explains.
for the departure and ask themselves “If an organization does not have such a
“There is no magic formula for getting truly sincerely, ‘What can we do to avoid mechanism to elevate it from its current
honest and helpful feedback from departing this in the future? How can we improve reality to its envisioned future, it will
remain unchanged. If there is not a system
No one’s going to say, ‘My boss is a jerk,’ on that places exit interview data in front of
their last day, especially if their boss is the one decision-makers in a timely and recurring
conducting the [exit] interview…The logic of way, its usefulness will be lost.”
the exit interview is that people are going to be
honest and spill their guts, but they just don’t. BETTER THAN BEFORE

John Sullivan, Professor of Management Despite these potential benefits, it can
– San Francisco State University still be difficult to make an argument for
overhauling the most unpleasant part of an
employees, but it is important to encourage hiring? What about onboarding? Training? employee’s tenure. To put it bluntly: Why
a culture where employees know that their Feedback? Career paths? Rewards and put all of this time and effort into someone
managers respect each of them and value recognition?’” Holtom advises. who’s already decided to leave?
their ideas,” Spain says.
After an attitude adjustment, it’s time to Retention is perhaps the most explicit
Perhaps the very best way to get input dive into the data. aim of the exit interview process. If a
and ideas from exiting employees, departing employee is honest about
however, is by having a solid track record “The data shows that 50% of turnover is what made he or she decides to leave,
of using exit interview feedback to drive preventable,” Sullivan explains. “When you the institution can respond. Whether
change in your institution. lose a person, you’re losing up to three times that response is revisiting compensation,
their salary – and it’s double the cost if they eliminating unethical behavior, identifying
“If an organization learns about something go to a competitor. And usually when a top bad managers or instituting better benefits
it should change by way of an exit performer leaves, they take three to five and recognition programs, an effective
interview, it should let employees know people with them. A lot of organizations will response to an insightful exit interview can
about the feedback and what is being rationalize this by claiming that everybody turn an otherwise bad thing into something
done about it,” Holtom says. “This sends has high turnover, but when you assign a of a positive.
a powerful signal to current employees dollar value to this, it changes everything.”
to speak up and share information the “You will find people who are mad and
organization can use to improve.” Sullivan’s point is that leaders should look leaving for a reason, and often that’s
at employee turnover statistically and preventable,” says Sullivan. “You can’t stop
In addition, this type of response can open assign metrics to attrition. Consolidating them from leaving, but you can stop future
up a dialogue for constructive criticism from individual exit interviews into a report employees from leaving. If you’re finding half
employees who are staying, as well as those allows patterns to emerge, which can of your attrition is preventable, you need to
who are leaving; it might even change the highlight potential management problems put a hell of a lot of effort into retention.”
minds of some who had a foot out the door. or larger cultural issues.
Even when exit interviews aren’t unearthing
ACHIEVING ACTION Spain cites GE under Jack Welch as an major problems or preventable retention,
example of an organization with a solid they may offer an excellent opportunity to
A successful exit interview program is a process in place to create change from build a new relationship with the departing
little bit of a chicken-and-egg scenario, feedback. In the early 90s, the company’s employee. While no longer a coworker, this
in that employees are more likely to be leaders actively solicited feedback from is the chance to open a door to ongoing
honest if employers are responsive, and their employees and had to decide to communication by inducting them into
employers are only able to be responsive if implement or dismiss those ideas on the what is essentially an alumni group. In fact,
employees are honest. It can be challenging spot while the CEO observed. Sullivan notes three potential benefits an
to take steps towards being proactive when organization can gain by ending employment
on a positive note and keeping a
36 | FMS forward | MAY/JUNE 2018 professional relationship alive: boomerangs,

referrals and a business source. at the new job, having an alumni network of toxic manager who forced them back into the
ex-employees with warm memories of their job search, for instance, it stands to reason
“Boomerangs” are what Sullivan calls time at your institution is a great source of that that same manager may not have been
employees who quit, but come back when referrals – both for new employees and for receptive to good ideas and innovations from
the job they left for doesn’t pan out. Exit new business. Sullivan’s recommendation the employee’s reports.
interviews with top performers are an is that off-boarding of this kind be built into
excellent time to let them know that if the exit interview process, so it’s not only A GRAND EXIT
they aren’t happy at their new gig, they’re about looking back over an employee’s time
welcome back anytime. with the organization, but forward to the Exit interviews can feel a like a bit of an
“We call it a ‘brown grass program,’” says relationship you’ll have in the future. obscure topic, and they’re rarely the source
of outside attention.
If an organization learns about something it
should change by way of an exit interview, “Organizations don’t talk about this publicly,”
it should let employees know about the Holtom says. “But not talking about it sends
feedback and what is being done about two messages: either we have a turnover
it. This sends a powerful signal to current problem, or we have this all figured out but
employees to speak up and share information we don’t want to share our secrets and give
the organization can use to improve. away our competitive advantage.”

Brooks Holtom, Professor of Business And make no mistake – a strong exit interview
– Georgetown University process can be a competitive advantage.

Sullivan. “The grass isn’t always greener. The exit interview is also an organization’s “Organizations with well-run exit
If you ask employees how many of them last chance to pick the departing employee’s interviews are in a position to better
felt that they were lied to in the interview brain. While exit interviews are an ideal time engage and optimize their talent, be
process, the number is 39% – that’s 39% to solicit negative feedback and criticism better learning organizations, create
who think they were misled about what the that might be driving good people away, it’s lifelong organizational ambassadors
job actually was.” also a perfect time to ask for positive ideas and learn information about their
and fresh perspectives that may never have competitors,” Spain notes. “Organizational
But even if a departing employee is happy been aired. If a departing employee had a leaders who establish effective interview
programs are also seizing an opportunity
to validate the worth and humanity
of their departing teammates – an
opportunity that a thoughtful leader
should never miss.” §

The Value of a “Stay Interview”

Exit interviews are an ideal time to sit down and ask the big their job better and let them know what they like about their job.
questions to really dig into what the employee experience at your
institution feels like. However, waiting until an employee is heading “Companies are better off spending resources on employee
out the door could be a big mistake. While exit interviews are engagement measures before people leave rather than trying to do
the perfect opportunity to take an in-depth look at the departing stuff after people leave,” Holtom adds. “And employees are more
employee’s entire experience and reason for leaving, pre-exit likely to give helpful feedback when they’re still committed to the
interviews may be the key to them never leaving in the first place. organization than when they’ve already decided to quit.”

“When people are leaving it’s too late,” Sullivan says. “You can’t Even if you can’t conduct “stay interviews” with every employee,
beg them to stay because they’ve already accepted a job. You have Sullivan advocates making sure to touch base with your top
to practice ‘stay interviews,’ or pre-exit interviews.” performers.

Pre-exit interviews should happen at least once a year, and ideally “Ask them why they stay – they could work anywhere and they’re still
every six months. Employees get the opportunity to sit down with an here with you,” he says. “They could tell you they love working with
HR representative or senior leader and tell them what would make their desk mate and you realize you were about to move one of them.”

FMS forward | MAY/JUNE 2018 | 37

Summer
School

38 | FMS forward | MAY/JUNE 2018

If compelled to come up with a pithy,
one-sentence capsule preview of the
2018 FMS Forum, it might go something
like this: sun, fun and education.

Thanks to its setting in beautiful
Orlando, the sun is something of a
sure thing in early June. Likewise,
given the traditional networking
opportunities afforded by this annual
gathering, abetted this year by the
hoopla surrounding the celebration
of the 70th anniversary of FMS, fun is
a virtual lock as well. But year after
year, the one absolute constant that
the FMS Forum has always delivered
has been an array of top thought
leaders and insightful topics for
finance and accounting professionals
– and 2018 looks to be a continuation
of this proud tradition.

So while some will be lured to the
Sunshine State this June by the
prospect of some time at the pool or
a chance to catch up with old FMS
friends, the main draw for most will
once again be the Forum’s three-day
slate of deep and diverse educational
sessions spread over the topical areas
of finance, accounting, strategic
issues and risk/internal audit. Here’s a
quick look at ten to keep an eye out for
as you plan your Orlando agenda.

FMS forward | MAY/JUNE 2018 | 39

These are just ten of UNDERSTANDING AND USING CUSTOMER PROFITABILITY
the more than 30 great
sessions set to unfold over Brad Dahlman, ProfitStars
three big days in Orlando.
Check out the full schedule Who are your key customers? There’s a compelling reason to find out – studies show that a
online at FMSinc.org/ large majority of the profit in most institutions is coming from just 20% of the customers. If
education and make your you don’t know who those 20% are, you probably don’t have a very clear idea of where to
plans now to join us for direct your strategic attention or which relationships to work hard to protect. Brad Dahlman
the FMS Forum! will identify and discuss a few analytical practices that can help you figure it all out.

THE IMPACT OF CECL: A FINANCIAL CRISIS RETROSPECTIVE

Larry Sorenson, Washington Trust Bank

While everybody busies themselves pulling together data and testing out models in order to
prepare for CECL, lost in the hectic run-up has been the notion of what life is actually going
to be like under the new accounting standard once it becomes effective. That’s why Larry
Sorenson decided to set the wayback machine to the financial crisis and re-run Washington
Trust’s data and performance metrics from that period under the assumption of CECL as the
in-force standard. How will CECL actually impact an institution once it’s in place in a couple of
years? To get a better feel for the future, this session will take a real-life look at the past.

DEPOSIT RISK MANAGEMENT AND BEYOND: LEVERAGING CUSTOMER DATA

Bruce Campbell, ALCO Partners

Everybody by now has heard about the importance of data and the growing role that data
analytics is sure to play in strategy development for successful organizations, but beyond
the grand pronouncements and the high-level tech talk, how does it all apply to the day-to-
day management of your institution? Bruce Campbell will break it down into terms that any
finance pro will understand and appreciate, focusing on how to use data to better measure
liquidity and predict customer deposit behavior.

FIVE THINGS FINANCIAL INSTITUTIONS NEED TO BE THINKING ABOUT NOW

John Behringer, RSM US LLP

When it comes to running your institution and planning for the future, you certainly have more than
five things to think about. But some loom larger than others, and John Behringer will spend his
presentation looking at the top five to focus on right now. From regulatory changes and tax reform
to data analytics and changing customer preferences, this is one session you can’t afford to miss.

IMPLEMENTING COSO’S NEW ENTERPRISE RISK MANAGEMENT
FRAMEWORK

Marianne Turnbull, CohnReznick LLP

For many institutions, ERM sounds like a great idea – actually putting it into practice, however,
is something else entirely. And in the wake of the new framework outlined by COSO in late 2017,
the boots-on-the-ground business of actual implementation may seem even more complicated.
Marianne Turnbull will therefore attempt what may seem impossible – making ERM make sense
for your institution, by focusing on where you stand now and where you want to be.

40 | FMS forward | MAY/JUNE 2018

A FRAMEWORK FOR STRATEGIC PLANNING IN THE BOND PORTFOLIO

Michael Davis, SunTrust Robinson Humphrey

What’s happening in your institution’s investment portfolio? And just as importantly, how
did you get there? Both strategic and tactical portfolio management are crucial to investing
success, and in this session Mike Davis will discuss the differences and demonstrate how
to use modern portfolio theory to develop a strategic portfolio management framework that
works for your institution.

WHY PLANNING AHEAD FOR M&A CORE IT CONTRACT NEGOTIATIONS PAYS OFF

Aaron Silva, Paladin fs

Of the many variables that can significantly impact a potential M&A transaction, the status of
IT contracts probably gets the least attention. But considering the amount of time and capital
that is often tied up in these deals, they truly have the ability to torpedo even the most well-
negotiated merger proposal. Aaron Silva explains why core and IT contracts are so important
to any M&A deal, and the steps that institutions should be taking to make sure such contracts
won’t be the fly in the ointment for their M&A plans.

CYBERSECURITY THREATS, TRENDS AND STRATEGIES

Mark Scholl, Wipfli LLP

Not a day goes by that doesn’t feature yet another bold-headline case of a major cyber
incident – the kind that cost millions of dollars and wipe out years of hard-earned customer
goodwill. As the financial industry continues to invest in the latest and greatest technology,
Mark Scholl discusses the most prominent threats, the controls institutions can and should
put in place to protect themselves and their customers and the steps to take after an attack to
restore normalcy and credibility.

HOW TO IMPLEMENT CECL IN EXCEL

Ryan Abdoo, Plante Moran

If your institution is in the process of considering whether to purchase modeling software to
manage the data-intensive transition to CECL, this session could not come at a better time.
Reprising the webinar presentation he offered in 2017 that turned out to be one of the most
highly attended online FMS offerings in our history, Ryan Abdoo demonstrates several Excel
calculations and strategies that can be employed to implement CECL.

HOW TO UP YOUR GAME: INTERNAL AUDIT BEST PRACTICES

Mary Lou Scalese, Customers Bank

Longtime FMS member (turn to page 10 to read her profile) and veteran auditor Mary Lou
Scalese shares IA best practices for financial institutions of all sizes. Whether you’re dealing
with $300 million or $10 billion in assets, the practical insights on factors such as performing
risk assessments and developing the audit plan in this interactive session will have something
to offer for every audit pro. §

FMS forward | MAY/JUNE 2018 | 41

CHAPTER AND VERSE

A SWEET GETAWAY

While FMS chapters present a smorgasbord of options when it If your mouth is watering just reading this, head over to www.
comes to education, networking and just plain fun all throughout fmsphila.com for more information. Room reservations can be
the year, big events like the 2018 FMS East Coast Regional made for a special rate by calling the hotel at (855) 729-3108 and
Conference nevertheless stand out on the calendar as something asking the room block for the Philadelphia Chapter of the Financial
truly special. Managers Society. Online registration will open in June, but for any
questions that just can’t wait, reach out to Tom Mennie at [email protected]
This year’s East Coast Regional will unfold September 23-25 in midcoastbankonline.com or call (302) 250-4288.
Hershey, Pennsylvania, as the Philadelphia Chapter presents
three days of expert insights, social outings and chances to connect
with members. Centered at the charming Hotel Hershey and
sponsored by FLHBank of Pittsburgh, IZALE Financial Group, and
Paladin fs, the East Coast Region will feature experts and thought
leaders from Global Tax Management, Janney Capital Markets,
The Kafafian Group, P&G Associates, Performance Trust Capital
Partners, PFM Asset Management, RKL LLP, RSM US LLP, Stevens &
Lee PC, and ZM Financial Systems.

But the conference is more than just hearty educational helpings
– there will be plenty of time for delightful diversions as well,
including the opening shindig at Troegs Brewing Company (hosted
by The Kafafian Group), followed by a dessert reception at the hotel.
And if that doesn’t satisfy your appetite for sweets, never fear –
complimentary tickets to Hershey Park will be available!

ON THE HORIZON May 15-16 NEW ORLEANS, LA
May 17-18 NEW ORLEANS, LA
COMPREHENSIVE ALM & IRR FROM THREE PERSPECTIVES June 10-12 ORLANDO, FL
A DEEP DIVE: LIQUIDITY MANAGEMENT July 15-20 SAINT LOUIS, MO
THE 2018 FMS FORUM September 9-14 MADISON, WI
2018 FMS-AMIFS INSTITUTE
FINANCIAL MANAGERS SCHOOL

We’re always adding new programming, so be sure to check the education calendar at FMSinc.org.
42 | FMS forward | MAY/JUNE 2018

FMS-AMIfs

Discover a place where Performance and Profitability Management
expertise exists to help you build confidence in your skills.

A comprehensive week-long program
Sunday, July 15 at 1:00pm to Friday, July 20 at 12:00 noon

LEARN MORE

WHAT TO EXPECT WHAT YOU’LL ACQUIRE WHAT YOU’LL LEARN

Hands-on training, Acquire the fundamental Learn about
case studies, building blocks in the Funds Transfer Pricing,
Capital and Asset Liability
group activities, and development of Product, Management. Sessions
real-life scenarios. Customer, and covering best practices,
recent research, and case
Organizational profitability. studies provide a real

JUST NEW SECTION hands-on and
ADDED ON SEVERAL CRITICAL RISK TOPICS practical experience.

REGISTRATION NOW OPEN AT FMSinc.ORG/INSTITUTE
FMS forward | MAY/JUNE 2018 | 43

Financial Managers Society PRSRT STD
1 North LaSalle Street, Suite 3100 US POSTAGE
Chicago, IL 60602
PAID
MARCELINE, MO
PERMIT NO. 13

EVER WONDER HOW YOUR INSTITUTION
COMPARES TO YOUR PEERS?

• ARE THEY FACING CHALLENGES IN THE SAME AREAS?
• WHERE ARE THEY GETTING A COMPETITIVE EDGE?
• WHERE ARE YOU OUTSHINING THEM?

FMS surveyed 400 leaders at banks and credit unions across the nation
to get that information for you. Get the inside scoop on:

• Biggest challenges
• Most important opportunities for growth
• Branch strategies
• Technological innovation
• Succession plans
• CECL implementation success

And More...

GO TO FMSinc.ORG/RESEARCH TO FIND HOW YOU STACK UP!


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