Plansmith Blog

The Future Risk in Community Banking

Posted by Craig Hartman on 12/8/14 10:30 AM

Since the introduction of the venerable GAP analysis in the mid-1970s, risk management has continued to evolve. It has moved from the basic mismatch of rate sensitive assets and liabilities to more sophisticated techniques – such as prepayment modeling, rate change betas on non-maturing deposits, and rate shocking with parallel rate shifts and non-parallel rate shifts. Then mark-to-market analysis of the balance sheet and the impact on equity was brought in with the attendant benchmarks. These are all interesting measurements of the company’s risk at a point in time. It’s like glancing at your car’s dashboard.

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Community Bankers: Year-End is Almost Here!

Posted by Sherri Scott on 12/1/14 10:00 AM

Whether your year-end is calendar or fiscal, there are a few things you can do to make the future-you happy. Examiners and auditors thoroughly enjoy marking off their-checklist of items to review and criticize. Most times the request letters ask for the same documents year-after year. Create an exam folder complete with instructions for yourself for the following year.

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Community Banks, Budget Your Time!

Posted by Sherri Scott on 11/17/14 5:30 PM

Interest rate risk, call reports, budget, ALCO, board meetings, re-doing the budget, exams, audits, holiday parties, vacation schedules…I’m already exhausted. My suggestion, budget your time! I can’t tell you how many times I hear clients say they had to postpone scheduled days off to complete their workload. This is the perfect time to plan what you can before year-end.

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Community Banks: Establish Goals and Contingency Funding Plans

Posted by Craig Hartman on 10/21/14 5:00 PM

"May you live in interesting times." This ancient Chinese proverb continues to describe the nature of banking. The banking community is going through the most challenging period since the Great Depression. Not only is the economy unsure, but flat interest rates, coupled with new regulation and increased consolidation, have caused massive structural changes within the financial industry. In brief, the task of management has become more difficult. It has changed from a maintenance task to one of survival. Today’s banker must be more sensitive to marketing, pricing, resource allocation, and productivity than at any time in the past. He/she must sharpen their business expertise, marketing skills, investment sense, and develop a tougher attitude toward expense control. To accompany all this, you must have the appropriate informational tools that allow you to assimilate and evaluate the impact of possible changes to the institution’s current and future income.

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Do You Balance Your Community Bank's Checkbook?

Posted by Shawna Brauer on 9/22/14 4:30 PM
It is always interesting to me to hear different people’s views of cash flow – from a personal perspective as well as a business perspective. I regularly ask people if they balance their personal checkbooks. Shockingly - to me, at least – I almost always hear "no". Most people feel comfortable checking an app or logging in online to view their balance periodically, scanning transactions for reasonableness rather than logging debits and credits in an old-fashioned check register. (Full disclosure time…I still use a check register for my personal accounts, so I’m biased here. I find it strangely comforting.) But most consumers feel they have a good handle on their cash flow without writing out the details. If they’re running short on cash they have back-up plans in mind - they can transfer money from another account, cut spending in the short term, ask relatives for a loan or cross their fingers, hold their breath and wait it out.

Interestingly, the response I usually hear from small businesses (outside of the banking industry) is that they do have a strong, more formal handle on their day to day cash needs. They keep a check register (albeit mostly electronically, for example in QuickBooks). They know how much cash they need to fund their regular business needs and they monitor their cash flow in detail. They know which customers they need to collect from up-front, and which ones are slow to pay. They have concrete back-up plans if cash runs tight – savings, lines of credit, which bills they can delay paying versus which payments are critical to be paid on time. They know where they’ve been and where they’re trending - positive cash flow is critical to staying in business, so cash flow is always top of mind. Otherwise they’re out of business (and hence not part of my survey.)

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A Tech In Community Bank’s Clothing

Posted by Ricardo Pena on 5/22/14 3:30 PM
The road to profitability begins with a very simple concept. An asset is acquired at a certain value X and it is sold at a value Y where Y is greater than X and the difference between the two gets you going. This is a concept that is very simple indeed. But this post isn’t a narrative about the arithmetic involved in generating profits; rather it is a discussion that begins with examining the nature of the assets being bought and sold, which is money.

Non-financial businesses ranging from the humble lemonade stand to the behemoth WalMart are easy to understand. The assets being transacted are, for the most part, quite tangible. It is easy to understand that something is manufactured, it is delivered to a retail place of business, it is stored in a warehouse as a portion of inventory, it is displayed on a shelf and it is ultimately purchased by people like you and me to put in a bag to take home. The equivalent chain of distribution can be identified in banking but there is one big difference that makes it all the more complicated. It is the fact that the product, being money in its many different forms, is not something you see, feel, taste, hear, or smell in any direct way.

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Community Bankers, Use Scenarios to Reduce Uncertainty

Posted by Karen Schaefer on 5/9/14 12:00 PM

If you are a parent, you use "what if" scenarios every day with your child. What if you get lost? What if you saved your allowance rather than spend it? What if your friends ask you to…? What if you study for that test? What if a stranger offers you a ride?

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Community Bankers, Aloha and Mahalo!

Posted by Brett Hendricks on 4/14/14 11:00 AM
Wow - what a fantastic trip to the 2014 ICBA in Honolulu this past March. It was a long way to travel but given this year’s weather, a little time in the sun mixed with one of my favorite conventions could not have come at a better time.

I would like to extend a sincere thank you to all of our clients and prospective clients that stopped by the Plansmith booth and took a few minutes to talk with me and my colleague, Ron Trice. In an era of endless emails, conference calls and web presentations it is always nice to put a face to a name and shake hands with all of you. If you didn’t come by the booth but happened to see the two tall guys in the loudest most obnoxious Hawaiian shirts ever - yes, that was us.

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Two Tickets to Washington D.C.

Posted by David Schwieder on 3/17/14 9:30 AM
Tom Parsons and I had the pleasure of attending the CUNA Government Affairs Conference in our nation’s capital. It was a great opportunity show support for our many credit union clients as well as learning more about the many challenges they face.

Opening night featured a performance by singer Eddie Money, which literally had the Washington Convention Center "shaking to the beat of the night". Day two presented a strong stream of visitors to the many exhibitor booths spread out around the convention center floor. It was great to finally put a few client faces to the many voices that we speak to regularly. We met a number of new credit unions that were interested in our solutions for managing risk and active planning. It was fun being able to run our Financial Compass model for these individuals, right there on the convention floor. Some really seemed impressed by our ability to quickly provide a two and three year rolling forecast for their organization. Impressive perhaps, but after all, "the future is ours to see".

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Of Bulls and Bears (Deuxième Partie)

Posted by Tom Parsons on 3/7/14 5:00 AM

Last week we covered the first half of the OCC letter requesting information from client banks on their interest rate risk (IRR) model. Along with the letter, you may have run across some forms to be filled in with results from your model. This post and the accompanying webinar are meant to clarify the letter and terminology. Separately, but related, we have produced a video and guide for completing the OCC EV IRR Data Form for Financial Compass Clients (to be released soon).

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