An Easy Way to Lose Sight of Critical Risks

CHICAGO — Let me ask you a question:

How does the executive team at your biggest competitor think about their future? Are they fixated on asset growth or loan quality? Gathering low-cost deposits? Improving their technology to accelerate the digital delivery of new products? Finding and training new talent?

The answers don’t need to be immediate or precise. But we tend to fixate on the issues in front of us and ignore what’s happening right outside our door, even if the latter issues are just as important.

Yet, any leader worth their weight in stock certificates will say that taking the time to dig into and learn about other businesses, even those in unrelated industries, is time well spent.

Indeed, smart executives and experienced outside directors prize efficiency, prudence and smart capital allocation in their bank’s dealings. But here’s the thing: Your biggest—and most formidable—competitors strive for the same objectives.

So when we talk about trending topics at today and tomorrow’s Bank Audit and Risk Committees Conference in Chicago, we do so with an eye not just to the internal challenges faced by your institution but on the external pressures as well.

As my team at Bank Director prepares to host 317 women and men from banks across the country this morning, let me state the obvious: Risk is no stranger to a bank’s officers or directors. Indeed, the core business of banking revolves around risk management—interest rate risk, credit risk, operational risk. To take things a step further:

Given this, few would dispute the importance of the audit committee to appraise a bank’s business practices, or of the risk committee to identify potential hazards that could imperil an institution. Banks must stay vigilant, even as they struggle to respond to the demands of the digital revolution and heightened customer expectations.

I can’t overstate the importance of audit and risk committees keeping pace with the disruptive technological transformation of the industry. That transformation is creating an emergent banking model, according to Frank Rotman, a founding partner of venture capital firm QED Investors. This new model focuses banks on increasing engagement, collecting data and offering precisely targeted solutions to their customers.

If that’s the case—given the current state of innovation, digital transformation and the re-imagination of business processes—is it any wonder that boards are struggling to focus on risk management and the bank’s internal control environment?

When was the last time the audit committee at your bank revisited the list of items that appeared on the meeting agenda or evaluated how the committee spends its time? From my vantage point, now might be an ideal time for audit committees to sharpen the focus of their institutions on the cultures they prize, the ethics they value and the processes they need to ensure compliance.

And for risk committee members, national economic uncertainty—given the political rhetoric from Washington and trade tensions with U.S. global economic partners, especially China—has to be on your radar. Many economists expect an economic recession by June 2020. Is your bank prepared for that?

Bank leadership teams must monitor technological advances, cybersecurity concerns and an ever-evolving set of customer and investor expectations. But other issues can’t be ignored either.

So as I prepare to take the stage to kick off this year’s Bank Audit and Risk Committees Conference, I encourage everyone to remember that minds are like parachutes. In the immortal words of musician Frank Zappa: “It doesn’t work if it is not open.”

5 Trends from Acquire or Be Acquired 2019

WASHINGTON, DC — To get a sense of what trended at Bank Director’s 25th annual Acquire or Be Acquired conference, here’s a link to five video check-ins.  All 2 minutes or less in length, these summarize various topics and trends shared with 1,300+ attendees.

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SAVE THE DATE:

Acquire or Be Acquired Conference
January 26-28, 2020 | Arizona Biltmore Resort | Phoenix, AZ

For early-bird registration, please click here.

Everything You Need to Know About 2019’s Acquire or Be Acquired Conference

WASHINGTON, DC — So, there’s this guy named Warren Buffet who has a few thoughts on business. This Nebraska-based investor once opined “I’d rather pay a fair price for a wonderful company than a wonderful price for a fair company.”  Quite sagacious — and appropriate to share in advance of our 25th annual Acquire or Be Acquired Conference which takes place January 27-29 at the JW Marriott Phoenix Desert Ridge in Arizona.

Since we last hit the desert, several regional banks have been active in the M&A market — and may continue to look for merger opportunities to build up scale. In addition, we’ve seen how tax reform had a big impact on the industry, with many making investments to grow their business.

Now, with the government shutdown straining our economy, big banks beating community banks on the digital front and shifting team & cultural dynamics, we have a lot of ground to cover over two-and-a-half days. Interested to see what we have planned? Take a look at the full agenda.

While I am excited to reconnect with quite a few folks, I am particularly interested in a number of strategic issues that will be discussed. For instance:

  1. Since the stock market doesn’t always reward longer-term thinking, what does a bank’s CEO needs to focus on, especially with many stocks being valued as if a recession is imminent;
  2. How can regional and local banks boost their deposits given the biggest banks 2018 deposit gather successes;
  3. How laggards to the digital movement can catch up with their peers? (One suggestion: take a look at Finxact, a “Tesla-like” financial technology company that offers an innovative, open-core banking platform. I believe it will quickly become a legitimate challenger to FIS, Jack Henry and Fiserv);
  4. The M&A outlook for 2019;
  5. How institutions can gain/acquire/rent the skills needed to vet and negotiate with potential FinTech partners;
  6. When we might see IPOs — realizing the SEC has to re-open before this occurs; and
  7. How many new bank applications will be approved by the FDIC, realizing that 14 were last year.

For those joining us in Arizona, I encourage men to bring a sports coat or a jacket for the evenings as we plan to be outside for our receptions and the desert quickly cools off once the sun sets. In addition, the rumors of people being in their seats at 7:15 – 7:30 on Sunday morning? 100% true. We start at 7:45 AM and there are quite a few pictures from last January’s event if you need visual proof.

Finally, the digital materials for the conference can be found on BankDirector.com. Once you register on-site, you’ll be given a passcode to access the materials that can be used throughout the event.

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Whether you are able to join us in person or are simply interested in following the conference conversations via our social channels, I invite you to follow @AlDominick @BankDirector and @Fin_X_Tech on Twitter. Search & follow #AOBA19 to see what is being shared with and by our attendees. If you are going to be with us in Arizona and we’re not already connected here on LinkedIn, drop me a note and let’s fix that.

On the Horizon for Bank CEOs, Their Leadership Teams and Boards

WASHINGTON, DC — Can community banks out-compete JP Morgan, BofA and Wells Fargo?  This is the elephant in the room awaiting 853 bank executives and board members — representing 432 Banks — at our upcoming Acquire or Be Acquired Conference.  The lights don’t officially come up on our 25th annual event at the JW Marriott Phoenix Desert Ridge until Sunday, January 27.  So in advance, three big questions I anticipate fielding in the desert.

Does 2019 Become the Year of BigTech?

As noted by H2 Ventures and KPMG, Amazon is providing payment services and loans to merchants on its platform, while Facebook recently secured an electronic money licence in Ireland.  Alibaba, Baidu and Tencent have become dominant operators in China’s $5.5 trillion payments industry.  Add in Fiserv’s recent $22B acquisition of First Data and Plaid’s of Quovo and we might be seeing the start of a consolidation trend in the financial technology sector.  Will such investments and tie-ups draw the attention of big technology companies to the financial services industry?

Has the window to sell your bank already closed?

When I heard the rumor that BBVA might be buying UK-based Atom Bank — one of the proverbial European challenger banks — I started to look at acquisition trends here in the U.S.  Case-in-point, we put together the following graphic in December for BankDirector.com

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We know that some community banks have been holding out hopes of higher pricing multiples or for a strategic partner.  These institutions might find the window of opportunity to stage an exit isn’t as open as it was just a few years ago. This doesn’t mean the window has shut — but I do think an honest assessment of what’s realistic, at the board level, is appropriate.

Wither the bond market?

A NY Times op-ed piece  posits that the bond market reveals growing cracks in the financial system.  Authored by Sheila Bair, the former chairwoman of the FDIC, and Gaurav Vasisht, director of financial regulation at the Volcker Alliance, it warns that “regulators are not doing enough to make sure that banks are prepared.”  While the duo calls for thicker capital cushions for big banks and tighter leveraged loan underwriting standards, I wonder how executives joining us in Arizona feel about this potential threat to our economy?
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As the premier bank M&A event for bank CEOs, senior management and board members, Bank Director’s 25th annual Acquire or Be Acquired Conference brings together key bank leaders from across the country to explore merger & acquisition strategies and financial growth opportunities. If you’re joining us in the desert, I’ll share a few FYIs later this week. If you’re unable to join us in Phoenix, AZ, I’ll be tweeting from @aldominick and using #AOBA19 when sharing on social platforms like LinkedIn.

I’ve spent the last 8 years engaged in board-level conversations. This is what I’ve found.

Quickly:

  • Members of a board have a duty of loyalty and also of care; at strong boards, these core responsibilities provide a foundation for five additional behaviors.

WASHINGTON, DC — This past week, I had the distinct pleasure of visiting San Antonio, Texas.  As I flew home on Thursday, I found myself reflecting on how purpose-driven companies (like the one I visited) focus on what their customers truly care about.  By extension, I spent time reflecting on how a board might best support and encourage this mindset.

As I wrote for a piece that posted on BankDirector.com yesterday morning, one of my favorite proverbs when talking about the value of high-performing teams is to go fast, go alone; to go far, go together.  Now, as my team prepares to head out to Chicago to welcome some 200 people to the Four Seasons Chicago for our annual Bank Board Training Forum, this mindset once again came front and center.

Given the financial industry’s rapid pace of change, one would be forgiven to think the best course of action would be to go fast at certain challenges.  However, at the board level, navigating an industry marked by both consolidation and emerging threats demands coordinated, strategic planning.

Since I re-joined our company in September of 2010, I’ve noticed five key elements characterize many boards at high-performing banks.  Some are specific to the individual director; others, to the team as a whole.

#1: The Board Sees Tomorrow’s Challenges as Today’s Opportunities

Despite offering similar products and services, a small number of banks consistently outperform others in the industry.  One reason: their boards realize we’re in a period of significant change, where the basic premise of “what is a bank” is under considerable scrutiny.  Rather than cower, they’ve set a clear vision for what they want to be and hold their team accountable to concepts such as efficiency, discipline and the smart allocation of capital.

#2: Each Board Member Embraces a Learner’s Mindset

Great leaders aren’t afraid to get up from their desks and explore the unknown.  Brian Moynihan, the chairman and CEO of Bank of America, recently told our Executive Editor that “reading is a bit of a shorthand for a broader type of curiosity.  The reason I attend conferences is to listen to other people, to pick up what they’re talking and thinking about… it’s about being willing to listen to people, think about what they say.  It’s about being curious and trying to learn… The minute you quit being educated formally your brain power starts to shrink unless you educate yourself informally.”

(*Spoiler alert: you can read more from Bank Director’s exclusive conversation with Moynihan in the upcoming 4th quarter issue of Bank Director magazine.)

#3: The Board Prizes Efficiency

In simplest terms, an efficiently run bank earns more money.  This allows it to write better loans, to suffer less during downturns in a credit cycle, to position it to buy less-prudent peers at a discount all while gaining economies of scale.

#4: Each Board Member Stays Disciplined

While discipline applies to many issues, those with a laser focus on building franchise value truly understand what their bank is worth now — and might be in the future.  Each independent director prizes a culture of prudence, one that applies to everything from underwriting loans to third-party relationships.

#5: The Board Adheres to a People-Products-Performance Approach

Smart boards don’t pay lip service to this mindset.  Collectively, they understand their institution needs to (a) have the right people, (b) strategically set expectations around core concepts of how the bank makes money, approaches credit, structures loans, attracts deposits and prices its products in order to (c) perform on an appropriate and repeatable level.

Looking ahead, I feel a sixth pillar could emerge for leading institutions; namely, diversity of talent.  Now, I’m not talking diversity for the sake of diversity. I’m looking at getting the best people with different backgrounds, experiences and talents into the bank’s leadership ranks.  Unfortunately, while many talk the talk on diversity, far fewer walk the walk.  For instance, a recent New York Times piece that revealed female executives generally still lack the same opportunities to move up the ranks and there are still simply fewer women in the upper management pipeline at most companies.

At Bank Director, we believe ambitious bank boards see the call for greater diversity as a true opportunity to create a competitive advantage. This aligns with Bank Director’s 2018 Compensation Survey, where 87 percent of bank CEOs, executives and directors surveyed believe a diverse board has a positive impact on the performance of the bank.  Yet, just 5 percent of CEOs above $1 billion in assets are female, 77 percent don’t have a single diverse member on their board and only 20 percent have a woman on the board.

So as we prepare to explore the strong board, strong bank concept in Chicago, I’m reminded of another adage, this one from Henry Ford.  If all you ever do is all you’ve ever done, then all you’ll ever get is all you’ve ever got…

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If you’re curious about what we’re talking about in Chicago, I encourage you to follow the conversation on social media, where we’re using #BDTrain18 to tag shared ideas on LinkedIn and Twitter.

An Early Look at the 2019 Acquire or Be Acquired Conference

Quickly:

  • Bank Director’s 2019 Acquire or Be Acquired Conference takes place next January 27 – 29 at the JW Marriott Phoenix Desert Ridge in Phoenix, AZ.  To register, click here.

WASHINGTON, DC — As the last few hours of July tick by, our team continues to build towards next winter(!) and the premier bank M&A event for CEOs, senior management and board members: Bank Director’s annual Acquire or Be Acquired Conference. This special event brings together key bank leaders from across the country to explore merger & acquisition strategies, consolidation trends and financial growth opportunities.

Earlier this year, we welcomed 1,200+ to the Arizona desert — and anticipate a similar audience when we return a week before next year’s Super Bowl. We’ve recently added a lot of new information on January’s program to BankDirector.com; if you’re interested to see what we’re planning, I invite you to take a look.

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In addition to Acquire or Be Acquired, I am really excited to host two conferences before we return to the desert.  On September 10-11 at the Four Seasons Hotel Chicago, we host our very popular Bank Board Training Forum.  This two-day program provides bank directors with the education and training needed to address the issues and challenges facing them in today’s ever competitive, highly regulated and rapidly evolving banking and financial services industry.

From November 5 – 7, at the Four Seasons Resort & Club Dallas at Las Colinas (a short hop from DFW airport), we convene Bank Director’s annual Bank Compensation & Talent Conference to focus on the recruitment, development and compensation of a bank’s most essential talent.  While in Dallas, leading advisers share their perspectives on building and supporting the best teams by providing first-hand information on the strategies and plans being used by successful banks today.

If you’re interested in any of these three exceptional programs, you can learn more here.

5 Trending Topics at the Acquire or Be Acquired Conference

Quickly:

  • Large buyers are not in the bank M&A game right now; indeed, banks $25Bn and below continue to drive M&A activity. Case-in-point, 95% of total M&A deals since 2011 have buyer assets less than $25Bn. Might this change in 2018?

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech.

PHOENIX, AZ — Michael Porter, the noted economist, researcher and teacher, once said, “strategy is about making choices, trade-offs; it’s about deliberately choosing to be different. The essence of strategy is choosing what not to do. No one can tell you which rules to break, but you can acquire more skill in determining which rules to break given your talents and circumstances right now.”

Porter’s perspectives came back to me while listening to KBW’s CEO, Tom Michaud. Yesterday morning, Tom talked about the strategic paths that a bank’s CEO might consider in the years to come. As he shared, pressure from investors to deploy capital stimulated M&A discussions in 2017 — and will continue to impact deals in 2018. He also noted that pressure placed on deposit costs, as interest rates rise, contributes to the potential acceleration of bank consolidation. These were just two of the many notes I jotted down during the first day of our annual event. Broadly speaking, what I heard fell into five categories:

1. Economic trends
2. Regulatory trends
3. Small business lending trends
4. Management succession trends
5. Technological innovation trends

Many banks enter 2018 with steady, albeit slow loan growth — while recognizing modest margin improvement as they continue to focus on controlling expenses. Accordingly, I thought to elaborate on the issues I found interesting and/or compelling. Feel free to comment below if other points caught your eye or ear.

Economic Trends

FJ Capital authored a piece in late October that noted how, as the Fed progresses further into the tightening phase of the interest rate cycle, banks will find it more difficult to fund loan growth by raising new low‐cost deposits. Their view, which I heard echoed here, is banks with low‐cost core deposits will become more valuable over the next few years as banks wrestle with increased funding costs. In addition to this idea, I made note that banks with a strong deposit base could be more attractive to buyers as interest rates rise. However, a remark I’ve heard at past events re-emerged here. Namely, making a small bank profitable is hard; exiting, even harder.

Regulatory Trends

Given the audience here, I wasn’t surprised by the continued talk of removing the synthetic $10Bn designation. If the Fed, FDIC and OCC raise the $50Bn threshold as spelled out in Dodd Frank, we could see more banks in the $20Bn – $40Bn range come together. Given that large regional banks usually can pay high prices for smaller targets, unleashing this capacity could reignite more M&A and boost community bank valuations. In addition, the Community Reinvestment Act remains a major headwind in bank mergers. Many here want improvements in the CRA process, which in turn could reduce regulatory risk for bank M&A.

Small business lending

When it comes to the lifeblood of most banks — small business lending — a recurring question has been where and how community banks can take market share from larger banks. My two cents: closing loans faster is key, as is structuring loans to fit specific borrower profiles while being supremely responsive to the customer. Oh, and credit is a big theme right now — and the best clients typically have the best credit.

Management succession

An inescapable comment / observation: aging management teams and board members has been a primary driver of bank consolidation of late. I noted that the average age of a public bank CEO and Chairman is 60 and 66, respectively. It was suggested that this demographic alone plays a key factor in the next few year’s consolidation activity.

Technological trends

When it comes to bank mergers, one of the big drivers of deals is the rise in technology-driven competition (*along with regulatory costs and executive-succession concerns). I sense that most traditional banks haven’t really figured out the digital migration process we’ve embraced as a world. Finally, it appears that the biggest banks are winning the war for retail deposits.  This is an issue that many management teams and boards should be discussing…

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For those of you interested in following the conference conversations via our social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector and our @Fin_X_Tech platform, and search & follow #AOBA18 to see what is being shared with (and by) our attendees.

10 Questions I Plan To Ask During Acquire Or Be Acquired

Quickly:

  • Despite improving economic conditions, the business of banking remains difficult.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech.

PHOENIX, AZ — For all the talk of bank consolidation, there are still 5,700+ banks in the United States.  But let’s not kid ourselves.  For many community banks today, earnings pressures + regulatory and compliance costs + the continued impact of technology = a recurring challenge.

While the number of banks in business will inevitably shrink over the next 10 years — perhaps being cut in half — I remain bullish on the overall future of this industry. If December’s tax reform spurs capital spending and job creation by small- and medium-sized businesses, many of the banks joining us here in Arizona stand to benefit. But will the recent tax cut induce companies to invest more than they already planned to? This is but one of a number of questions I look forward to asking on stage through the first day of Bank Director’s Acquire or Be Acquired Conference.

Below, ten more questions I anticipate asking:

  1. Are FinTechs the industry’s new de novos?
  2. What does it mean that the banking world is deposit rich yet asset poor?
  3. Why are certain credit unions thinking about about buying banks?
  4. In terms of technology spending levels, where are dollars being earmarked and/or spent?
  5. With respect to small business lending, do credit unions or FinTechs pose a more immediate challenge to community banks?
  6. What is an appropriate efficiency ratio for a bank today?
  7. Will big M&A buyers get back in the game this year?
  8. What are some of the critical items in due diligence that are under appreciated?
  9. What does an activist investor look for in a bank?
  10. Is voice recognition the next huge source of growth for banks?

We have an exciting — and full day — coming up at the Arizona Biltmore. To keep track of the conversations via Twitter, I invite you to follow @AlDominick @BankDirector and @Fin_X_Tech.  In addition, to see all that is shared with (and by) our attendees, we’re using the conference hashtag #AOBA18.

21 Reasons I Am Excited About Acquire or Be Acquired

Quickly:

  • Making banking digital, personalized and in compliance with regulatory expectations remains an ongoing challenge for the financial industry. This is just one reason why a successful merger — or acquisition — involves more than just finding the right cultural match and negotiating a good deal.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech.

PHOENIX, AZ — As the sun comes up on the Arizona Biltmore, I have a huge smile on my face. Indeed, our team is READY to host the premier financial growth event for bank CEOs, senior management and members of the board: Bank Director’s 24th annual Acquire or Be Acquired Conference. This exclusive event brings together key leaders from across the financial industry to explore merger & acquisition strategies, financial growth opportunities and emerging areas of potential collaboration.

AOBA Demographics

The festivities begin later today with a welcoming reception on the Biltmore’s main lawn for all 1,125 of our registered attendees.  But before my team starts to welcome people, let me share what I am looking forward to over the next 72 hours:

  1. Saying hello to as many of the 241 bank CEOs from banks HQ’d in 45 states as I can;
  2. Greeting 669 members of a bank’s board;
  3. Hosting 127 executives with C-level titles (e.g. CFO, CMO and CTO);
  4. Entertaining predictions related to pricing and consolidation trends;
  5. Hearing how a bank’s CEO & board establishes their pricing discipline;
  6. Confirming that banks with strong tangible book value multiples are dominating M&A;
  7. Listening to the approaches one might take to acquire a privately-held/closely-held institution;
  8. Learning how boards debate the size they need to be in the next five years;
  9. Engaging in conversations about aligning current talent with future growth aspirations;
  10. Juxtaposing economic expectations against the possibilities for de novos and IPOs in 2018;
  11. Getting smarter on the current operating environment for banks — and what it might become;
  12. Popping into Show ’n Tells that showcase models for cooperation between banks and FinTechs;
  13. Predicting the intersection of banking and technology with executives from companies like Salesforce, nCino and PrecisionLender;
  14. Noting the emerging opportunities available to banks vis-a-vis payments, data and analytics;
  15. Moderating this year’s Seidman Panel, one comprised of bank CEOs from Fifth Third, Cross River Bank and Southern Missouri Bancorp;
  16. Identifying due diligence pitfalls — and how to avoid them;
  17. Testing the assumption that buyers will continue to capitalize on the strength of their shares to meet seller pricing expectations to seal stock-driven deals;
  18. Showing how and where banks can invest in cloud-based software;
  19. Encouraging conversations about partnerships, collaboration and enablement;
  20. Addressing three primary risks facing banks — cyber, credit and market; and
  21. Welcoming so many exceptional speakers to the stage, starting with Tom Michaud, President & CEO of Keefe, Bruyette & Woods, Inc., a Stifel Company, tomorrow morning.

For those of you interested in following the conference conversations via our social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector and our @Fin_X_Tech platform, and search & follow #AOBA18 to see what is being shared with (and by) our attendees.

Bank CEOs and Their Boards Can Lay Claim to These 5 Technologies

Quickly:

▪ Regional and community banks continue to lay claim to innovative technologies that attract new customers, enhance retention efforts, improve efficiencies, cut costs and bolster security.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech

ATLANTA — The digital distribution of financial goods and services is a HUGE issue for bank executives and their boards.  Margins on banking products continue to decline due to increased competition.  In my opinion, this provides ample incentivize for banks to seek partnerships with specialized product and service providers.

I shared this thought earlier today at Bank Director’s annual Bank Board Training Forum. During my remarks to an audience of 203 officers and directors (representing 84 financial institutions), I laid out five potential area of collaboration that community bank CEOs and their boards might spend more time discussing:

1. New core technologies;
2. Machine learning / Artificial intelligence applications;
3. RegTech;
4. Payments; and
5. White labeling product offerings.

I elaborated on why I think our audience needs to explore each area before expanding on how banks might take steps to incorporate such technologies into their culture and business.  I wrapped up by providing examples of companies in each space that attendees might learn more about.

For instance, when it comes to the core technological systems offered by Fiserv, Jack Henry and FIS, many banks are investing in “integration layers” to bridge the needs of client‐facing systems with their core system. While these layers have proven valuable, banks are also aware of the need to migrate away from legacy cores should the flexibility they desire not come from these companies.  Hence the advent of companies like Finxact, a cloud banking platform promising to be the most transparent and open core banking system available.

In terms of machine learning and artificial intelligence, I see five potential use cases for banks to consider: smarter customer acquisition, better Know-Your-Customer efforts, improved customer service, smarter and faster account openings and the ability to offer more competitive loans.  Here, I am impressed with the work being done by companies like Kasisto, whose conversational AI platform is pre-loaded with thousands of banking intents and millions of banking sentences.  It promises to fulfill requests, solve problems, predict customers’ needs and improve performance on its own using sophisticated machine learning.

Given the cost and complexity of compliance, RegTech offerings promise to simplify fraud prevention and detection, improve the interpretation of regulation while accelerating reporting functions.  Further, RegTech companies held simplify data access, storage and management while strengthening risk management efforts.  There are quite a few companies in this fast-growing space that I highlighted.  One is Fortress Risk Management, a company whose advanced analytics predict and detect financial crime while its tool enable efficient case management, dispute management, reporting and regulatory compliance.

With respect to payments, our rapidly changing and oh-so-interconnected markets of debit, credit, mobile, prepaid and digital payments proves both a blessing and a potential curse for traditional institutions. As we move toward a cashless society and payments become less visible, banks need to maximize their opportunities to become the default payment method, and keep abreast of innovations in credit scoring, faster payments, analytics, security and fraud detection.  Case-in-point, BluePay delivers non-interest income to banks of all sizes by aggregating customer data coupled with the latest merchant processing technology.

Finally, white label product offerings are nothing new.  However, technology companies like SimplyCredit and StrategyCorps continue to help banks reshape and rethink customer engagement, setting new and higher bars for their’s clients’ experiences.  For banks seeking innovations like rapid loan adjudication, partnering with technology providers like these enables a bank to keep pace with the customer experience expectations set by large technology firms.

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If you weren’t able to join us in Atlanta and are curious about today’s featured image, here is a link to the pdf: 2017 Bank Board Training Presentation (Tech-focused). As I shared, New Zealand’s All Blacks are the world’s most successful sporting outfit, undefeated in over 75% of their international rugby matches over the last 100 years.  Their willingness to change their game (and their culture) when they were at the top of their game inspired me — and allowed me to challenge our attendees to think if they are willing to do the same with their banks.  I’m also inspired by my colleagues who helped develop this year’s program. From our conference team to editorial group, marketing to data departments, I’m proud to work with a great group dedicated to the idea that a strong board makes contributes to a strong bank.

Strong Board. Strong Bank

Quickly:

  • A bank’s CEO, Chairman and board of directors face a number of challenges in today’s ever competitive, highly regulated and rapidly evolving financial services industry.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech

ATLANTA — Complex regulations, technological innovations and a highly competitive environment that leaves little room for error have placed unprecedented demands on the time and talents of bank boards.  Still, no one I’m with today seems interested in pity or sympathy.  To wit, I’m in Atlanta, at the Ritz-Carlton Buckhead, as we host Bank Director’s annual Bank Board Training Forum.  With us are 200+ men and women committed to strengthening their bank’s performance by enhancing the skills and abilities of their boards.

I’m buoyed by their collective optimism, especially having surfaced myriad governance issues, compliance challenges, audit responsibilities, risk concerns and areas of potential liability. What follows are five takeaways from presentations made today that are growth, risk or team-oriented.

  1. When it comes to growing one’s bank, an acquisition of another institution certainly helps a buyer achieve operating scale efficiencies, which in turn increases its valuation.
  2. In addition to traditional M&A as a driver of growth, we are seeing more partnerships with (and outright acquisitions of) non-banks in order to enhance non-interest income and the expansion of net interest margins.
  3. Personally, I appreciated Jim McAlpin (a partner at the law firm of Bryan Cave) for elaborating on the phrase “Strong Governance Culture.” As he explained, the regulatory community takes this to mean a well developed system of internal oversight and a board culture focused on risk management.
  4. When it comes to risk, financial institutions face a quite a few. Indeed, Eve Rogers, a Partner at Crowe Horwath, touched on cybersecurity, economic factors, regulatory changes, shrinking margins and fee restrictions. As she made clear, proactively identifying, mitigating, and, in some cases, capitalizing on these risks provides a distinct advantage to the banks here with us.
  5. In terms of compensation, a good checklist for all banks includes (a) the bank’s compensation philosophy, (b) specific details for how to incorporate a performance plan against a strategic plan and (c) details around how one’s compensation peer group was formed — and when was it last updated.

Tomorrow morning, I share some new ideas for approaching technology in terms of growth and efficiency given the digital distribution of financial goods and services.  As I noted from the stage, we’re seeing some banks, rather than hire from the ground up, take a plug-and-play approach for partnering (or acquiring) FinTech companies. While I certainly intend to talk about the culture and team aspects of technology tomorrow, my focus goes to how and where machine learning, RegTech, payments, white labeling opportunities and core providers allow financial institutions to present a cutting-edge looks and feels to its customers under the bank’s brand.  (*If you’re interested, click here.)

Consolidation Trends in Banking

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech

Quickly:

  • Nationwide consolidation in the banking space will continue; at least, that is my sense based on conversations and presentations at Crowe Horwath’s Bank Leadership and Profitability Improvement Conference.

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So much of this morning was spent talking about growth through mergers and acquisitions (M&A) that I couldn’t help but flash back to January’s Acquire or Be Acquired conference.  Thematically, I went into that event expecting the unexpected.  Given this morning’s presentations on growing one’s bank, I believe that mindset still holds water.

For example, Tom Michaud, the president and CEO of Keefe, Bruyette & Woods, described 2016 and 2017 as one bumpy ride.  From recession fears to lower-for-longer rates, the initial euphoria after the presidential election (at least in terms of stock prices, which went up 27% – 30%) to the uncertainty of regulatory relief, he reminded us of where we are coming from relative to where we might be heading.  I am always curious to hear what Tom thinks about the state of banking; below, ten things I learned from him this morning:

  1. The interest rate outlook is a bit cloudier than it was in November;
  2. Regional banks have had excellent earnings per share growth relative to the overall market;
  3. We have an active pace of consolidation — nearly 5% of the industry is merging;
  4. The most prolific acquirers can buy 2, maybe 3 banks, at best each year;
  5. M&A deals are getting bigger — not ’97 or ’98 levels, but bigger than where they’ve been;
  6. Large buyers are not in the game right now — buyers $25Bn and below continue to drive M&A activity (case-in-point, 95% of total M&A deals since 2011 have buyer assets less than $25Bn);
  7. Buyers are completing their acquisitions in 6 months or less;
  8. Banks with strong tangible book value multiples are dominating M&A;
  9. There have been 37 bank IPOs since 2013 — and the market today is open to small bank IPOs; and
  10. If you’re running a bank, you better be watching (like a hawk) the FinTech charters being pursued by companies like SoFi.

Following Tom’s presentation, we doubled down on growing-the-bank type topics with a session involving Rick Childs, a partner at Crowe Horwath, Jim Ryan, the CFO at Old National Bancorp, Jim Consagra, EVP and COO at United Bancshares and Bryce Fowler, chief financial officer at Triumph Bancorp.

From pricing discipline to acquisitions of privately-held/closely-held companies, the guys made clear that “there are only so many deals out there.”  They shared how boards need to determine the size they want to be, honestly assess the talent they have relative to such aspirations and determine how growth through M&A aligns with enterprise risk management positioning.  Essentially, their remarks made clear that a successful merger or acquisition involves more than just finding the right match and negotiating a good deal.

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As I shared with yesterday’s post, my thanks to Crowe Horwath, Stifel, Keefe Bruyette & Woods and Luse Gorman for putting together this year’s Bank Leadership and Profitability Improvement Conference at The Inn at Spanish Bay in Pebble Beach, California.