Half-Day Event Jointly Sponsored by New Jersey Bankers Association

 

ARTICLE AND PHOTOGRAPHY BY DAVID LAUWE - META4 COMMUNICATIONS

 

Members of the FMS NY/NJ Chapter joined their counterparts from the New Jersey Bankers Association at a jointly sponsored Half-Day CFO Conference. The event featured an agenda of contemporary educational sessions designed for the community banking executive presented by respected and knowledgeable speakers in the banking industry. The event was held at the Stony Hill Inn in Hackensack, NJ on Friday April 12, 2019. Attendees earned five CPE credits for attending the conference.

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Members enjoyed a hot buffet breakfast prior to the opening session, which featured a very informative and detailed review of the economy. The Macroeconomic Outlook was presented by Niso Abuaf, PhD from Ramirez & Co. He very aptly discussed the perils and benefits of economic forecasting. In the words of John Kenneth Galbraith, he noted “There are two kinds of forecasters: those who don’t know and those who don’t know they don’t know.” Niso provided a synopsis of the current economic conditions and advised that the Fed is optimistic, yet cautious about the US economy. He noted the US experienced strong 3% GDP growth during 2018, far higher than the 1.8%-2.0% average over the past several decades.

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Brad Brockman and Bryan Ridgway from Kaufmann Hall Axiom Software presented Relationship Profitability: Unlocking Value from the Institution’s Relationships. The session centered on the concept of bringing profitability from the back office to the front lines by creating a culture focused on increasing value. Bryan stressed the importance of identifying the customer relationships that bring the most value to an institution and developing strategies to develop and maintain those relationships as an integral part of an institution’s management plan. Brad stressed the importance of pricing products based on the value of the relationship with an institution’s most valued customers. The speakers provided detailed examples of pricing models and made specific recommendations that management should consider when making pricing decisions.

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Jerry Clark from ZM Financial Systems presented an informative and entertaining Asset and Liability Management (“ALM”) session. Jerry presented a series of humorous slides that in many ways are indicative of ALM decision making. He compared the photo on the opening slide of a car skidding sideways into a snow bank because the driver was unable to anticipate skidding on a curve, much like an institution’s ALM plan that fails to negotiate an interest rate curve. Jerry noted how ALM has evolved from the stone age as depicted in the cave men cartoons in his presentation into being an integral part of every bank’s management plan. Jerry provided a history lesson of financial failures and enumerated the specific objectives that management should formulate in their bank’s ALM plan.

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While members enjoyed a sumptuous full course luncheon, Scott Hildenbrand from Sandler O’Neill + Partners presented a Balance Sheet Strategy program. Scott outlined the current balance sheet trends noting that liquidity and cost of funds continues to be a focus and that down rates are not so crazy anymore. He noted that Fed Funds are now expected to move lower and that the probability of a rate hike in the next year is unlikely. Scott explained the new hedge accounting rules and the corresponding strategy implications. He provided specific investment portfolio tactics and deposit product offerings to maximize profitability in a downward rate environment. Scott offered examples of new funding opportunities to beat the spread by hedging rollover risk.

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Assessing Your Financial Institution’s Culture was presented by Scott Baranowski and Drew Coveney from Wolf & Co. following lunch. Scott emphasized that an institution’s underlying culture is the responsibility of the board and senior management working together with human resources, risk management and internal audit. He explained that the board establishes the ethical framework of a bank’s culture, establishes a risk appetite and has the responsibility of culture “oversight”. Senior management is responsible for implementation and monitoring of the board’s culture plan. Scott explained the important steps an institution should consider in assessing the bank’s culture including code of conduct enforcement and training. Drew provided specific examples of “When culture goes bad” including well-known failures at Wells Fargo, Volkswagen, Tesla and Equifax.