Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com1
Remaining Relevant and Achieving Desired Financial Performance with an
Uncertain Rate Environment
Sally Myers
CEO/Principal
Rob JohnsonEVP/Principal
May 18, 2015
Ob
ject
ive
This session will focus on a CFO’s responsibility to:
Identify the potential challenges and threats to the institution’s relevance and financial performance
Help other key stakeholders understand them as they decide and execute business strategies
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com2
Ab
ou
t c.
mye
rs We have the experience of working with over
500 credit unions
• 50% of those over $1 billion
• 25% of those over $100 million
Services: Strategic planning, A/LM, NEV, budgeting, liquidity, mergers, long-term financial forecasting, process improvement, project management, model validations
Facilitate 100+ strategic planning and process improvement engagements each year
Founded in 1991
45 people on the c. myers team
g
“If everyone is thinking alike, then somebody isn’t thinking.”
—General George Patton
Relevancy
Sustainability
Differentiation
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com3
20049,000stores
$5.9 billionin revenue
Source: Blockbuster and the End of Movie Buying, Bloomberg Businessweek, 11/8/13
2013300
stores$120 millionin revenue
Blo
ckb
ust
er F
ails
In It
s S
trat
egic
Pla
nn
ing
Did you know?
In 1997, a man named Reed Hastings returned a late copy of "Apollo 13" to his local Blockbuster. He was assessed a $40 fee. Two years later, he founded Netflix
Blockbuster could have purchased Netflix for $50 million in 2000, but passed
Source: Your late fees are waived: Blockbuster closes, CNN.com, 11/6/13
Blo
ckb
ust
er F
ails
In I
ts S
trat
egic
Pla
nn
ing
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com4
Th
e B
attl
efie
ld C
han
ged
WE CAN BEAT OTHER VIDEO
STORES
Th
reat
s
Changes in consumer behavior
Non-traditional sources of competition
FASB credit risk
Talent acquisition and retention
Payments systems
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com5
Th
reat
s Rapid development in, and adoption
of, technology
Risk management
• Interest rate risk
• Cyber security risk
• Liquidity risk
• Credit risk
Regulatory
Reg
ula
tory
Th
reat
s
CFPB eliminating ODP debit transaction fees
RBC 2 and potential IRR standardization
Change in NCUSIF calculation components
FASB credit risk compliance costs
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com6
Str
ateg
y L
ever
sYield on Assets
– Cost of Funds= Net Interest Margin
– Operating Expense– Provision for Loan Loss+ Fee/Other Income
= Return on Assets (ROA)
Source: NCUA/CUNA
199466% 42%
2014Cre
dit
Un
ion
Co
nsu
mer
Lo
ans/
Lo
ans
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com7
Cre
dit
Un
ion
Ind
ust
ry
Source: NCUA/CUNA
1994 2014Margin 3.86% 2.85%
Op Expense 3.05% 3.10%
Non-Int Inc 0.66% 1.31%
PLL 0.24% 0.28%
ROA 1.21% 0.80%
Asset Size $299B $1.1T
# of CUs 12,560 6,513
It’s 2020…
Apple and Google have acquired bank charters and there is intense competition between them for deposit and loan volume resulting in significant market share losses for traditional depository institutions.
Set
tin
g t
he
Sce
ne
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com8
Aggregate Strategic Net Worth Requirements
Asset Growth
Compliance
Credit Risk
Current Net Worth Ratio
Current ROA
Deposit Mix
Efficiency Ratio
Infrastructure
Interest Rate Risk
Liquidity
Loan Growth
Loan/Asset
Loan/Deposit
Membership Growth
Membership Satisfaction/ Net Promoter Score
Net Interest Margin
Net Economic Value (NEV)
Non-Interest Income
Operating Expense
Processes
Quality Member Acquisition
Risks to Earnings
Risks to Net Worth
Talent Requirements/Talent Acquisition
Technology
Do
es T
his
Im
pac
t?
Did You Know?
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com9
Million
Th
e M
illen
nia
l F
orc
eT
he
Mill
enn
ial
Dis
rup
tio
n
Ind
ex
Source: The Millennial Disruption Index, Viacom Media Networks, 2013
53% don’t think their bank offers anything different than other banks
71% would rather go to the dentist than listen to what banks are saying
Banking is at the highest risk of disruption.
Million
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com10
Nearly 75% of the respondents say they would be more excited in financial services provided by Google, Amazon, Apple, PayPal, or Square than from their own banks.
Source: The Millennial Disruption Index, Viacom Media Networks, 2013
Th
e M
illen
nia
l D
isru
pti
on
In
dex
Mill
enn
ials
Em
bra
ce
Alt
ern
ativ
es t
o B
anki
ng
They are twice as likely to choose
non-traditional payment companies than those over 50 years old.
Source: Millennials Ready for Nontraditional Lending and Payments, PYMNTS.com, 4/9/2015
Becauseit’s easy
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com11
Dis
rup
tio
n Google Wallet funds are now FDIC-
insured
Other prominent mobile wallet services, such as Venmo and PayPal, do not offer FDIC insurance for users who leave cash in their accounts
Source: Google Wallet Funds are now FDIC-insured, Yahoo! Finance, 4/20/15
…YET
It’s 2020…
Apple and Google have acquired bank charters and there is intense competition between them for deposit and loan volume resulting in significant market share losses for traditional depository institutions.S
etti
ng
Th
e S
cen
e
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com12
Aggregate Strategic Net Worth Requirements
Asset Growth
Compliance
Credit Risk
Current Net Worth Ratio
Current ROA
Deposit Mix
Efficiency Ratio
Infrastructure
Interest Rate Risk
Liquidity
Loan Growth
Loan/Asset
Loan/Deposit
Membership Growth
Membership Satisfaction/ Net Promoter Score
Net Interest Margin
Net Economic Value (NEV)
Non-Interest Income
Operating Expense
Processes
Quality Member Acquisition
Risks to Earnings
Risks to Net Worth
Talent Requirements/Talent Acquisition
Technology
Do
es T
his
Im
pac
t?D
oes
Th
is I
mp
act?
YES NO DEPENDS
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com13
It’s 2020…
Apple and Google have acquired bank charters and there is intense competition between them for deposit and loan volume resulting in significant market share losses for traditional depository institutions.
YES NO DEPENDS
Set
tin
g T
he
Sce
ne
Financial
Implications
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com14
Share Drafts ↓ 5% Assets
Reg Shares ↓ 5% Assets
Reg Sh and MM Betas ↑ 10%
Deposits and
Loan-to-Asset Ratio ↓ 5%
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com15
Deposits, Loans and
Non-Interest Income ↓ 10bps
Dep, Lns, Non-Int Income and
Operating Expense ↑ 10bps
OPTION RUN DURING SESSION
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com16
Co
nsi
der
Th
is P
roce
ss Turn your ALCO meetings into
forward-thinking meetings by rehearsing tomorrow today
Set the scene for your team
Estimate and simulate financial implications
Nothing happens in isolation, so combine events
It’s 2020…
Apple and Google have disrupted the financial services industry. There is intense competition for deposit and loan volume resulting in significant market share losses for traditional depository institutions.
Homeownership is lackluster, as millennials are more cautious of owning homes.
Additionally, the CFPB has severely limited sources of “penalty fees,” resulting in a 33% reduction of this type of revenue across the financial services industry.R
ehea
rse
Tom
orr
ow
To
day
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com17
Co
nsi
der
Th
is P
roce
ss Have a strategic discussion ‒ make
it a debate
Think critically about key business model questions, such as….• What would we have to do to be relevant in
this environment?
• How would desired members be acquired?
• How would effective cross-selling occur?
• How would we compensate for potential loss of income?
• What are the talent requirements? How are they different from today?
2 T
hin
gs
“If everyone is thinking alike, then somebody isn’t thinking.”
—General George Patton
Don’t underestimate changes in the battlefield
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com18
Ob
ject
ive
This session focused on a CFO’s responsibility to:
Identify the potential challenges and threats to the institution’s relevance and financial performance
Help other key stakeholders understand them as they decide and execute business strategies
Mo
re M
illen
nia
ls S
ay “
No
” to
Cre
dit
Car
ds
Source: More millennials say 'no' to credit cards, bankrate.com, 9/2014
63 percent of millennials don't have a credit card. Comparatively, only 35 percent of adults 30 and over don't have credit cards.
2%
6%
23%
63%
0% 10% 20% 30% 40% 50% 60% 70%
3 cards
2 cards
1 card
None
Millennials: How many major credit cards do you have?NOTE: Millennials are people age 18-29
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com19
A S
tory
of
the
Mill
enn
ial
Source: Millennials in Adulthood, Pew Research, 3/7/14
The Decline in Marriage Among the Young% married at age 18 to 32, by generation
Nat
ion
al H
om
e O
wn
ersh
ip
Rat
es 2
004-
2014
Source: Why the cost to rent is soaring, Slideshare.net, 1/7/2015
Proprietary property of c. myers corporation 800.238.7475 • www.cmyers.com20
Source: Housing Vacancies and Homeownership, Census Bureau
Sta
te H
om
e O
wn
ersh
ip
Rat
es 2
004-
2014
Only 3 states saw their homeownership rate rise:
Rhode Island (+.03)
South Dakota (+.07)
Vermont (+1.5)
Thank You!We welcome your questions and comments. Contact us at cmyers.comor 800.238.7475.
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