Sally Rob Myers Johnson - CUNA Councils · Rob Johnson EVP/Principal May 18, 2015 Objective This session will focus on a CFO’s responsibility to:

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


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


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


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


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


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


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


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?


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


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


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


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


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


Share Drafts ↓ 5% Assets

Reg Shares ↓ 5% Assets

Reg Sh and MM Betas ↑ 10%

Deposits and

Loan-to-Asset Ratio ↓ 5%


Deposits, Loans and

Non-Interest Income ↓ 10bps

Dep, Lns, Non-Int Income and

Operating Expense ↑ 10bps

OPTION RUN DURING SESSION


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


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


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


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


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.


Remaining Relevant and Achieving Desired Financial Performance with an

Uncertain Rate Environment

Sally Myers

CEO/Principal

Rob JohnsonEVP/Principal

May 18, 2015

Documents

Sally Rob Myers Johnson - CUNA Councils · Rob Johnson EVP/Principal May 18, 2015 Objective This session will focus on a CFO’s responsibility to: