Let’s do the inventory dance!

Disco feet

Photo courtesy of Alison on Flickr

Your deposits. They’re on the proverbial shelf. They aren’t doing much for you. Deposits are much like inventory. You need to move some inventory. Can you feel the groove? Can you feel it?

It’s a simple concept, right? Manufacturing companies and retailers alike manage their inventory to a tee. They sweat every detail. When, how much, what time, and over what distance will we need to move these shelf killers? Does the banking industry need to add an element of this rigorous oversight to their daily-to-quarterly performance tool kit?

“Well,” you say, “we already watch the loan-to-deposit ratio like a hawk.” True. Throw in some asset-liability management and you’re all over it. It’s more of a mentality of watching versus actingMoving inventory, or converting deposits into loans, should be the eternal preoccupation of every community banker in the land. How much do we have? When is it going out the door? Who is buying? Where are the target communities that want some of our product? Campaign management is a key aspect of converting inventory into product, deposits into loans. Are you leading the charge?

As you think through this, here are some quick steps in the inventory dance:

  • Don’t overthink the process. Realize up front that there will be missteps and, at times, it may sound like the music has stopped. It hasn’t until you say so.
  • Get out on the dance floor. So much of what we do tends to be about guarding what we have, and not finding our groove in the lending marketplace. To do this, you must surveil the landscape methodically, but quickly. It can be done.
  • ALM has a role. The pertinent aspect of this is that you should know at all times what the mix should be; however, there must be some flexibility. The market will dictate what inventory you should move and what the final product, the loan, looks like.
  • Reviewing enterprise-wide risk is a necessary undertaking. Here are the seven categories, neatly arranged by the folks over at the NCUA, upon which we like to shine the light:
    • Credit
    • Interest Rate
    • Liquidity
    • Transaction
    • Compliance
    • Strategic
    • Reputation
  • You’re not selling. Well, you’re sort of selling. What you are doing is engaging others on the dance floor. “This is our song,” you say. “This is our groove. This is our way of bringing the magic of our institution to you.”

The most important thing you can do tomorrow is step outside your office and discreetly inform the staff that it’s time to boogie. It’s time to do the inventory dance. Oh, and don’t forget your dancing shoes.

Do you want to dance?

Photo courtesy of Bob_Doran

Photo courtesy of Bob_Doran

It’s a question that fourteen-year-old teens fear the most after, “Have you finished your homework?”

“Do you want to dance?”

It’s a question that not only strikes fear, but it begs you to check all the key components of your arsenal before saying yes, or even asking the question. How’s my outfit? What about my hair? Are these shoes the right shoes? What about my hair?

As a banker, it is a moral imperative (Where have I heard that before?) that you ask the question each and every quarter at least. You must ask it of yourself, your employees, your commercial partners, and of your customers. As you contemplate asking the question, and certainly before you’re hitting the dance floor, here are some key components you should consider:

  • Marketplace understanding
    • What and where is your market? This needs to get down to the census tract. Okay. Down to the parquet tile.
    • What is your share of the market? This is not always easy to measure, even in an industry such as banking. And what about loan market share? That’s always a tough one.
    • Do you have the right access points as well as the right number of points? How well are your access points doing?
    • Are you willing to exit and enter markets for the benefit of the institution and set aside your emotion in doing so?
  • Operational readiness
    • Have you put effort into making sure that process meets market? Do you have your operational dance steps figured out?
    • Digital technology is a wonderful construct. It can also be an impediment to making a human connection to your customers. Are you using digital technology optimally? In this case, optimal equals efficiency and effectiveness both in your market and for your institution.
    • Are you ETDBW*? After all, ETDBW is so sexy on the dance floor, right?
  • Financial safety, soundness and adventure
    • Have you analyzed the potential financial upside and pitfalls of hurling yourself out onto the dance floor?
    • Safety and soundness are must-have components in your repertoire; however, doing nothing out of fear of loss oftentimes leads to obsolescence, which can lead to obscurity.
    • Embrace a sense of adventure. Yes. Even in your financial analysis and direction, have a sense of adventure. Sometimes you may go to the edge of the dance floor, but that may be the better path than clinging to the wall.

I’d like to add one more thing here. The parents. The board, the regulators, and the auditors are the parents in our little story. They will shroud you and your team in reasons why you should not dance, why you shouldn’t ask the big question. They may even make you so harried that you want to give up. Don’t give up the dance, my friends. Keep the beat. Shuffle those feet.

*ETDBW – “Easy to do business with.”

A Farm Fresh Perspective

http://www.dreamstime.com/royalty-free-stock-photography-fresh-berries-dark-background-strawberries-raspberries-blueberries-health-diet-gardening-harvest-concept-image41423247Farmers markets are in full swing this time of year. Handmade signs beckon us to stop and browse the morning’s harvest and friendly farmers gladly chat about growing conditions and recipes. It’s a time to reap the rewards of their hard work, time, and attention to the details. Planting conditions are not always ideal and the weather can waylay even the best garden plans. But still, the farmer adjusts and adapts to the current situation by watering more, watering less, and pulling out the ever-eager weeds. So in the end, we benefit from all of their efforts and score some fresh marmalade and pints of sweet blackberries.

Believe it or not, strategic planning for financial institutions is not unlike the work that our faithful farmers dedicate themselves to year-round. We make plans, we till the soil, and we plant the seeds. We establish a vision for where we want to be in the coming months and years and we work day in and day out to make it happen. We make adjustments as the economic weather changes and we keep our eyes on the goal: growth, whether it be organic, or from the acquisition of new “farmland,” increased profits, and perhaps rotating the crops of our products and services. Like the farmer, we must mind the details. If we grow impatient and attempt to maximize yield at the expense of the land by dumping an aggressive amount of fertilizer on our seedlings, we will kill our crops and never see a healthy harvest. Because the farmer has one ultimate goal in mind -feeding people- she must manage her land, her crops, and her employees with care. We must keep our sights on our goals as well.

In the heat of the summer, however, ”garden fatigue” can set in. Home gardeners and farmers alike grow weary of the water demands of the garden in the dry, hot conditions of the peak of summer. And those ever-present weeds? Enough!

As we head into fall planning sessions, have you grown tired of last year’s strategic plan? Has it been a while since you even looked at it? It is always exciting to plant new seeds, but the day-to-day work can seem painfully unfulfilling at times. Exhausting, even. Maybe garden fatigue has drained the life out of your strategic plan and the harvest seems out of reach. It happens to the best of us. Through careful planning, mindful adjustments, and an eye on that ultimate goal: harvesting the food and feeding the people, the profits will come.

Many of our clients appreciate the new perspective we can offer in creating next year’s strategic plan. We not only help plant the seeds, but keep them watered and fertilized as well. And those darn weeds? We can help with that, too. If you’d like to have a conversation about the specific needs of your financial institution,  we can be reached at 908-368-1270. We’ve even scooped our share of, um, manure over the years.


Reconn Radio: Podcast #26 – Week ending 08/15/14


The Return from Summer Issue: Strategic planning with purpose, the wobbly economy, and goodbye, Mr. Williams

Your purpose is paramount. However, it should not be pursued so that you drain the bank account. We speak to these two conflicting items in this podcast. If your strategic planning efforts focus solely on profits, how will your financial institution stay true its purpose? We also pay our respects to Williams and Bacall. And how can we forget the economy? We cannot. We did not.



To listen to more of our podcasts, please click here.

Crystal Ball

http://www.dreamstime.com/royalty-free-stock-photos-business-man-holding-hot-chart-hand-crystal-ball-image32307298As an advisor and consultant, I wear many hats: independent thinker, problem-solver, hand-holder, weather-forecaster, and confidante. Oh, I sometimes send cookies. I am occasionally asked to wield a hatchet or carry an olive branch, but I never pull out a crystal ball. Careful analysis can go a long way, but no one can predict the future.

Now that 2014 is more than half over, it’s time to think ahead to January 2015, and the fall of 2014 as well. It’s hard to think about falling leaves, hot chocolate and snowmen when it’s 85 degrees outside, but it’s even harder to imagine starting the new year without a measurable, attainable, and well-thought-out plan for the direction of your financial institution. Here are several thoughts I’ll leave with you as you set out on that most humbling of processes, the strategic planning cycle:

  • You’re preparing for next year.

There is no dreaming about next year. There is no hoping that it is better than this year. There is no predicting. Focus yourself and your team on preparing for potential microeconomic  and macroeconomic bursts of change. They’ll come. The height and length of the wave as it crushes down around you may vary from what was planned, but that wave, that change, will come to your world. Now, that’s not to say that you shouldn’t stay abreast of things like the economy, interest rates, and the geopolitical whirlwind. It’s all part of the preparations.

  • Check that. You’re preparing for at least the next three years.

More often than not, financial institutions create one-year business plans. The annual business plan differs from the longer, richer, and, yes, looser, strategic plan. The annual plan, and accompanying budget, is simply a component of the strategic plan. I think three years is plenty. However, don’t relieve yourself of this duty by saying things are changing too quickly. That’s the voice of a salesperson getting you to buy something. Just about everything that’s going on is incremental in nature. The industrial revolution, the PC, and the Internet are epoch-setting events. A cool ATM is not.

  •  Tie it to risk. Enterprise-wide risk that is.

We like to think in terms of seven categories of risk. Yes, all ye bankers, it is based on NCUA guidance, but it’s a clean list and easy to communicate and reference. We think you’ll like it. These are the components:

      • Credit risk
      • Interest rate risk
      • Liquidity risk
      • Transaction risk
      • Compliance risk
      • Strategic risk
      • Reputation risk

There is certainly more detail to this as we consider specific factors within each category of risk. Also, it would be handy to learn your traffic signalization. Red-yellow-green light metaphors are used repeatedly during this stage of planning.

  • Communicate the plan. And then, communicate it again.

Get the word out. Prepare the troops and not just the generals. It is your duty to make sure that everyone is apprised of the plan. Whether they buy into it or not is a human resource matter. Selling it, and more importantly, living it, is a primary focus of the management team.

So, put aside that crystal ball. I don’t have mine. It’s not useful to you or your organization to be overly focused on predicting. I’m sure it’s not in your job description. However, bets are there is something in that same description about making sure everyone that wants to be prepared is prepared.

Reconn Radio: Podcast #25 – Week of 06/30/14


The Survey Issue: Dr. Matt Champagne and some quick thoughts on Interest Rate Risk

Interest rates will change. It’s a given. Don’t panic, though. We have some thoughts to help you cope.

More importantly, we have another fantastic guest on the program. Dr. Matthew Champagne, of Embedded Assessment, will explain the ins and outs of surveys and help you get the feedback that your customers and members so desperately want to give your financial institution. Dr. Champagne has created and implemented innovative customer feedback technologies in hundreds of organizations across every industry. With over twenty-five years in the field of psychology, Dr. Champagne is an expert and pioneer in his field. Listen in as he shares some insight from his new book, “The Survey Playbook”, on this week’s program. “The Survey Playbook” is available here on Amazon.com. You can learn more about The Evaluation Guy at theevaluationguy.com.



To listen to more of our podcasts, please click here.

Reconn Radio: Podcast #11 – Week of 2/17/2014


The Economy, EMV & “The American President”

This week, I discuss the upcoming economic items for this week. I also delve into EMV and remind folks of its pending entrance into the American market. Finally, we close with a timely discussion about “The American President,” one of my favorite movies, and about gaining perspective. Go!




To listen to more of our podcasts, then please click here.

Reconn Radio – Podcast #10 (Week of 02/10/2014)


Bank consolidation. Maybe. Perhaps.

Liquidation. Other People’s Money. Maybe. No. Definitely.

This week on the radio program, we discuss the economy, bank M&A, and DeVito and Peck. We are into double digits here at Reconn Radio.


P.S. For more information on bank M&A activity, with those spiffy charts and graphs, check out the accompanying blog post here.



Bank Consolidation in this Millennium

The tragedy and comedy inherent in our banking system reminds me of a Steven Wright line: “You can’t have everything. Where would you put it?” Darn funny stuff from Mr. Wright.

The consolidation of banks, thrifts, and credit unions continues. Our curiosity got the best of us and we wanted to see how fast or how slow in terms of deals and values. The following charts highlight data on bank and thrift deals since 2000. All data is courtesy of our friends at SNL Financial.


The number of deals has actually slowed after the 2008 redux. That makes sense. Many deals in 2009 and 2010, as one can see in the second chart of the dashboard, were government-assisted deals. One can imagine that bankers are waiting on the sidelines in hopes of gaining higher and higher multiples. However, franchise value, from our perspective, will come from a couple of things: 1) size and 2) demonstrated leadership and technological/organizational nimbleness and scale. Furthermore, government-assisted deals are waning and doing so quickly. That’s a good sign. Institutional euthanasia is just wrong.

It has often been said that this industry is highly commoditized. We think that is a fair assessment. What strikes us as interesting is that no one really loses sleep if there are fewer institutions. It’s not really the same when compared to say gold bullion or copper plating. Panic sets in and prices rise.




We’ve represented dollar value of deals in two ways below. The first, Total Deal Value, shows a pretty murky market. The Total Assets data speaks to the relatively small size of the institutions coming to the altar.


We’d rather have something than nothing

Overall, there’s just not much action in the consolidation business right now. Ultimately, this should not keep FI executives from seeking out deals. We believe that there is growing demand for bigger and better. Scale economies mixed with the right assortment of service technology and outstanding human resources will win over customers.

It’s true. You can’t have everything. However, one can plan for the advent of just about everything – from force majeure to what is the correct path for your institution and its stakeholders. This doesn’t mean that one has to predict the future. That, after all, would be having everything and Mr. Wright has already demonstrated there’s no place for that.

For assistance looking at markets, operations, and financial impact for your community financial institution, give us a shout. Or, if you like, you can whisper our name in the wind. It all works. Call us at 908.368.1270 or complete our contact form here.

Reconn Radio – Podcast #9 (Week of 02/03/2014)



Reconn Radio brings you its second guest in as many weeks. Also, we’re announcing our joint venture with strategic partner Structure First. Please check out the headquarters planning and facility development collaborative at myhq1.com.