11/15/2018

Wild ride: Stay in control during unpredictable conditions

Barry Adcock November 15th, 2018

Babies were crying. Strangers were holding hands and praying. Seat belts were pulled tight to the point of impinging circulation. “We’re going to have to ride this out,” the pilot had said.

I suspected the 757 was on autopilot, the sophisticated electronics constantly adjusting to the turbulent conditions. “How nice that would be,” I thought. “Autopilot is not an option for us CFOs.”

In the best and worst of conditions, we are expected to constantly monitor our bank’s performance indicators and adjust to changing conditions. If we don’t, we could be missing profit opportunities or putting our institution at risk.

As a community bank CFO and controller, I steered through plenty of turbulent times, including the dot-com bust, shifting political climates, and the great recession. Through it all, I came to realize that while I couldn’t control the external factors affecting our business, I could control the institution’s response to them.

Control What You Can

Banker’s Dashboard was a saving grace for me. It put me in the cockpit of the bank. It gave me the data and insight I needed to make informed decisions as we rode out the ups and downs. It ensured a smoother ride for our board and stakeholders.

You’ve had to deal with a lot of uncertainties lately: the mid-term elections, extreme stock market volatility during October, the flattening and near inversion of the yield curve, just to name a few. And then there’s all the speculation about the Fed’s pace of rate increases, how long economic growth can continue, and how banking regulation could change under the leadership of a Democratic House.

The wild ride is going to persist, and one of the safest places you can be is in front of your Dashboard. You’ll know how external conditions are affecting your institution, and you can quickly adjust to stay on course.

React Quickly

Our clients at high performing banks access Dashboard every business day to check their loans-to-deposits ratio, asset totals, loan and deposit trends, net interest margin, key balance changes, and more. If they see threats, they avert them. If they see opportunities, they grasp them.

As you look for daily opportunities, you might ask yourself:

  • Based on our loans-to-deposits ratio, is there an opportunity to move some higher-cost deposits off the balance sheet?
  • Could we add basis points to the net interest margin with proactive monitoring and better pricing strategies on maturing loans and CDs?
  • Are we pricing new loans appropriately for the risk we are assuming?
  • Are we writing the right kinds of loans (fixed vs variable) based on where we think rates are headed?
  • Are our deposit rates set appropriately so we can:
    • Meet our liquidity targets;
    • Fund expected loan growth;
    • Prevent cost of funds from getting out of control; and
    • Achieve asset/liability goals?

Lean on Your Dashboard Team

Finally, remember that you don’t have to endure turbulence alone. Our staff are former financial leaders for community banks, so we’ve steered through volatile economic conditions ourselves. We understand the challenges you’re facing and we’re always happy to share our strategies and ideas. Contact us any time.

This content is accurate at the time of publication and may not be updated.