Poll Results: Digital Transformation’s Next Phase

NYDIG-Report.pngJPMorgan Chase & Co., which is the largest U.S. bank by assets, spends $12 billion a year on technology, investing in a vast array of technologies that include machine learning, artificial intelligence and blockchain. The second largest bank, Bank of America Corp., spends roughly $3.5 billion annually on new technology initiatives alone, according to Chairman and CEO Brian Moynihan.

It’s a lot of money — and a level of spending that smaller banks can’t hope to achieve. Executives and directors primarily representing community banks under $10 billion in assets reported a median technology budget of $1.7 million for fiscal year 2021 in Bank Director’s 2021 Technology Survey, with a median increase in spending of 10% compared to the previous year.

Those limitations should have bank leaders thinking strategically about how to allocate those precious dollars. With that in mind, Bank Director’s FinXTech division polled bank executives in January and February 2022 about technology adoption trends, and asked about specific noncore solutions that have had a recent, significant impact toward achieving their goals.

Bankers identified 20 platforms as their favorites when it came to driving that change, ranging from digital lending solutions to data analysis. You can find the companies listed on page 7-8 of the report. To categorize the solutions by type, we relied on input from FinXTech Research Analyst Erika Bailey, who manages Bank Director’s FinXTech Connect platform, a guide to financial technology companies working with U.S. banks.

While the past 18 months found many banks putting digital account opening and lending platforms in place — in response to the digital acceleration brought about by the pandemic — banks shifted plans for the next 12 months to application programming interface (API) platforms, data aggregation and analysis, and workflow automation.

To gain additional perspective on these trends, we talked to the executives of three banks that are actively accelerating their digital journeys. Mascoma Bank, a $2.6 billion mutual in Lebanon, New Hampshire, is in the early stages of implementing an API-enabled, cloud-based core platform that will help the bank customize its product and service offerings. St. Louis-based Midwest BankCentre, with $2.4 billion in assets, leveraged its digital subsidiary to expand its capabilities to all of its customers; it will expand digital account opening to business clients in 2023. And West Reading, Pennsylvania-based Customers Bancorp, with $20 billion in assets, is using data-driven insights to fuel the next phase of its digital transformation.

Click here to access the poll results and learn more about how those banks are moving technology transformation forward in this special report.

Also included is a success checklist, questions that boards and leadership teams could ask to help strengthen their technology strategy.

Bank leaders should start by evaluating their organization’s strengths and how technology can align with strategy, advises Ron Shevlin, chief research officer at Cornerstone Advisors. “Stop thinking about technology adoption, and focus more on … the business opportunity,” he says. “Focus on the business results.”

Bank Director Releases 2022 Risk Survey Results

BRENTWOOD, TENN., Mar. 29, 2022 – Bank Director, the leading information resource for directors and officers of financial institutions nationwide, today released its 2022 Risk Survey, sponsored by Moss Adams LLP. The findings reveal a high level of anxiety about interest rate risk as well as a lack of awareness in the environmental, social and governance (ESG) space.

The 2022 Risk Survey finds that the majority of responding directors, CEOs, chief risk officers and other senior bank executives are more concerned about interest rate risk compared to the previous year. Why? While interest rate increases — kicked off with a quarter-point hike announced by the Federal Reserve earlier this month — would ease pressures on bank net interest margins, they could also dampen loan demand and slow economic growth. When asked about the ideal scenario for their institution, almost three-quarters of survey respondents say they’d like to see a moderate rise in rates in 2022, by no more than one point. That’s significantly less than the 1.9% expected from the Fed by the end of the year.

“Finding the balance between an increase in rates without a decrease in the volume of lending can be an art form,” says Craig Sanders, partner at Moss Adams. “Banks with more diverse loan portfolios and those that made the right bets regarding loan terms will be better positioned to adapt to the new, ever-changing environment.”

Findings also reveal that more than half of the respondents’ banks don’t yet focus on ESG issues in a comprehensive manner, and just 6% describe their ESG program as mature enough to publish a disclosure of their progress. 

“While we see a handful of primarily larger, public banks focused on ESG, it’s a broad issue that touches on several areas important to community banking, including community and employee engagement, risk management and data privacy, and corporate governance,” says Emily McCormick, vice president of research at Bank Director. “The survey finds banks setting goals in these distinct spheres when it comes to ESG, despite a lack of formal programs or initiatives.”

Key Findings Also Include: 

Top Risks
Respondents also reveal increased anxiety about cybersecurity, with 93% saying that their concerns have increased somewhat or significantly over the past year. Along with interest rate risk, regulatory risk (72%) and compliance (65%) round out the top risks. One responding CRO expresses specific concern about “heightened regulatory expectations” around overdraft fees, fair lending and redlining, as well as rulemaking from the Consumer Financial Protection Bureau around the collection of small business lending data. 

Enhancing Cybersecurity Oversight
Most indicate that their bank conducted a cybersecurity assessment over the past year, with 61% using the Cybersecurity Assessment Tool offered by the Federal Financial Institutions Examination Council (FFIEC) in combination with other methodologies. While 83% report that their program is more mature compared to their previous assessment, there’s still room to improve, particularly in training bank staff (83%) and using technology to better detect and/or deter cyber threats and intrusions (64%). Respondents report a median budget of $200,000 for cybersecurity expenses in fiscal year 2022, matching last year’s survey.

Setting ESG Goals
While most banks lack a comprehensive ESG program, more than half say their bank set goals and objectives in several discrete areas: employee development (68%), community needs, investment and/or volunteerism (63%), risk management processes and risk governance (61%), employee engagement (59%), and data privacy and information security (56%).

Protecting Staff
More than 80% of respondents say at least some employees work remotely for at least a portion of their work week, an indicator of how business continuity plans have evolved: 44% identify formalizing remote work procedures and policies as a gap in their business continuity planning, down significantly compared to last year’s survey (77%). Further, banks continue to take a carrot approach to vaccinations and boosters, with most encouraging rather than requiring their use. Thirty-nine percent require, and 31% encourage, employees to disclose their vaccination status.

Climate Change Gaps
Sixteen percent say their board discusses climate change annually — a subtle increase compared to last year’s survey. While 60% indicate that their board and senior leadership team understand the physical risks to their bank as a result of more frequent severe weather events, less than half understand the transition risks tied to shifts in preferences or reduced demand for products and services as the economy adapts.

The survey includes the views of 222 directors, CEOs, chief risk officers and other senior executives of U.S. banks below $100 billion in assets. Full survey results are now available online at BankDirector.com.

About Bank Director
Bank Director reaches the leaders of the institutions that comprise America’s banking industry. Since 1991, Bank Director has provided board-level research, peer-insights and in-depth executive and board services. Built for banks, Bank Director extends into and beyond the boardroom by providing timely and relevant information through Bank Director magazine, board training services and the financial industry’s premier event, Acquire or Be Acquired. For more information, please visit BankDirector.com.

About Moss Adams LLP
With more than 3,800 professionals across 30-plus locations, Moss Adams provides the world’s most innovative companies with specialized accounting, tax, and consulting services to help them embrace emerging opportunity. We serve over 400 banks and other financial institutions in all stages of the growth cycle helping our clients navigate an evolving regulatory environment, maintain profitability, and manage risk throughout each phase of their business’s growth. Discover how Moss Adams is bringing more West to business. For more information visit www.mossadams.com/fs.

Source:
For more information, please contact Bank Director’s Director of Marketing, Deahna Welcher, at dwelcher@bankdirector.com.

Confronting M&A Headwinds & Tailwinds In 2022

Deal activity picked back up in 2021 — and 2022 promises a similar pace, including enhanced interest in scale-building mergers of equals, according to Bank Director’s 2022 Bank M&A Survey, sponsored by Crowe LLP. Rick Childs, a partner at the firm, explains what factors could drive and hinder deal volume. He also discusses external pressures on the banking space, and how potential buyers and sellers should incorporate environmental, social and governance (ESG) matters.

  • Expectations for Deals in 2022
  • What Buyers Want
  • Balancing the Regulatory Burden
  • Weaving ESG With M&A

The 2022 Bank M&A Survey examines current growth strategies, including expectations for acquirers and what might drive a bank to sell, and provides an outlook on economic and regulatory matters. The survey results are also explored in the 1st quarter 2022 issue of Bank Director magazine.

Bank M&A: Pricing Considerations for 2018



Forty-four percent of the bank executives and directors responding to Bank Director’s 2018 Bank M&A Survey indicate that rising bank valuations made it more difficult to compete for acquisition targets, and higher prices didn’t result in a significant increase in deal activity in 2017. Rick Childs, a partner at survey sponsor Crowe Horwath LLP, explains how today’s environment fuels his expectations for the year, and why he thinks regulatory relief could result in fewer transactions.

  • Bank Valuations and Pricing
  • Impact of Regulatory Relief on M&A

In accordance with applicable professional standards, some firm services may not be available to attest clients. © 2018 Crowe Horwath LLP, an independent member of Crowe Horwath International. crowehorwath.com/disclosure

Navigating Today’s M&A Market



Bank deal activity in 2017 is likely to be on par with 2016, as the bank executives and board members responding to Bank Director’s 2017 Bank M&A Survey reflect lower levels of optimism for the bank M&A environment. In this video, Rick Childs, a partner at survey sponsor Crowe Horwath LLP, provides his perspective on the survey results and explains why, despite a lower number of sellers, it really is a buyer’s market today.

  • Expected Deal Activity for 2017
  • What Successful Buyers Look For in a Target
  • Factors That Sink a Deal

In accordance with applicable professional standards, some firm services may not be available to attest clients. This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction. © 2016 Crowe Horwath LLP, an independent member of Crowe Horwath International. crowehorwath.com/disclosure

Bigger Banks More Focused on M&A


Want to buy another bank? Get in line. The number of potential buyers far exceeds the number of banks willing to sell—but bigger banks are much more likely to focus on mergers and acquisitions (M&A) than small banks. Bank Director’s 2015 Bank M&A Survey, sponsored by Crowe Horwath LLP, queried more than 200 bank directors and senior executives to uncover the opportunities and challenges in today’s deal environment.