strategic planning Issues

 

STRATEGIC PLANNING ISSUES:

As you and your team identify and assess key issues, think of these issues not just in terms of "strategic" but also "long range" - actions that you need to take over the next five years or so. An example of a long range issue may be what investments are needed for computer applications over the next five years and how do you prioritize and align with your overall strategic objectives.

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Discussion:  The yield curve has flattened substantially from year ago and two years ago. We have not managed in such an interest rate environment for over 12 years. The 10-year / 2-year US Treasury slope has not been in the 15 - 20 bps range since 2007.   For your strategic plan assessment, what if this flat yield curve stays for an extended period of time? How will net interest margins hold up? Margins deteriorated 10 - 15 bps during the last period of flat yield curve.

Discussion: The yield curve has flattened substantially from year ago and two years ago. We have not managed in such an interest rate environment for over 12 years. The 10-year / 2-year US Treasury slope has not been in the 15 - 20 bps range since 2007.

For your strategic plan assessment, what if this flat yield curve stays for an extended period of time? How will net interest margins hold up? Margins deteriorated 10 - 15 bps during the last period of flat yield curve.

How will net interest margins hold up with this flat or inverted yield curve?

What if the yield curve remains flat for extended timeframe?


COMMUNITY Bank Regulatory Relief


Are any of the drivers of your local and regional economy undergoing any stress? Growth?

Is this a short-run issue - or is this the long term direction?

  • Agriculture

  • Energy

  • Manufacturing

  • Construction

  • Commercial real estate

  • Housing and residential real estate

  • Retail industry

  • Population growth or decline

  • Demographic changes

  • Tariffs


At the March 2019 FOMC meetings, the Fed did not change the fed funds rate target. And, the FOMC projections now suggest that there will be no further increases during 2019. The next meeting of the FOMC where an interest rate decision is typically made is June 18-19.

At the March 2019 FOMC meetings, the Fed did not change the fed funds rate target. And, the FOMC projections now suggest that there will be no further increases during 2019. The next meeting of the FOMC where an interest rate decision is typically made is June 18-19.

Has the Fed paused its interest rate normalization program for the remainder of 2019?

And beyond?


How will your strategic plan address key risks identified over your planning horizon?

The following are several key areas of risk that the OCC has identified for banks:

  • Increased merger and acquisition activity

  • Competition from non-financial and fintech companies

  • Loosening credit underwriting standards and practices

  • CECL implementation

  • Commercial real estate lending and concentrations

  • Operational risk due to cyber threats

  • Reliance on third-party service providers

  • Bank Secrecy Act compliance

  • Compliance with multiple new or amended regulations

  • Agricultural lending

  • Interest rate risk with changes in interest rates and the yield curve

  • Effective change management practices when implementing new regulations, products and services and emerging technologies

  • Potential LIBOR discontinuation and replacement


How will continued developments in technology impact your customers, your competitors and your bank?

Technology has always been a key driver of change - and success - in banking. And change in technology continues at a rapid pace.

  • The world that you operate in today is digital, mobile and real time - is your bank positioned for this?

  • How do you keep up with such continuous change?

  • Are you or your vendor partner investing adequately in your IT systems and future technology?

  • How are new fintech companies impacting you today - and what are you hearing about the future?

  • Most importantly, what are your customers telling you regarding their preferences for product delivery, convenience, mobility and information?

  • Financially what can you afford to invest in technology? Can you afford not to make these investments? How can you partner to share in technology costs and investments?

  • Have you developed and documented a 5-year IT plan and "road map"?


Are there areas of significant investment and capital expenditures that need to occur over your planning horizon?

  • IT systems and applications

  • Outsourcing contracts

  • New facilities or facilities re-branding / signage


Discussion:  Through April 2019, economic cycle is 118 months of age and is the second longest economic expansion phase in recent U.S. history - just below longest U.S. economic expansion period of 120 months. To tie the record, the expansion needs to continue through June 2019. And by the end of the 2019 planning year, the economic expansion will be 126 months - longest in modern history.

Discussion: Through April 2019, economic cycle is 118 months of age and is the second longest economic expansion phase in recent U.S. history - just below longest U.S. economic expansion period of 120 months. To tie the record, the expansion needs to continue through June 2019. And by the end of the 2019 planning year, the economic expansion will be 126 months - longest in modern history.

When will current U.S. economic expansion end?


How will increasing minimum capital ratios impact your Strategic Plan as the Basel phase-in is final in 2019?