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THE WARREN GROUP’S Annual Information Guide For Bankers

+INSIDE: Forensic Banking Finds Hidden Revenue Empowered Employees Make the Most of Your Products Recognizing and Abating Internal Threats to Security Retirement Plans Renewed

What Does Automating Your Currency Handling Needs and Providing Self Service Coin Redemption do for Your Branch? It Gives Your Tellers Tools for Success: Increases Branch/Teller

Increases Cross Selling

Helps to Meet Customer

Strengthens Customer



What Does it Take to Learn a Little More? Not a Lot...

Just ask your Magee Representative to arrange for the Magner Solution Center to visit your institution to discuss the right solution for you.

Magner Solution Center

Opportunities Retention

Reduces Costs

Adding to your Bottom Line

Let’s talk about doing things the right way...

Self-Service Coin Centers

Currency Dispensers



61-201 50 Y E AR S

Contact us: 800-347-1414 ext. 336 or visit

Currency Recyclers



ur annual guide to products, trends and services in the world of banking this year bears all the signs of the times – risk, compliance, technology, and customer relations. We hope you find the 2013 edition of Banking Solutions to be helpful, interesting and informative.

CEO & Publisher Timothy M. Warren Jr. President & COO David B. Lovins Controller & Director of Operations Jeffrey E. Lewis


A Successful Marketing Plan Needs Teller Tools By Douglas R. Magee Jr.

6 Don’t Miss the Latest Episode of CSI: Banking: ‘Finding Hidden Revenue’ By Mark Clark


Managing the Insider Threat: Tips on Introspective Security By Dan Vassallo


Custom Publications Editor Christina P. O’Neill Associate Editor Cassidy Norton Murphy Director of Media Solutions George Chateauneuf Advertising Account Manager Richard Ofsthun Advertising Account Manager Cara Feldman Director of Marketing & Creative Services John Bottini

Do Retirement Plans Without Limits Make Sense for Your Bank’s Executives? By Richard S. Sych

Design Production Manager Scott Ellison Marketing Communications Manager Michelle Laczkoski Graphic Designer Amanda Martocchio Graphic Designer Tom Agostino

©2013 The Warren Group Inc. All rights reserved. The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. Advertising, editorial and production inquiries should be directed to: The Warren Group, 280 Summer Street, Boston, MA 02210. Call 800-356-8805.

10 Evolution of the Bank Marketing Strategy By John Siracusa

12 Top-Performing Banks Opt for New Kind of Strategic Plan By Roxanne Emmerich

14 Hamburger While you Work and Steak When you Retire By Arthur Warren

Banking Solutions 2013| 3

By Douglas R. Magee Jr.


A Successful Marketing Plan Needs Teller Tools


inancial institutions, whether a community bank or credit union, all face the same challenges, including competition to attract and retain customers and members. Banks and credit unions all do things a little different to meet their challenges. However, what is shared in common is that their primary contact person with depositors is the teller. Goals are similar, but plans are widely varied, sometimes nonexistent, and the path to their success often wavers without a clear vision, particularly from the teller’s perspective. While exhibiting at a trade show earlier this year a man stopped to look at one of our products. His name tag said “vice president of marketing.” One 4 | Banking Solutions 2013

of our people asked him, “What is your marketing plan?” He just stared at him, and then said “I’ll be back later.” Several hours later the man came by again and said, “No one ever asked me that question before; I didn’t know what to say. What do other people say?” If you were all asked to stop for a minute and summarize in one paragraph your institution’s marketing plan, could you do it? Ask your management team to do the same, then the branch personnel. Compare the responses. If they are all relatively similar, congratulations. On the other hand, most of you will have varied responses. How can the staff’s perception of our marketing plan vary so much? Understand that “plans” get diluted

and often diminished in priority as they move down the chain of command. How is that possible? Easy: Remember who your “primary contact person” is – your teller. And how many other tasks do they have to focus on and prioritize during their typical day besides your marketing plan? A simple marketing plan includes the following priorities: • Drive growth. • Prevent depositors from leaving. • Attract new depositors. • Create cross selling opportunities. • Increase depositor satisfaction and loyalty. Agreeing that there needs to be a plan – how is implemented and driven?

Tellers need tools to be successful. Remember they are the primary contact with the depositors. What tellers are commonly lacking is the quality time to initiate a real dialogue with the depositor to discuss other products and services the institution offers. How do they get that quality time? There is a simple and easy solution: automating the manual currency handling portion of your tellers responsibilities. In the past it was primarily associated with security and staff reduction. Today it is equally viewed as the easiest way to reduce the workload on the teller, allowing them to become your marketing sales force, focused on implementing everything defined in the marketing plan. Currency handling automation can be accomplished in two ways: first, through the use of currency dispensers, which are most efficient and effective when currency transactions are primarily going out, such as drive-ups and heavy check cashing windows. Second is currency recyclers, which have the ability to automate the incoming currency deposits and outgoing currency transactions, thereby reducing the need for the teller cash drawer. In both cases branch security is increased, currency levels are reduced, balancing is automated and teller efficiency is dramatically increased. The end result is that you have given your tellers the tools to successfully implement your marketing plan: you have “created a cross-selling” environment. Once you have created this new environment, how do you implement the rest of the plan, including attracting new depositors and preventing depositors from leaving? Look around at what your successful competitors have done to help make themselves a destination. You will find that the really aggressive and successful ones have installed self-service coin centers

in their lobbies. But they have not just installed them; they have designed a complete marketing plan around them. Why? Because they do not want their current depositors going anywhere else to process their coins. Those other locations probably are someone else’s branch or the supermarket, which probably also contains someone else’s branch, all looking for new depositors just like yours! When non depositors come in to use their coin service, they have a plan in place to convince them to become a depositor. This is a very successful way for you to build lobby traffic, through both your current and soon-to-be depositors. Choosing the right self service coin center for your institution is important, because it is another key teller tool that

reduces teller work and creates a perfect cross-selling opportunity in your teller’s new environment. Teller tools for success are available, and the financial institutions that embrace them are going to be the ones that successfully implement their marketing plans, drive growth, increase depositor satisfaction and, most importantly, loyalty.  n Douglas R. Magee is president of Magner Corporation of America, a long-standing market leader in currency counters and authentication devices, coin equipment and cash settlement systems. For more information about Magner Corporation and how it can help you, please visit or call 860-349-1097.

The Northeast’s premier consulting firm to the Banking Industry

Contact Richard Sych, President., at 860-521-8400 · Actuarial Consulting

· Postretirement Health

· Executive Retirement Plans

· DB to DC Plan Consulting and Transition Services

· Defined Benefit Plans · 401(k) Plans

· Investment Advisory Services

Banking Solutions 2013 | 5

By Mark Clark


Don’t Miss the Latest Episode of CSI: Banking:

‘Finding Hidden Revenue’

less profitable or incorrect system settings, and thanked Heaven for the stars of CSI: Banking.

The Making of CSI: Banking


id you catch this compelling episode of CSI: Banking? It’s the one where the stars of “CSI: Banking” do what you can’t: solve the case by delivering over $1 million in unrealized earnings per $1 billion in assets.

Forensic Analysis

The banker was expecting his core system to do for the institution what it should be doing. However, there was a lot more revenue needed to meet goals. He knew something was missing, but didn’t know what our how to find it. Could it be something small or large was missed during a conversion or merger? What if, in his core system, one or two of products were either set up incorrectly or set up in such a way that they weren’t performing as expected? The star of CSI: Banking, Lodestone Banking’s Shahin Clark, led the bankscene investigation, as she’s done for 18 years, and uncovered the unrealized earnings. There was over a million dollars beyond what our banker had already found. He realized, more than ever, that the bank didn’t have the ability or time to perform a forensic analysis of its core system to find and correct 6 | Banking Solutions 2013

To see how this can happen, let’s go behind the scenes. Your bank’s income from the products and services used by your customers are dependent upon your core system. It’s where your product pricing is established and where your automatic calculations are performed. It triggers customers to be charged the associated product pricing. It reports your income and expenses. And, finally, you depend on it to track the bank’s performance and to provide you with information to make daily management decisions. It is not unusual for bankers to find that they are adrift in an ocean of information; consequently finding a specific bit of information becomes a formidable challenge. A recent analysis of all advanced earnings methodology (AEMSM) projects completed over the past 16 years has found that on average 51 percent of the missed income opportunities experienced by our clients are a result of the core banking system’s incorrect or unprofitable settings. Also known as “parameters” or “system specifications,” these settings vary by system and govern all manner of how bank processes function.

$1.45 Million Found

A few years ago Lodestone found $1.45 million in lost annual noninterest income that was hidden deep in our client’s core banking system. This institution was looking for ways to increase its annual earnings and had utilized the consulting services

of 15 other firms prior to retaining Lodestone and, as you would expect, all the low hanging-fruit had already been found. Lodestone had to go deep into the core system and discovered that an entire group of customers were NOT being assessed their ACH fee! This opportunity had been missed because on the surface everything looked to be accurately set up for this particular profit-driver. And this is why this profitdriver was missed; the bank had the fee properly disclosed, it was priced competitively and the general ledger was set up to report the ACH income to the bank. However, Lodestone’s heuristics pointed out that the GL income numbers were low for the bank’s asset size, so we developed a query to analyze how the bank was processing all ACH transactions and discovered that an entire universe of customers were not included in the daily ACH fee capture. For this client it was as simple as changing the specific parameter settings on their core system for the identified customers and the next day the bank began collecting their missing $1.45 million. This is not an isolated situation! Every AEMSM discovers 15 to 25 income opportunities and approximately 51 percent of these are system-related. These are challenging times for banks … and TV shows. The audiences are fragmenting, the internet is taking away depositors and viewers and you need to make every episode your best to ensure success. The CSI: Banking stars of Lodestone Banking guarantee results based on their average return for banks over the past 18 years. Now that’s must-see TV – and successful forensic analysis!  n Mark Clark is senior executive vice president and managing partner of Lodestone Banking Consultancy, Inc., founded in 1994, and can be reached at 800-722-2566.


By Dan Vassallo

Managing the Insider Threat Tips on Introspective Security


ith so much of the national security conscience focused on elusive international hackers and cybercrime, particularly in light of the recent distributed denial of service (DDoS) attacks on U.S. financial institutions originating from the Middle East, it has become increasingly difficult for organizations to remain cognizant of an equally severe and sometimes more likely threat – the insider threat. Earlier this year, a special report on insider fraud penned by five researchers from Carnegie Mellon’s computer emergency response team (CERT) served as both a reminder and a warning that instances of fraud at financial institutions often originate from inside the organization, and that most (approximately 80 percent) are non-technical in nature. While fraud, regardless of its origin, is virtually inevitable within the financial services industry, there are several mitigation strategies that can be applied. Recognize the risk. There is no use in denying that granting access to information systems exposes the organization to risk. It may be uncomfortable to admit, but an employee’s ability to conduct business on behalf of the organization also grants them the power to defraud it. In security, access equals exposure. Therefore, it is best to recognize this risk, determine where fraud is most likely to occur, and dedicate the appropriate resources to minimize the likelihood of fraud occurring. Trust, but verify. Obviously, it is necessary to give employees the ability to process transactions on behalf of the institution and, as previously indicated, this ability presents inherent risk. Yet the beauty of being bound to technology to carry out these transactions is that the systems can record everything. Therefore, ensure all systems, particularly transactional

systems, have audit trails. Furthermore, instead of consulting these audit trails after the damage is done, have the appropriate personnel review them proactively. The CERT study noted that many of the victim institutions had audit trails with sufficient data to implicate the offending parties, yet they were used as a forensic response tool more so than a detection measure. While the frequency review often depends on the system in question, weekly reports are useful for trend monitoring and tend to provide more meaningful data than daily, monthly, or quarterly snapshots. Embrace transparency. Show staff that active monitoring is in place. The fear alone may dissuade them from trying to victimize the institution. After all, part of the reason fraud takes place is that perpetrators believe they will get away with it. Properly utilizing audit trails and data loss prevention tools can help detect and respond to incidents, and ultimately prevent fraud. Mind your managers. The CERT study made it very clear that lower-level staff can certainly do damage when they set out to defraud their employer. However, as an employee gains more access to systems and information, there is greater potential for wrongdoing. In short, an impeccable track record should not be rewarded with license to engage in unsupervised behavior, especially since the majority of the cases in the CERT study involved tenured employees over an average of five years. When it comes to auditing and monitoring, the same rules should apply to managers: trust but verify. Carefully considering and assigning “need to

know” access also becomes increasingly important with managers. Keep attuned to employees. Practically all financial institutions evaluate factors such as criminal background, credit worthiness and personal financial stability upon hiring a new employee. However, most institutions find it unnecessary and sometimes unethical to periodically assess an existing employee’s financial health. Since most organizations have a formal performance review process in place to manage promotions and terminations, they should consider using this process as an opportunity to periodically assess an employee’s financial health and, by extension, his/ her incentive to embezzle or commit other types of insider fraud. While this notion is never popular, it often times may be necessary to truly manage the organization’s operational and reputational risk.  n Dan Vassallo is a certified information security manager and certified information systems auditor at GraVoc Associates, Inc. in Peabody, Mass. Email: Banking Solutions 2013 | 7


By Richard S. Sych

Do Retirement Plans Without Limits Make Sense for Your Bank’s Executives? qualified plans or may not exist: • plan sponsor not entitled to a tax deduction until benefit is actually paid. • there is no trust fund that fully protects the benefits. Technically these plans are unfunded but may be supported through certain corporate funding arrangements.

Competition for Talent


ince the passage of ERISA in 1974, plan sponsors have been trying to balance the delivery of retirement benefits (defined benefit or defined contribution) between qualified and nonqualified plans. A fundamental objective of either a qualified or nonqualified plan is the deferral of taxes. In exchange for compliance with Internal Revenue Service (IRS) requirements, favorable tax treatment is available to qualified plans. For example: • contributions are tax deductible for plan sponsor. • benefits increase on a tax deferred basis. • participants generally not taxed until they receive benefits. Since a nonqualified plan is not subject to most of the IRS requirements imposed on qualified plans, it can be designed to target certain individuals to provide them benefits in excess of IRS limitations. Tax treatment is not as favorable as

8 | Banking Solutions 2013

More competition for talent exists today than at any other time in history. Financial organizations are striving to be as efficient as possible. This focus on efficiency also includes the use of benefit dollars. Every benefit dollar needs to be deployed in the most efficient way possible to obtain the maximum impact. An employer not using nonqualified plans will find themselves at a competitive disadvantage to others. As a result, operations and profitability may ultimately suffer. Benefit dollars used effectively allow employers to attract and retain the “A” players that everyone wants on their team. Nonqualified plans are a popular way to attract and retain not only senior level executives but also middle managers. These plans (either defined benefit or defined contribution) permit the employer to specifically target the use of benefit dollars for certain employees rather than all employees. A well designed plan will attract new talent, drive performance, and motivate and retain “A” players by providing comprehensive benefits.

The Total Picture

Many organizations and employees do as much as possible to mitigate taxes through retirement savings. Qualified plans can be a very effective part of an overall benefit program and can provide an enhanced level of retirement benefits to all employees. However, qualified plans must limit benefits and contributions in accordance with the IRC. For 2012 annual limitations for defined contribution plans are $17,000 for employee deferrals (excluding catch up contributions) and $50,000 for total employee and employer contributions. There are currently at least two deficit reduction proposals that would limit tax deferred saving to the lesser of 20 percent of compensation

or $20,000 annually (for employee and employer contributions combined!). If Congress adopts proposals that reduce amounts that can be deferred into a defined contribution plan, nonqualified plans will be more widely used and become a very common way to address these issues. In that case, you will see plan participation dramatically increase to include more middle management. Increased participation enables the employer to make sure his key employees are retirement ready.

Retirement Income Replacement

Even without the proposed changes in Congress, one could argue that qualified plans already disadvantage highly compensated employees. To illustrate that, let’s look at an example involving two 50 year old employees, a “middle manager” and a “senior executive:” • The middle manager has a salary of $75,000; the senior executive has a $250,000 salary. • Each employee defers salary to the maximum amount permitted by law (excluding catch-up). • Inflation is 3 percent. • Each has salary increases of 4 percent. • Employer contributes 5 percent of salary for each. • The chart below shows the amount of income replaced in retirement for each employee and illustrates two very different results. The disparity of the benefits delivered to the employees is a direct result of the current deferral limitations. If the proposals in Congress are adopted, it will only increase the disparity and create more of a demand for a nonqualified plan.

Retirement Income Replacement Comparison Age Current salary

Senior executive





Final salary at age 65



Accumulated 401(k)/403(b) account value at age 65







Estimated annual annuity Retirement income replacement

Conditions for a Well-Designed Nonqualified Plan Employer Choices

Types of nonqualified plans: Defined benefit Defined contribution

Employer Goals

Attract and retain talent Reward senior management Provide benefits in excess of IRC limits Supplement core compensation Efficient use of benefit dollars Deferral of taxes

Employer Flexibility

Identify executives to participate No discrimination or other testing Choose any additional benefits Consider including some welfare benefits Can support benefits with “rabbi” trust

Get Help

Assistance from professionals: Attorney

In Summary

Continued communications and education regarding a nonqualified plan is critical to its success. Employees need reminders and reinforcement of the many benefits that the plan has to offer. If you don’t have a nonqualified plan already, you should consider working with your benefit consultant, actuary, attorney or accountant to determine if one is right for your organization. Working with a qualified professional is critical to ensuring compliance with all applicable rules and regulations. Employers facing tight budgets and limited benefit dollars will find that nonqualified plans can be an effective way to maximize the use of those dollars. They will also assist with the deferral of taxes for the individual especially with the large budget deficits in Congress. One can only assume that part of the solution will be increasing income taxes, perhaps including reducing limits on qualified plans. n

Middle manager

Benefits consultant Accountant Actuary Identify Key Factors

Identify which plan design best meets goals: Will plan be an addition or amendment to current plan? Determine legal implications Avoid unintended modifications

Make a Decision

Select plan design that best meets overall objectives


Prepare communication materials and related forms

Richard S. Sych is president of Hooker & Holcombe, Inc., a West Hartford-based firm that designs and administers nonqualified retirement benefit plans for corporations, both private and public, as well as non-profit entities. For more information about Hooker & Holcombe, please visit Banking Solutions 2013 | 9


By John Siracusa

The Evolution of the Bank Marketing Strategy


s the banking industry has changed, so has the importance of social media in banking. In the 1990s and early 2000s, banks’ marketing strategies were primarily focused on traditional forms of advertising and marketing, such as billboards, community events, mailers and branch grand openings. Today, with the advent of mobile devices, tablet PCs and abundant technology platforms like Facebook, social media has become a vital form of communication in most people’s lives, yet banks struggle to understand how to integrate it into their own marketing strategy. No one could have predicted that one day people’s primary form of communication and research on a bank brand would be socially, through the cloud; nonetheless, here we are. And since the way humankind communications have drastically evolved, a bank should evolve its marketing strategy with it. Consumers access social media for a myriad of reasons, but today I would like to address how they utilize social media and the web to choose banks, banking products and services.

Crowd-Sourcing Your Banking Needs

So where do consumers go to eventually find their banking relationship today? They may start by going to Facebook or Twitter to ask their “friends,” or they may go to Google and do a search on “banking reviews,” or they go to a rating and review site like and find a bank near their location with the highest consumer generated ratings and reviews. These queries happen every day; the amazing thing is that consumers these days can do all of the above – and more – within seconds. So how should a bank’s marketing strategy evolve? First, consumers rigorously research and scrutinize banks based on what other people are saying about that bank. 10 | Banking Solutions 2013

Whether a bank is in the starting point of the research process or close to the final steps, consumers will ensure that the bank, on many levels, is the right choice for them. This research, most of which they will do online at home, does not necessary happen during your normal branch hours. Second, a bank’s advertisements and promotions can be ineffective when a consumer performs their online research and there is non-existent, very light or negative bank branding and consumergenerated information about that bank via social media and search engines. Third, a customer experience with your bank becomes another person’s preshopping experiences. It used to be that if someone had a positive or negative experience with your bank, they would tell their family and friends. Today, they praise and/or complain on Facebook or Twitter, or on social media platforms that are searchable and can be indexed into search results by Google, like Google+,, or many of the dozens other platforms. This makes consumers’ experiences with your bank available to everyone, and it is used as an integral piece of new shoppers preshopping research. Finally, a study performed by Shopper Sciences states that on average, consumers research and use 8.9 sources of information before making a decision to open a bank account with a particular bank. Yet most banks focus on showing up and influencing just one to two sources. This means that a bank’s lack of researchable sources gives the consumer no choice but to put that bank in the “not even considered” category. One important note regarding the four points above is that the younger potential bank customers are, the more influential and important these four points become when it comes to choosing a new banking relationship. So if you are targeting younger customers, your

traditional marketing strategies must evolve, or your bank will have limited or no access to the new banking generation.

Getting Started

Here’s how to get started today, regardless of the size of your bank: Make your bank the obvious choice: If you knew nothing about your bank, and researched the web for a new banking relationship, does that research cause you to choose your bank? All searches should point directly to your bank as the obvious choice. In order to be the obvious choice, you need strategy, planning and care, but great results can follow by adding marketing strategy tactics to influence and increase positive user and third-party content about your bank. The first step in improving your bank’s strategy is to understand the foundations of this approach. Web stores like Amazon and have changed forever the way that people shop for products; essentially they train consumers how to shop for products today. Customers look at product reviews, ratings, comparable products, even seller reviews. Mobil devices have further simplified this process. Ingrained deeply in every young shopper is the need to find and digest this information. The lack of this information in banking searches causes consumers to search other options. A new strategy for a new era in banking: Your bank should build a strategy around utilizing sources that are easier for consumers to access and greatly influence their decisions, rather than a shotgun approach to strategy. A quick example of this is to optimize your location pages and try to find creative ways to get real, happy customers to rate and review you, rather than trying to create and manage a Face-

fectiveness will mirror your goals, and be murky and non-existent. Goals should be tied to very specific and real-life business goals. Keep your goals simple and your measurements even more simple; it will save you a lot of headaches and help avoid much of the self-created confusion around social media marketing.

A Team Effort

book page that has only 51 to 1,000 likes. The truth is, real ratings or reviews on Yelp and websites specific to banking, like and, will show up on the first page, or even as the first result, of a Google search, and will heavily weigh on a consumer’s decision on choosing a banking product or service. Do you have a content-based strategy, like a blog, Facebook or Twitter? Then at least make it do something. Most banks aren’t in the business of creating exhilarating content, and it shows. Time and time again, I see banks on a content-based platform like Facebook, Twitter or a blog, yet their content is not something that their targeted customers are interested in. Most banks see very little results from these efforts. It’s vital to first understand what your goal is, what your intended market shares with you in regards to interests, and then building strategies and content that will effectively connect the two, driving real business results for your bank. It takes time to build an effective strategy, but it’s worth it in the long run. Measuring for success, not for more “good friends.” How do you measure success with your social media efforts? Here is a vitally important point: If your initial goals are murky or nonexistent, measuring your campaign’s ef-

No longer is marketing and branding a silo in the marketing department. Social media has forced everyone at all levels to be a part of the bank’s marketing efforts. Social media should be viewed as a resource for growing in your potential market, not as a technology. If you haven’t considered implementing social media at your bank, you will eventually have no choice, if you are to survive. Why not take the strong approach by starting today and strategizing to thrive?

If you’re currently using social media at your bank, put your efforts to the test. Before sharing any content through your social media channels, put yourself in your consumers’ shoes and ask yourself, “Would I read this post if I found it, and would it influence my decision to choose my bank?” Without question, having an effective and strategically laid out website, social media campaign and search engine existence is vital to the future of your bank, and the banking industry as a whole, since it’s how consumers today and tomorrow will find and communicate within their new banking relationships. A fully effective and integrated social/search/website campaign doesn’t grow overnight. So take your time, and properly care for your efforts. It’ll be worth it.  n John Siracusa is president and CEO of mOSa e-bank marketing services. He can be reached at 201-941-1458 ext 708, or

Banking Solutions 2013 | 11


By Roxanne Emmerich

Top-Performing Banks Opt for New Kind of Strategic Plan to the end results you want, coupled with the skills to adapt and adjust your strategies as changes come your way. So when you meet to plan for the coming year, put away that chisel. Instead, define the targets you intend to keep in your sights and build the shared commitment to reach them.

Build Mutual Trust


s the year falls away, planning for the New Year begins, and everybody’s trying to figure out how to turn last year’s budget into this year’s strategic plan. For all the good that would do; you’d be better off folding the budget into a flock of little origami cranes. At least that would improve your dexterity and add a bit of flair to your office décor. Trying to make a strategic plan out of a budget is ugly. Budgeting and planning are as different as a grocery list and a five-course meal. You need one to get to the other, but they are hardly the same. So how do you create a plan that leads to world-class results?

Put Away the Chisel

You’ve probably heard of the Butterfly Effect, where the beating of a butterfly’s wings sets off a chain of countless small reactions until you’ve got a hurricane on your hands. That’s the economy for you – an incredibly complex web of tiny causes and huge effects. It’s difficult to predict exactly what the world will look like three, six and 12 months out. Given all this uncertainty, any minute-to-minute plan you carve in stone is doomed to fail. The move from Step 5 to Step 6 that seemed so logical in January may be suicide in July after the economy has shaken the ground beneath your feet a few times. What you need is constant reassessment and reorientation 12 | Banking Solutions 2013

“We must hang together, or most assuredly, we will all hang separately.” That was Benjamin Franklin’s thought upon signing the Declaration of Independence, but it ought to be on the lips of everyone in your planning meeting as well. Hang together! Mutual trust is a key ingredient in strategic planning. Putting petty conflicts and self-interest aside is vital to refocusing all eyes on the prize. Every team member must know that every other team member has his back and will support rather than undercut his efforts to reach the mutual goal. Since you’re not dealing with robots, that kind of trust can’t simply be programmed. You have to name it as an indispensable value from square one and get your whole team to recognize this fact. When trust breaks down along the way – when, not if – everyone must have the ability and willingness to communicate on the spot and heal the rift for the sake of shared objectives.

Put Some Strategies in your Strategic Plan

The reality is, the strategic plans of typical banks are devoid of strategies. What most of them have instead is goals. There may be some initiatives or tactics, too. But without strategies, world-class results will only be something you read about in the headlines – not something you realize within your own bank.

One Page – Period!

As a teenager, Stephen King had

a dozen short stories refused by one magazine after another. Finally, an editor gave him a piece of advice: Your final draft should always be shorter than your first draft. Always. Once King started reducing instead of expanding in the final step, he began getting published. The same rule goes for speeches, advertising, marriage proposals – and strategic plans. Write all you want into the first draft. Get all of your ideas out there. Then brutally whack your plan down to one tight page.

Be Precise

Vague wandering in the general direction of results will get you vague and general results. Instead, create a plan that zeroes in on the results you expect with glistening, crackling clarity, and build in follow-through templates, making sure everyone is aligned through weekly check-ins.

Be Systematic

Good intentions are swell. But you will never connect the dots between Point A and Point Z unless you put a system in place. Not a system that is written up and forgotten, but one that you return to every week for realignment and one that is integrated into every employee’s quarterly plan. These elements of a successful plan – flexibility, trust, strategies, conciseness, precision, and drum-tight systems – are all optional. So is success. But if you choose to follow these guidelines, you’ll be well on your way to the kind of success that will have your old-school competitors running for their silver bullets. Let ’em run – you’ve got things to do. n Roxanne Emmerich, CSP, CMC, CPAE, helps community banks incorporate high-performance internal cultures, profit-rich marketing systems and premium-priced sales processes. Visit

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By Arthur Warren


Hamburger While you Work and Steak When you Retire guarantee retirement benefits? 2. How much bank compensation should be apportioned to delayed pay through retirement programs versus immediate pay through competitive salary and incentives? 3. What retirement plan design will help the bank attract, retain and motivate the employees who are essential to carrying out the bank’s business mission?


arren Buffet calls public-sector pension plan liabilities “time bombs.” Many state and municipal pension liabilities far exceed their assets. This is due to their failure to consistently fund the liabilities. This is not the problem facing community bank pension plans. Community banks fund their pension plans aggressively, yet underfunding continues. Why?

gains, the pension plan does not realize an immediate benefit. Pension plan asset and liability mismatching is an added problem. The average age of employees at community banks as a demographic is uniquely older. This fact results in larger benefit liabilities. But often a plan’s liabilities are not properly synchronized with the duration of plan asset investments. This creates unpredictability in budgeting.

What are the problems?

What should management and board members do?

Volatility of bank funding for a pension plan has become a significant issue which is further complicated by the Pension Protection Act of 2006. The act requires use of corporate bond interest rates and requires losses to be amortized over a short period of time. The result is a considerable compression of a bank’s funding obligation. There is a high cost to low interest rates. Shrinking bond yields cause an increase in the present value of pension plan benefit liability regardless of the actual or assumed investment rate of return. When there are losses, the act requires an acceleration of the funding requirements. However, when there are 14 | Banking Solutions 20112

Management and boards should not to ignore the substantial volatility and unpredictability of pension plan costs. Based on strategic reviews of numerous community bank retirement programs, this trend will continue. Unfortunately, smaller banks are more at risk, but pension plans of all sizes are subject to criticism that there is no apparent link to bank financial performance. I suggest that management and board members deliberate three fundamental questions: 1. Does the bank want to be in the pension plan asset/liability management business and

To control costs, banks should restructure pension plans to reduce the richness of the benefit formula or to freeze all future benefit accruals, and implement depowered benefit formulas with a career cap, if the decision is to maintain the pension plan. Banks that freeze pension plans are implementing enhanced defined contribution 401(k) plans with bank matching and discretionary profit sharing contributions. Supplement executive retirement plans are being implemented for the higher paid key employees providing annual fixed benefits, supplemented with discretionary performance based contributions. The resulting cost savings are reinvested in the bank’s tactical incentive based pay program initiatives designed to improve profitability and competiveness. The fallout from the Great Recession requires changes in retirement plan philosophy, favoring the elimination of uncontrolled costs symbolic of pension plans. The old community bank career adage, “Hamburger while you work and steak when you retire” is recast as “Hamburger while you work, and when you retire, upgrade to steak with demonstrated financial performance.” n Arthur Warren is the founder of Arthur Warren Associates in Walpole, Mass. He can be reached at 508-660-0280 or

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License 181726


CSI: Banking Your bank is hiding $1Million in unrealized earnings per $1Billion in Assets.

Lodestone will find it for you. “Like CSI:” Even though one New York community bank CEO called our work for him “like “CSI:” because the work we do is really at the microscopic level,’ Our “CSI:” team is really more of an “AEM:” investigative team (Advanced Earnings Methodology, AEMSM), but, just as in the TV series, our in-depth analytical approach to your bank’s profit improvement, results in uncovering unrealized earnings beyond the “low-hanging fruit” that bankers can see for themselves. Lodestone Does What Banks Can’t Do As another Lodestone client remarked, “Internally, we do not have the ability or time to perform a forensic analysis of our core system to find and correct less profitable or incorrect system settings. They also found opportunities in operations that were previously invisible” Lodestone’s “CSI: Banking” team does what bankers can’t do… They “solve the case” by delivering over $1Million in unrealized earnings per $1Billion in Assets. Guaranteed Results Lodestone Banking works with your bank’s senior management to increase revenue by way of more profitable system settings, closed policy vs. procedure gaps, improved operations and increased interest and non-interest income without raising fees and without reducing staff. And most important is that we offer Guaranteed Results, which states “if we fail to reach our guaranteed amount to your financial institution – we will forgo our success fee.” To FInD ouT HoW MuCH Revenue IS HIDDen, CALL LoDeSTone

Contact: Mark Clark, SEVP and Managing Partner at or call Lodestone at 800-722-2566. And visit us at Shahin Clark

Mark Clark

Profile for The Warren Group

Banking Solutions 2013  

The 2013 issue of Banking Solutions covers a range of information for bankers, vendors and financial institutions, an provides an outlook fo...

Banking Solutions 2013  

The 2013 issue of Banking Solutions covers a range of information for bankers, vendors and financial institutions, an provides an outlook fo...

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