Presented By: Jack R. Salvetti, Principal S.R. Snodgrass, P.C.

Transcription

1 Presented By: Jack R. Salvetti, Principal S.R. Snodgrass, P.C.

2 2018 S.R. Snodgrass, P.C. All Rights Reserved 2

3 3

4 Number of Commercial Banks ( ) 9,000 8,500 8,315 8,082 8,000 7,500 7,887 7,767 7,628 7,523 7,397 7,279 Number of Institutions 7,000 6,500 7,077 6,829 6,519 6,275 6,072 6,000 5,847 5,607 5,500 5,340 5,112 5,000 4,918 4, Year Source: Federal Deposit Insurance Corporation s Historical Statistics on Banking 4

5 Number of Commercial Banks and Bank Branches ( ) 9,000 Institutions Branches 85,000 83,056 83,130 83,203 83,576 82,735 8,500 8,000 7,500 8,315 8,082 7,887 7,767 7,628 7,523 7,397 79,269 7,279 82,646 81,990 81,541 80,089 79,163 82,500 80,000 77,500 Number of Institutions 7,000 6,500 6,000 70,978 73,613 76,682 7,077 6,829 6,519 6,275 6,072 5,847 75,000 72,500 70,000 Number of Branches 5,607 5,500 68,272 5,340 67,500 66,954 5,112 5,000 65,682 4,918 65,000 64,916 4, Year 62,500 Source: Federal Deposit Insurance Corporation s Historical Statistics on Banking 5

6 Number of Commercial Banks and Bank Branches ( ) Institutions Branches 9,000 85,000 83,056 83,130 83,203 83,576 82,735 Number of Institutions 8,500 8,000 7,500 7,000 6,500 6,000 8,315 8,082 7,887 7,767 7,628 7,523 7,397 76,682 73,613 70,978 79,269 7,279 7,077 6,829 82,646 6,519 6,275 6,072 5,847 81,990 81,541 80,089 79,163 82,500 80,000 77,500 75,000 72,500 70,000 Number of Branches 5,607 5,500 68,272 5,340 67,500 66,954 5,112 5,000 65,682 4,918 65,000 64,916 4, Year 62,500 Source: Federal Deposit Insurance Corporation s Historical Statistics on Banking 6

7 Pennsylvania Branch Deposits 2018 S.R. Snodgrass, P.C. All Rights Reserved 7

8 Total Loans to Total Deposits Comparison Total Deposits Total Loans 120,000, ,000, Q4: $108,965, ,000,000 90,000, Q4: $108,601,980 80,000, Q1: $57,296,059 70,000,000 60,000,000 50,000, Q1: $52,987,269 40,000,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Source: S&P Global Market Intelligence Pennsylvania Banks with Total Assets less than $10 Billion 8

9 Changes in the Household Savings Rate 9

10 10

11 The Changing World has both cyclical patterns and historic vectors (fundamental change) 2018 S.R. Snodgrass, P.C. All Rights Reserved Age of Discovery Digital Age 11

12 A Dozen Emerging Trends Industry Consolidation Branch Banking/Digital Services ecommerce Payment Systems Artificial Intelligence Customers Facing Disruptive Innovation Funding the Loan Growth Demographic Succession Organizational Succession Business Analytics Leader of Leaders Wealth Coaches 2018 S.R. Snodgrass, P.C. All Rights Reserved 12

13 13

14 14

15 The Payment System Mobile is ruling the world, with millions of apps making lives easier and more convenient. Digital payments apps are attempting to replace traditional and less convenient methods with minimal or no charges. The field will continue to become more competitive with many new players coming in. New innovative features and social media connections are providing a wide range of end users with ample choice, convenience and efficiency. 15

16 Digital Payments PayPal is entering the banking world with plans to roll out a new debit card for online and offline shopping PayPal Cash MasterCard will let users access the money in their PayPal account to shop online or in stores and withdraw cash from ATMs anywhere MasterCard is accepted Those without a bank account will be offered the opportunity to directly deposit their paycheck into their PayPal account for free Venmo was the hands-down number one P2P application as it offers users much more than just a tool to complete a transaction, but rather a community where users can interact with and engage other users. It allows users to transfer money to one another using a mobile phone app. It handled $12 billion in transactions in the first quarter of 2018 Zelle entered the P2P payment market to rival juggernauts such as PayPal and Venmo The Zelle service enables individuals to electronically transfer money from their bank account to another registered user's bank account using a mobile device or the website of a participating banking institution Zelle doesn t charge a fee to send or receive money 16

17 Digital Payments Varo Money is entwining financial experiences into their users daily lives. The Varo app is an intelligent mobile banking app that improves consumers financial health by encouraging positive spending, savings, and borrowing habits Customers need help to get ahead financially, and technology can enable more personalized help for more people Varo is built to improve customers financial health. We envision a world where customers consistently spend less than they earn, gradually save up a three-month emergency fund in cash, steadily improve their credit profile, and plan ahead for insurance risks and big life events Amazon recently got involved in the payment industry, leaving banks and even PayPal wondering how to compete Amazon is offering up its discounts on credit card fees to other retailers if said retailers turn to Amazon s online payments service This would remove Amazon s ability to profit on payment processing as it would be passing on that profit directly to the retailers that put Amazon s own service to use 17

18 Amazon Is the Least of Banking s Problems Banks problem is much bigger than whether or not Amazon becomes more of a threat in financial services or not. Banks core value proposition is not nearly as important as it used to be. The real value of money is based on what it can do. And if people no longer need banks to hold their money, the business model is fatally flawed. Banks should plan for an overhaul on the value their industry provides to customers. The Alipay model works because the financial model doesn t rely on stockpiling money. The company s goal is to enable commerce. Source: Ben Gaddis, Amazon is the least of banking s problems. American Banker. March 19,

19 Banking is necessary, banks are not Bill Gates 19

20 Value Creation Sequence So we need to answer a simple question concerning your Value Creation Sequence: Does your bank seek to create customer loyalty or does it seek to enhance the customer s life? Shapes your technology strategy 2018 S.R. Snodgrass, P.C. All Rights Reserved 20

21 21

22 22

23 The Future of Branch Banking? The question is, What work will be done in the branch office in the future? 23

24 Information vs. Knowledge 24

25 The Application of Artificial Intelligence More AI is on the way 60% of over 900 financial services executives and firms surveyed are mulling, or in the process of deploying, artifical intelligence projects. 40% 35% 30% 25% 20% 15% 10% 5% 0% Deployed Deploying in Next Year Deploying in 12 to 18 Months Under Consideration No Plans in the Next 18 Months Source: 2017 Digital Banking Report, Aite Group At this point, bankers are beginning to pay serious attention to AI 25

26 Image by Can Stock Photo 26

27 Pennsylvania Market Demographics Head of Households 49% of HH age 55 and older 29% of HH age 65 and older 34% of HH age % of HH age Source: ESRI 27

28 Follow the Retail Industry s Moves 28

29 Department Stores Dying? Don t tell that to Macy s Don t write off department stores just yet. Traditional retailing may still be under pressure from online retailers such as Amazon, but results released Wednesday by Macy s show there s still plenty of hope as the sector evolves and transforms itself. Macy s is also aiming to better compete with Amazon, as well as its traditional retail peers, by bringing technology to its aisles. And trying to make the in-store experience as much of a draw for customers as merchandise lining the shelves. By the end of this year, shoppers will be able to use their smartphones to scan and pay for most products with the Macy s app. USA Today

30 30

31 31

32 Leading Your Bank in a Rapidly Changing World The focus has been on our business models, delivery channels and management s perception of changing customer needs. However, an outward focus on the disruptive challenges customers face and the sheer speed of change in this environment will create significant opportunities for those banks that are highly focused and culturally disciplined S.R. Snodgrass, P.C. All Rights Reserved 32

33 Leading Your Bank in a Rapidly Changing World Perhaps the effects on our customers success may be more telling about our bank s future than we think. A very bright future waits for those banks adopting an enhanced strategy to further customerrelationship activities at this fascinating point in history S.R. Snodgrass, P.C. All Rights Reserved 33

34 34

35 Five Signs You Should Sell Dick s Sporting Goods 1) Top Two Key Suppliers (Nike and Under Armour) are going directly to customers. 2) Nike Cozies Up with Amazon inked a deal with Amazon to sell its wares on the ecommerce giant s website. 3) Plunging Margins and Weakening Same Store Sales. 4) More Stores, More Problems although plans to slow its store-count expansion in 2018, shareholders should consider whether their capital could be used for other purposes, such as ecommerce. 5) Cheap Can Get Cheaper the problem with investing in businesses facing disruption: their seemingly cheap stocks can become a lot cheaper. The Motley Fool, LLC. Sept. 27,

36 The Amazon Whole Foods Deal Is Done Now What? Create a shopping list of exactly what you want and have it delivered to your door. 36

37 The Looming Challenge Your commercial business customers are subject to the effects of marketplace disruption. A top-line customer s business model may be negatively impacted, thus resulting in a temporary or permanent financial setback. How might this impact your asset quality position? This leads to the ultimate question of whether you will continue to finance the business of a longtime excellent customer that must finance the modification of its business S.R. Snodgrass, P.C. All Rights Reserved 37

38 The Questions Remain What is the Future of Banking? What is the Future of Your Community Bank?? What is the Future of Your Community??? What will be Your Legacy???? 2018 S.R. Snodgrass, P.C. All Rights Reserved 38

39 Epilogue The development of this presentation caused me to leave many of the subject matters that I have long espoused as being essential to leading a successful bank on the cutting room floor in order to address the most essential themes of the day. That experience of finally letting go of more traditional subjects allowed me to experience what my clients are reckoning with in this time of transition. Along the way, I met many new CEOs who are addressing these challenges as great personal and organizational opportunities. But the sheer velocity of innovative disruption will pose new experiences to all leadership teams. And strategy, which has always been focused on what s next just got a whole lot more interesting. SRSNODGRASS.COM P: