Last month, the Financial Managers Society (FMS) held its annual forum – a one-of-a-kind event designed specifically for community bank and credit union finance professionals. Each year, the FMS secures speakers from key regulatory bodies in the accounting and auditing profession and advisory space. These speakers present to the forum relevant and thought-provoking topics that matter most to the financial industry today.
An overarching theme throughout each presentation was the importance of balance sheet management and understanding where you are positioned today as a institution and what your strategy is going forward. The “buzz” throughout the conference was an almost certainty that there would be a 75 bps rate hike on top of the already high inflation rates. Many professionals felt that the likelihood of additional rate increases was probable (which ultimately turned out to be true). Following an extended period of low rates, these rising rates are viewed as positive for the net interest margins of many institutions—however, there is concern over their bond portfolios. Multiple presenters spoke to the importance of understanding your strategy and ensuring committee members, the board, and other key decision makers do so also in order to make sure you aren’t making irrational decisions based off “paper entries” (hint … OCI).
For many in the crowd, CECL is still a four-letter word they are trying to figure out. However you could tell many had a better understanding of how they will be addressing it than they had before. Presenters were able to share a lot more “best practices” and “lessons learned” geared towards more of the attendees peer institutions instead of some of the large, accelerated filers. The comments from those that are still in the process of adopting CECL continue to be that smaller and less complex institutions don’t need complex models. To double down on this, the regulators teased the roll out of a new credit loss model tool called the Expected Loss Estimator (ELE) to be considered in addition to their previously released Scaled CECL Allowance for Losses Estimator (SCALE) tool. In addition, purchase credit deteriorated (PCD) and non-PCD accounting were lively debated topics that the FASB staff continues to perform additional research and outreach on.
Finally, thought-provoking presentations about crypto and digital innovations had us looking forward to the future of evolving our relationships with financial technology companies (fintechs). These topics drew a highly engaged audience and it was welcoming to hear how many institutions have already begun exploring these different digital avenues.
If you would like to hear more about the conference or ways Baker Tilly can help please contact us!