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  • About
    • R. Scott Richardson, JD
    • Brenda R. Haag
    • Bruce F. Barge
    • Chris A. Richardson
    • Debra Hardimon
    • Fannie Mae Pantaleon
    • Jeff Prescher
    • Joe Tripalin
    • Patrick J. Costello
    • Philip Aderton >
      • 2019 CBAI IZALE Sponsored Golf Outing
  • Resources
    • Blog
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        • 2017 Client Conference
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IZALE Financial Group

Blog

A Better Bottom Line

7/28/2020

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by R. Scott Richardson, JD, CLU, ChFC, Founder & CEO IZALE Financial Group

It is jaw-dropping how much has changed in a quarter. The pandemic has a firm grip (and seems to be tightening it!), the US has experienced the sharpest GDP decline in history (relative to the time frame) and millions of Americans are suddenly unemployed. We have seen the S&P 500 plummet 34% from its February 19 high, only to climb back up 38.5% to end June at 3,100.29. (Notice how returns work - while the S&P is up 4.5% more than it declined, it was still below the market high; the S&P would need a total return of 51% from the low to get back to that high!)
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In the midst of that, however, we are hearing how credit unions have stepped up to help, whether through helping the Federal government distribute some of the $3 trillion it has injected into the economy (and the ever-changing rules that came with that!) or by offering their own assistance to their members. And you had to do that while figuring out how best to work remotely yet serve members and keep your own employees safe. The work that has been done thus far is nothing short of amazing.

As credit unions know, there is a cost, however: we’re hearing from many clients who have revised their budgets for 2020 to reflect a substantial drop in net income. Several are even forecasting very lean earnings for 2021. All are looking for ways to enhance earnings, and there is also a focus on reducing expense.

One area that is often a target for tightening during these times is compensation and benefit expense. It does, after all, represent one of largest expense categories on the P&L. At a time when you have asked so much more from your team – and by most accounts they have delivered - we caution you to carefully consider those decisions and review some of the ways we’ve helped clients adjust their budgets while valuing their people.

Here are some of the ways that IZALE has helped clients this year:
  • Client A, a $1 billion FCU, has used BOLI for several years to offset the cost of all employee benefits. With deposits up, loan demand tempered, and traditional yields down significantly, they allocated additional money to BOLI and immediately (with no market risk) boosted earnings by over $140,000.
  • Client B, a multi-billion FCU, had an established 457(f) for several executives. We helped them evaluate the merits of continuing that plan vs. using a split-dollar loan structure, deciding the latter met their objectives. The client recaptured more than $5 million of prior expense while offering more net cash flow to executives.
  • Client C, a multi-billion state CU, needed a program for senior executives. They have a rational process for first quantifying how much of a benefit they want to offer. The board, with input from the CEO, evaluated 457(f), split-dollar loan, and Restricted Executive Bonus Arrangements (or REBA), and decided that a combination 457(f) + REBA most met their objectives.

While there is no one best way for every institution to value their people or improve earnings, we believe you should evaluate all options and choose the one (or ones) that check the most boxes for the institution and executives (not vendor). Our examples above describe ways we’ve assisted larger institutions, but we helped clients in all asset sizes implement programs appropriate for their budget. IZALE has never charged for evaluating plans, and we welcome the opportunity to share what we’ve learned from helping to design (or redesign) over 1,100 executive benefit plans over the past 20 years.
Original publication in the Defense Credit Union Council Alert Magazine July 2020
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StartFresh Checking®

7/14/2020

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by IZALE Friend, Tim Bode, Stratis

The popularity of courtesy overdraft programs combined with recent COVID financial stress has resulted in many potential checking customers not qualifying for a traditional checking account. With fewer customers qualifying, checking account growth rates are lower, and account acquisition costs are higher. To help financial institutions overcome this challenge, the value of a product Stratis created has become even more viable to change this trend. Over the past 12 years with great success they installed it's StartFresh Checking® program in over 50 banks and 2 credit unions.
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At Banterra Bank, Head of Retail Debra Becht saw that they were turning down about 15% of checking applicants due to past closure history.  She didn't like losing potential customers, and more importantly not helping people with their banking needs.  Further, their small business customers were also experiencing frustration: they wanted to pay all of their employees via direct deposit, but many employees don't qualify for a traditional checking account due to previous closure history.

The StartFresh program has been a great solution. It helps Banterra Bank serve a previously underserved segment in a way that meets their needs, is profitable, and earns compliance favor.  As Debra recently shared:
"...we had our quarterly compliance committee meeting yesterday.  We love this product and the performance.  It was a great CRA factor in our recent exam.  Just wanted to say thanks for all you do."  

What worked for Banterra can work for your bank or credit union as well; through this program, your StartFresh account holders will:
  • Avoid the embarrassment and inconvenience of not qualifying for a checking account
  • Rebuild their financial reputation
  • Feel more empowered and more "in control" of their finances
  • Get direct deposit for payroll and government checks
  • Avoid costly check cashing fees, and
  • Eventually "graduate" to a more favorable traditional checking product!

By implementing StartFresh Checking, your bank:
  • Serves more customers
  • Increases customer satisfaction
  • Establishes longer lasting and more loyal customers
  • Grows deposit and checking accounts
  • Enhances fee income
  • Opens accounts more efficiently
  • Creates cross-sell opportunities
  • Serves a new segment of customers in a consistent and compliant manner.

Stratis has pioneered this program, implementing it most effectively since 2007. No other firm has more experience in the "second chance" space. With unemployment at an all time high, there is a population that truly needs this option.

Stratis is available to speak with you about your particular challenges to see if StartFresh Checking can work for you!
For more information, contact your IZALE Representative.
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COVID19 Financial Next Steps

7/2/2020

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by Todd Taylor, Taylor Advisors
As financial institutions across the nation cope with market and economic challenges created by COVID-19, anticipating next steps to manage balance sheet "risks" AND improve or protect profitability is becoming increasingly more difficult.

Below are excerpts from Taylor Advisors' four-part Pandemic Mini-Series. Please click the corresponding hyperlinks below to read the eBriefs associated with the four ALCO positions of liquidity, capital, investments, and interest rate risk.
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In Part 1 of our mini-series, we discussed the importance of robust liquidity stress testing, a comprehensive contingency funding plan, and anticipating potential changes in loan and deposit portfolios.
 

In Part 2, we discussed potential impact on capital from asset quality deterioration, margin compression, and other balance sheet changes.

In Part 3, we discussed investment strategies, as portfolios and cash usually make a meaningful contribution to institution's overall interest income. 
 

In Part 4, we turn our attention to interest rate risk management and look at challenges relating to exposures to falling/low rates.  Many financial institutions are beginning to feel pressure on interest income and earning asset yields, frequently compounded by funding costs already at historically low levels.

We hope the topics covered will benefit you and your clients as you progress through these unprecedented times.

If you have questions, contact your IZALE Financial Representative. 855-492-5334

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​Effective June 9, 2017, all individuals who provide advice to retirement plans, including Individual Retirement Accounts (IRAs), must abide by the fiduciary standard.  What does the fiduciary standard mean?  This means that your advisor must put your interests first before their own or that of the firm, make prudent recommendations, charge reasonable compensation and make no misrepresentations to you regarding recommended investments.  The recommendations made by your advisor must be based upon your specific investment needs and objectives.  The fiduciary standard is applicable to any recommendations that your advisor makes to you, the client, for your retirement account.
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This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Scott Richardson at 855-492-5334 .