When a Stock Valuation Can Add Value

By: Martina Dowidchuk, Senior Consultant

The stock market continues to remind us of its inefficiencies. Most banks saw their stock values decline last year despite the industry’s record levels of earnings, continuing growth, and strong asset quality levels. In fact, the month of December 2018 recorded the greatest monthly stock decline since 1931. The broad market index, the Nasdaq Composite Index, was down 9.5% for the month of December and the banks were impacted even more than the overall market with the Nasdaq Bank Index falling 14.1%. For the year 2018, bank prices declined by 17.9% as measured by the Nasdaq Bank Index. This market correction was caused by a combination of economic and political factors, as well as the market’s perception of their impact on the industry. The Nasdaq Bank Index has showed a considerable improvement since the end of 2018, but as of July 30, 2019, it continues to be more than 9% below the level it reached 12 months ago.

While there will always be external factors outside of any bank’s control affecting the market pricing, the intuitive fundamental relationships tend to remain true among broadly-traded stocks. Regardless of the overall market’s ups and downs, the market values of banks with a higher profitability, stronger growth prospects, and other positive fundamentals are typically higher when compared to banks with weaker performance. However, this is not always true for banks with a limited stock trading activity. To ensure that the improvements in the bank’s performance translate into the shareholder value, the earnings prospects and financial strength need to be proactively communicated to the proper audience so that investors realize the value of a community bank stock and the bank gets a proper credit for its performance.

One of the easiest and fastest proactive measures available is to obtain an independent third-party valuation of the bank’s stock. Professional appraisers use multiple valuation techniques that encompass both sound financial theory and the latest market realities. Different considerations are made depending on the type and purpose of the valuation. Some valuations may require a minority interest value (i.e., a trading value), while others may call for a controlling interest value (i.e., change of control value). A valuation report evaluates the bank’s performance from different perspectives and provides an immediate stock value estimate that can then be communicated to shareholders and potential investors, providing a base point for future trades, stock repurchases, employee stock ownership programs, etc. Furthermore, if the bank has not previously had a valuation of its stock completed, the result in many cases could be a significant, immediate increase in shareholder value as the bank and its shareholders realize the true value and potential of the stock.

For community banks, understanding and proactively managing the shareholder value can be vital for many reasons. Young & Associates, Inc. has been providing valuation services and advice encompassing a variety of transactions and valuation purposes for over 40 years. Our experience in merger and acquisition activities, bank formations, and other capital market transactions gives us the expertise to help our clients understand their market value and make informed decisions as they implement their strategic initiatives. For more information on how Young & Associates, Inc. can assist your bank in this area, give me a call at 330.422.3449 or send an email to mdowidchuk@younginc.com.

Succession Planning – The Key to Remaining Independent

By: Bob Viering, Senior Consultant and Manager of Lending Services

For many community banks today, remaining independent is the number one strategic priority. There are many reasons boards believe remaining independent is important: the board believes that the shareholders’ investment will be maximized over a longer time horizon; that the bank as an independent local bank can best serve the needs of the community; that the employees as a whole will be far better served (and have jobs) by remaining independent. These are all reasonable and sincere reasons.

So, if staying independent is important, why are an increasing number of banks selling today? One of the biggest reasons that banks sell is that the board is not confident that there is anyone ready to take over management of the bank. Developing a successor internally is a multi-year process to groom a talented individual to learn enough about the day-to-day responsibilities and skills needed to manage a bank successfully. Hiring a new CEO externally sounds easy, but to find that right person that not only has the skills and background to succeed and also can fit in the community and, most importantly, the bank’s culture can be a very challenging process, especially if you are in a rural community. If something happens that the CEO role is suddenly open, or the CEO decides to retire in a year or less, all too often there is not enough time to find that right person, and the easier decision is to sell while the bank is still running smoothly.

It sounds like having a plan on how the CEO position will be filled is the answer. We’ve seen very simple plans that are a few short paragraphs that basically say, “Joe and Mary can run the bank in the interim. If one of them is not the right person, we’ll just hire someone.” Even for a very small bank, it’s almost never this easy. Even if you believe one of the top managers has the “right stuff” to be the next leader, have you thought about what skills they may need to develop to be ready? Have they had any real experience leading a group or an important project that gives you confidence they can run the place? Can you picture that person standing up in front of your shareholders? Or representing your bank to regulators? Or allowing your other key employees to operate successfully? Can they run the bank when times get tough (and they always do)? If you answered positively to these questions, do you have a plan, with timeframes, to provide the types of training and experience so that they will be ready to take over?

Even if you are confident you have the right person to take over, or you start early enough to recruit your next leader, what about the next level of management? Are they ready to step up when Joe or Mary ascends to the top spot? Do you have a plan to develop that next level of management? As you step through the layers of your organization, it often becomes clear that there are other key employees that would impact your ability to run the bank smoothly if they leave. What do you do if your head of IT leaves? Is there a replacement? Can the functions be outsourced? Every organization has those key people; they may not even be mangers that are critical to the operation. What’s your plan if they are gone one day?

If you may be facing the expected change at the CEO level and you have other key people that are in sight of retirement, selling can seem like a simple, expedient solution. The key to not being backed into a corner when retirements occur, or when a key person leaving is a threat to the successful operation of the organization, is having a well thought out succession plan. A successful plan has the following elements: it identifies those key individuals in the bank needed to run the organization successfully; it identifies the skills and training needs for those individuals that have the ability to be promoted to more responsible positons, even the CEO role; it has a written plan with timelines for preparing the individual for that next step; and it is updated at least annually to verify that the plan is still the best plan for the bank and that the individuals are progressing as expected.

If you truly want to remain independent, then you must take the time, and it will take time, to develop a meaningful succession plan. Well done, it will take months to develop and time to groom and coach that next level of talent, to review and update your plan as required.

At Young & Associates, Inc. we are committed to the idea that we are all best served by having strong, well-run community banks. If you would like help in developing your succession plan or would like a critical eye to review your existing plan, reach out to us: we’ve got community banking’s back. To contact me, give me a call at 330.422.3476 or send an email to bviering@younginc.com.

Capital Market Commentary

By: Stephen Clinton, President, Capital Market Securities, Inc.

July Market Update

July marks the beginning of the 11th year of the U.S. economic recovery that began in June 2009. Back then was the end of the Great Recession that followed the 2007-2008 global financial crisis. The current expansion has continued, uninterrupted, ever since. While the annual economic growth has not been remarkable, it has been stable. GDP growth has been around 2% for each of the years of the recovery. However, the recovery has led to a near 50-year low unemployment rate of 3.7% while holding inflation below 2%. Highlights on the economic front include:

  • On July 31, the Fed lowered its short-term benchmark interest rate by a quarter of a percentage point, the first rate cut since 2008. Previously, the Fed had conducted several rounds of raising rates as it expected inflation to surface due to the “full employment” conditions. Surprisingly, inflation has remained in check and concerns about the global outlook clouded by trade policy uncertainties allowed the Fed to concede that interest rates were too high.
  • The June quarter, for the second quarter in a row, saw industrial production decline at an annual rate of 1.2%. Capacity utilization for the industrial sector decreased 0.2 percentage point in June to 77.9%, a rate that is 1.9 percentage points below its long-run (1972–2018) average.
  • The trend in wage growth has slowed from late last year when wages were rising at their fastest rate in a decade. Average hourly earnings in June rose six cents, or 0.2 %. That kept the annual increase in wages at 3.1% for a second straight month.
  • Strong consumer spending in the second quarter helped bring the GNP growth to 2.1% in the second quarter. The growth in personal consumption expenditures were reported at 4.3%, compared to 1.1% in the first quarter.
  • Home price increases are cooling off after recording strong growth since the recovery began. The Case-Shiller National Home Price Index rose an annual 3.4% in May.
  • Big fluctuations in oil prices have occurred in 2019. First, prices surged 48.2% by April 25, due in part to rising tensions between America and Iran. Then prices plunged 20%, with headlines blaming slower global oil demand growth and weak manufacturing data.
  • The federal deficit is expected to top $1 trillion for the second year in a row. The principal factors leading to the deficits are the 2017 tax cuts while the federal budget exceeded the spending caps enacted by Congress in 2011 by $300 billion.
  • American farmers are hurting. Unusually heavy spring rains have delayed or completely prevented planting across many areas of the Midwest while trade disputes drag down agricultural exports and crop prices. The pain is spreading from farmers to businesses related to farming.
  • The stock market has been strong in 2019. The Dow increased 15.16% in the first seven months while the broader Nasdaq market increased 23.21%. Banks followed the upward trend, rising 15.06% as measured by the Nasdaq Bank Index. Banks are reporting strong financial results. Based upon the March FDIC Quarterly Banking Profile, banks increased their net interest income by 6% from the prior year leading to an improvement of profitability by 8.7%. Noncurrent loans are below 1% while banks increased their reserves for future loan losses. Capital ratios continue to climb. The Fed recently announced the results of its annual capital stress tests (CCAR) for large banks and reported no objections to any of their capital plans. This will allow for increased dividends and continued stock buyback activity for these banks.
  • Short-term interest rates have declined in 2019 with the 3-month T-Bill moving down from 2.45% at the end of 2018 to 2.08% at the end of July. The 10-year T-Note also declined from 2.69% to 2.02%. The yield curve is partially inverted, with the 3 and 5-year T-Notes trading below 2%.

Merger and Acquisition Activity

As of the end of July, bank and thrift merger activity was down approximately 10% from last year at the same time. The median price to tangible book for transactions involving bank sellers was 168%.

Capital Market Services

Capital Market Securities, Inc., has assisted clients in a variety of capital market transactions. For more information on our capital market services, please contact Stephen Clinton at 1.800.376.8662 or sclinton@younginc.com.

Improving the Interview of Job Applicants

By: Mike Lehr, Human Resources Consultant

Never have businesses had to do so much recruiting. Never have they spent so much money on it. Yet, they have never been worse at it. The interviewing of applicants highlights this demise.

Imagine going to a team meeting. It has no agenda. It has no planning. It has no pre-work. People just “wing it.” That’s today’s job interviews. More puzzling, these “meetings” play a key role in the buying of a $20,000 to $200,000 asset annually. In contrast, how much thought and planning went into the last technology purchase for only a one-time cost of $15,000?

Research shows these interviews are a waste. It shows that most times the winner is the applicant most like the interviewers, not the most talented, skilled, or experienced. Yes, some argue that this determines cultural fit. What is that culture though? What is fit? Ask a dozen senior employees. It’s highly likely the responses will lead one to conclude that a unifying culture does not exist.

How to Improve Interviews

To improve interviews, they require more thought, planning, and analysis. That includes asking applicants the same set of questions. Ugh! Most likely, if you’re like I am, my eyes rolled when I first heard this. Much of my thinking had to do with feedback from interviewees. They described straight-jacket interviews where interviewees couldn’t ask or say anything but what was on their prep sheet. Moreover, the questions appeared very similar from one interview to another in the same company.It’s only later after digging into the original design of this approach that I found that it was structured interviews gone awry. It’s not how we should apply them.

How Structured Interviews Work

Here’s how it should work. First, think about the job and the skills it needs. Don’t make a laundry list. Start out with the half-dozen key ones. Then, come up with scenarios that can actually happen in your bank in which the applicant will need those skills. Now, devise “what if” questions around them that would require the use of those skills.

Examples of Questions in Structured Interviews

For example, take the job of branch manager. Take the skill of customer service. Let’s say the scenario is a very upset customer at the platform over fees charged to her account. She is getting loud and stressing the teller or customer service rep. The question now becomes, “How would you handle this?”

As another example, take a customer service rep or teller. The aptitude you want is conscientiousness or integrity. The scenario here could easily be that he/she is out with coworkers in a public place. One of the coworkers starts talking about a customer. Yet, it doesn’t seem he/she is talking loud enough for anyone outside the group to hear. The question could become then, “What would you do if this happened?”

The Grading of Answers to Interview Questions

Once you have these questions, come up with your own answers and grade them. This is key because you’ve thought about the answers before any bias could set in. As the research shows, if we like the person, we are more apt to look at a response favorably even if it’s one we were lukewarm about beforehand.

Now, this doesn’t mean that answers falling outside of those are wrong. It just means you’ve established a guide for determining good answers. After all, if you’re looking for creative problem solving skills, answers that aren’t like yours are important.

Practically Applying Structured Interviews

As I described in my early experiences with this, it’s easy to go over the edge. The entire interviewing team doesn’t have to ask the same questions. In fact, it’s better if they don’t. You can decide who might be best at asking a question. The circumstances, scenario, and importance of that question to the interviewer will often make the decision for us.

This also doesn’t mean that interviewers can’t ask other questions. Some might work to make the interview more conversational as in the case of exchanging pleasantries. In this case though, the answers don’t matter or they count less. After all, if the question was that important, we should have thought of it before any interviews began.

Better Interviews Yield Better Employees

According to Bureau of Labor statistics, 95% of hiring activity aims at filling existing positions. Turnover is at record highs. While many factors contribute to this, such as more employers preferring to hire from outside rather than to promote from within, some are myths, such as increased mobility. According to the same statistics, people are just as likely to move out of state for a better job as they were in the late 1960’s.

So, we can’t use outside factors as excuses. Hiring outside candidates is risky. The data shows promoting from within is better, less costly, and yields better outcomes. Therefore, to remove the risk of hiring outside applicants, improving the interview is low-hanging fruit to lowering drastically that risk.

Yet, even with this it’s easy to bypass the interviews and not take them seriously. Just think of the outside candidate that the president or other employees know. Think of employee referrals. It’s a myth that they automatically produce better employees. Research doesn’t support it. They, too, need to go through the same rigorous interviewing process as lesser known applicants.

In the end, there’s an easy way to determine if your interviewing process is in good shape. Ask this question: Does it have the same or better planning, analysis, and research that went into the bank’s last major technology outlay?

For more insights and guidance on how to improve interviewing of job applicants, including advice on questions, you can reach Mike Lehr at mlehr@younginc.com.

The Value of Internal Audit Through a Fresh Set of Eyes

By: Jeanette McKeever, CCBIA, Consultant & Internal Audit Operations Manager

There is risk in every aspect of the banking industry and the regulatory environment seems to continually change. As to the governance and control functions of the banking industry, it may be refreshing to the board of directors, audit committee, and executive management to have their internal audit function re-assessed and validated though a fresh set of eyes to assure that the controls in place are functioning as intended.

A strong internal control system, including an independent and effective internal audit function, is part of sound corporate governance. The board of directors, audit committee, senior management, and supervisors must be satisfied with the effectiveness of the bank’s internal audit function, that policies and practices are followed, and that management takes appropriate and timely corrective action in response to internal control weaknesses identified by internal auditors. An internal audit function provides vital assurance to a bank’s board of directors (which ultimately remains responsible for the internal audit function, whether in-house or outsourced) as to the quality of the bank’s internal control system. In doing so, the function helps reduce the risk of loss and reputational damage to the bank.

All internal auditors (whether in-house or outsourced) must have integrity and professional competence, including the knowledge and experience of each internal auditor and of team members collectively. This is essential to the effectiveness of the internal audit function.

We encourage bank internal auditors to comply with national professional standards, such as those issued by the Institute of Internal Auditors, and to promote due consideration of prudent issues in the development of internal audit standards and practices.

The scope of the internal audit function’s activities should ensure adequate coverage of matters of regulatory interest within the bank’s audit plan.  Regular communication by the audit committee, management, and affected personnel is crucial to identify the weaknesses and risk associated to assure that timely remedial actions are taken.

Young & Associates, Inc. can independently assess the effectiveness and efficiency of the bank’s internal controls and processes to provide value and assurance that the internal control structure in place operates according to sound principles and standards.

For more information on how we might provide internal audit services specific to your bank’s needs, whether it is outsourced or co-sourced, please contact me at 1.800.525.9775 or e-mail jmckeever@younginc.com.

Liquidity Risk Management

By: Martina Dowidchuk, Senior Consultant

Does your liquidity management meet the standards of increased regulatory scrutiny?

What was once deemed acceptable is gradually coming under a more rigid review, and financial institutions need to be prepared to show that their liquidity risk oversight complies with both supervisory guidance and sound industry practices.

The liquidity risk may not be among the areas of community banks’ immediate concern given the abundance of liquidity in the banking industry today. However, the history shows that liquidity reserves can change quickly and the changes may occur outside of management’s control. A bank’s liquidity position may be adequate under certain operating environments, yet be insufficient under adverse environments. Adequate liquidity governance is considered as important as the bank’s liquidity position. While the sophistication of the liquidity measurement tools varies with the bank’s complexity and risk profiles, all institutions are expected to have a formal
liquidity policy and contingency funding plan that are supported by a liquidity cash flow forecast, projected liquidity position analysis, stress testing, and dynamic liquidity metrics customized to match the bank’s balance sheets.

Some of the common liquidity risk management pitfalls found during annual independent reviews include:

Cash Flow Plan

  • Lack of projected cash flow analysis
  • Inconsistencies between liquidity cash flow assumptions and strategic plan/budget
  • Lack of documentation supporting liquidity plan assumptions
  • Overdependence on outdated static liquidity ratios and lack of forward-looking metrics
  • Lack of back-testing of the model

Stress Scenarios

  • Stress testing of projected cash flows not performed
  • Stress tests focusing on a single stress event rather than a combination of stress factors
  • Stress tests lacking the assessment of a liquidity crisis impact on contingent funding sources
  • Insufficient severity of stress tests

Contingency Funding Plan Document

  • Contingency funding plan failing to address certain key components, such as the identification of early warning indicators, alternative funding sources, crisis management team, and action plan details
  • Lack of metrics defined to assess the adequacy of primary and contingent funding sources in the baseline and stressed scenarios

Liquidity Policy

  • Inadequate risk limits or lack of acceptable levels of funding concentrations defined in the liquidity policy
  • Liquidity policy failing to address responsibilities for maintenance of the cash flow model, model documentation, periodic assumption review, and model validation

Management Oversight

  • ALCO discussions related to liquidity management not containing sufficient detail and not reflected appropriately in the ALCO meeting minutes
  • Lack of periodic testing of the stand-by funding lines
  • Lack of liquidity model assumption review or documentation of such review
  • Lack of periodic independent reviews of the liquidity risk management process

If you are interested in an independent review of your existing liquidity program and a model validation or are looking for assistance with developing a contingency funding plan, liquidity cash flow plan, and liquidity stress testing, please contact me at 1.800.525.9775 or mdowidchuk@younginc.com. Young & Associates, Inc. offers an array of liquidity products and services that can help you to ensure compliance with the latest regulatory expectations.

A Look to the Future

By: Jerry Sutherin, President & CEO, Young & Associates, Inc.

On January 31, 2018, I was fortunate to have the opportunity to purchase Young & Associates, Inc. from Mr. Gary Young, the company’s founder and current Chairman. Nearly 40 years ago, Gary created this organization with a vision of providing community banks with consulting services that were typically cost-prohibitive to perform internally. Since its inception in 1978, Young & Associates has evolved from a small start-up organization offering select outsourcing and educational services to one of the premier bank consulting firms with clients nationwide and overseas. We now offer consulting, education, and outsourcing services for nearly every aspect of banking.

From the outset of our acquisition discussions, Gary and I agreed that the greatest asset of the company is its employees. Over the years, not only has Gary developed unique servicing platforms for the industry but more importantly, he has assembled an employee base that is second to none. These employees provide a level of expertise and service to our clients that remains unparalleled in the community banking industry.

To quote Gary, “I founded Young & Associates with the goal of assisting community banks while maintaining a family atmosphere that valued and respected the people that I work with.” Going forward, it is my primary objective to carry on this legacy that Gary has created. I look forward to making this a seamless transition building on the solid foundation that Gary has built over the years. With the work of our employees and support of our clients, there is no doubt that Gary’s legacy will continue for years to come.

Although the ownership of Young & Associates, Inc. has changed, the company’s name, mission, personnel, quality of service, and structure will not change in any way. Gary now serves as Chairman of the Board and will remain actively involved with the business through January 2019, providing the same high-quality service while also assisting me with the transition. In addition to ensuring a smooth internal transition, Gary and I remain focused on making sure that the relationship with our clients remains strong. Existing and new clients are encouraged to contact me, Gary, or any of our consultants to discuss this transition and how we might be able to earn your business.

Capital Market Commentary – 2018 Forecast and 2017 in Review

By: Stephen Clinton, President, Capital Market Securities, Inc.

The stock market continued its climb to new heights in 2017. The stock market was propelled by the election of President Trump, which brought the expectation of lower taxes, less regulation, and an administration favorable to businesses. The Dow ended 2017 at 24,719.22, an increase of 25.08% for the year. The S&P 500 also improved nicely, ending up 19.42%. The market, despite a correction in early February, has increased further from 2017’s year-end values.

The Fed continued its plan to move short-term interest rates higher in 2017. The Fed moved short-term rates up 25 b.p. in March, June, and December. The three-month T-Bill ended December at 1.39%, an increase of 88 b.p. from year-end 2016. Longer-term interest rates were little changed from year-end 2016, resulting in a flatter yield curve.

Job creation continued in 2017, and the unemployment rate in December was 4.1%. The unemployment rate is at a level not seen in 17 years. The low unemployment rate would typically lead to rising wages, but wage growth was only around 2% in 2017.

As we enter 2018, there are a number of items worth monitoring:

  • Economic Growth. U.S. economic growth for 2017 came in at 2.5%, comparable to prior years. The slow but steady expansion that began in mid-2009 ranks as the third longest economic expansion in U.S. history. Should the recovery continue into the second half of 2019, it would become the longest recovery on record, surpassing the 1990’s economic boom.
  • Housing. Home prices continued to rise in 2017. The S&P/Case-Shiller National Home Price Index rose 6.2% in the 12 months ending in November. The rising price for homes has exceeded inflation and wage growth for several years. The limited housing inventory has aided the rise in prices along with historically low mortgage rates. U.S. single-family homebuilding surged to more than 10-year highs in November. Existing home sales were up 5.6% in December, while new home sales increased 17.5%.
  • Industrial Production. U.S. manufacturing activity remains strong. The Institute for Supply Management said its purchasing managers index rose to 59.7 in December, the second highest level since early 2011. A reading over 50 indicates expansion in the sector; below 50 suggests contraction. Boeing recently announced deliveries of 763 aircraft in 2017, a record for the company. Auto sales were down 1.8% in 2017, but with sales of 17.2 million vehicles, it marked the first time the industry has surpassed 17 million for three consecutive years.
  • Consumers. Consumer confidence is positive. The University of Michigan’s consumer sentiment index average level for 2017 was the highest since 2000. A sign of the strong consumer sentiment is reflected in consumer debt. In the fourth quarter, consumer debt, excluding mortgages and other home loans, rose 5.5% from a year earlier. That is the highest amount since the Federal Reserve Bank of New York began tracking the data in 1999. Moreover, consumers’ non-housing debts accounted for just over 29% of their overall debt load, also the highest amount on record.
  • Inflation. The Fed’s preferred measure of inflation in January was 2.1%, moving above the Fed’s target of 2% for the first time in a while. The anticipated 3% growth of the economy along with the tight labor market and rising interest rates is expected to finally push inflation upward.
  • Political Risks. There are a number of geo-political risks that could significantly change the outlook for 2018. Among these are the ongoing Brexit process, North Korea nuclear saber rattling, and President Trump’s plans to renegotiate NAFTA. Furthermore, the dysfunction in Washington creates uncertainty.

Predictions for 2018

  • Lending Activity. We anticipate an increase in lending activity. We think the lower tax rate for businesses will encourage businesses to expand their operations.
  • Interest Rates. The Fed has indicated that three rate increases are probable in 2018. We think that we will get those increases.
  • Home Prices. We expect the growth rate in home prices to be lower than in the past several years. We think higher interest rates will come into play and make housing less affordable. We also think that the less favorable tax status of the deductibility of mortgage interest will have an impact on some home buyers.
  • Inflation. We do see inflation moving up in 2018. As mentioned above, we expect wage increases to heighten. The low unemployment rate and the shortage of skilled labor in many markets will put pressure on employers to increase wages to attract and retain workers. We also think the growing economy will impact commodity prices.
  • Jobs. We envision unemployment to remain low as businesses expand.
  • Regulation. We expect bankers to be disappointed about the lack of regulatory relief in 2018. It will be difficult for regulatory relief to filter down the bank regulatory bureaucracy.

Merger and Acquisition Activity
Merger activity in 2017 was slightly higher than the activity in 2016. In 2017, there were 267 announced mergers of banks and thrifts compared to 244 deals in 2016. In terms of deal size, the total assets of sellers totaled $147 billion in 2017, compared to $188 billion in 2016 and $459 billion in 2015. Pricing on 2017 bank sales improved significantly from 2016’s pricing, recording a median price to book multiple of 162% and a price to earnings multiple of 20.9 times. We believe that 2018 will see increased merger activity spurred, in part, by bank buyers’ enhanced profitability from reduced corporate taxes

Capital Market Services
Young & Associates, Inc. has a successful track record of working with our bank clients in the development and implementation of capital strategies. Through our affiliate, Capital Market Securities, Inc., we have assisted clients in a variety of capital market transactions. For more information on our capital market services, please contact Stephen Clinton at sclinton@younginc.com or 1.800.376.8662.

Young & Associates, Inc. Changes Ownership on 1/31/18

We are pleased to announce that Young & Associates, Inc. has been sold by Gary J. Young, the company’s founder, to Jerry Sutherin, a Senior Consultant with the firm, effective January 31, 2018. While ownership has changed, the company’s name, mission, personnel, quality of services, and structure will not change in any way.

Upon the effective date of the sale, Mr. Young became Chairman of the Board, and Mr. Sutherin became President and CEO. Young will remain actively involved with the firm for one year, continuing to provide the same high quality service he has provided for the past 40 years. Mr. Young said, “I founded Young & Associates with a goal of assisting community banks while maintaining a family atmosphere that valued and respected all of the people that I work with. After 39+ years, I have accomplished that goal, and that mission will continue through Jerry’s leadership.”

Tommy Troyer, Executive Vice President, will continue to serve in that position, where he successfully uses his professional expertise, detail-oriented management style, and excellent people skills while working with both clients and employees.

Mr. Sutherin has worked at Young & Associates, Inc. for nearly four years. Mr. Sutherin said, “I look forward to making a seamless transition at Young & Associates, building upon the solid foundation that Gary has built over the past 40 years. It is my goal that our clients and employees will continue to receive the same professional, high-quality experience that they have come to expect here over the years.”

With over 30 years in the financial services industry, Sutherin has worked primarily in the company’s Lending and Loan Review Division where he provided community banks throughout the U.S. with third-party loan review, lending policies and procedures, loan portfolio due diligence, and ALLL Review services. Prior to joining Young & Associates, Inc., Sutherin worked in varying capacities ranging from overseeing an Asset Quality/Loan Review function at a large regional bank, to managing a $2.5 billion loan portfolio responsible for loan performance, credit quality, and departmental efficiency.

Young & Associates, Inc. has provided practical products and services to community financial institutions since 1978, and we look forward to serving our clients for many years to come. Please join us in congratulating both Jerry and Gary on this sale.

ADA Website Compliance Notes from the Field

By: Mike Lehr, Human Resources Consultant

About this time last year, the topic of website accessibility and accommodation under Title III of the Americans with Disabilities Act (ADA) hit the community banking industry with full fury. Since that time both banks and service providers have upped their game. So, now is a good time for us to assess and share what we have learned in our ADA website audits.

There are two ways to assess sites. The more common and less expensive way involves scanning the site using software. Based on the logic coded into it, the software identifies potential issues. The second, less common, and more expensive way involves professionals or sight-impaired people using the site with a screen reader. A screen reader is software that converts a site page to text and reads it to the user.

Both ways involve a professional overseeing the process to interpret the results. Yet, something else drives both ways that tend to lead clients astray – measurability. The old adage of “what gets measured gets done” hits full force here. However, just because it’s a number doesn’t mean it’s more important. We are finding that the software scan, because of its beautifully quantifiable graphics, is causing many of our clients to focus on minor, even insignificant aspects of their sites that have little to no impact on the site’s overall accessibility.

In the end, if a bank ever ends up in court, it’s not about software being able to access the site. It’s about individuals with disabilities. Yet, it is much harder to quantify that into an eye-catching chart. For instance, a client called worried about their PDFs. The software scan showed them inaccessible. Moreover, they spent a lot of time trying to fix them. The nature of the documents were such that they required a professional printer. In short, it wasn’t a Word document. Upon closer look, there were only a dozen of them. All but one were on the same page of the site. Furthermore, the page saw little traffic from customers and prospects. Plainly, the page wasn’t important.

Yet, since bankers can be conscientious to a fault, it bugged them that these PDFs kept showing up “red” as an issue. By itself it’s not bad. In context of the whole site though, it is. This was energy, time, and money diverted from far more important issues. One was whether a sight-impaired person can navigate the site. Software can’t determine this. One can only determine this reliably by using a screen reader or by observing a sight-impaired person trying.

For instance, it’s not uncommon these days to find sites that have multiple ways to navigate them. On one hand, you have the traditional horizontal navigation. On the other, you have the more recent mobile friendly navigation (“hamburger menu”). Still yet, some sites use vertical left-hand (or less common right-hand) navigation. That’s three ways to navigate the site. We’ve seen these on a couple of sites already. This doesn’t even include all the links and smaller menus that might be contained within the page.

Now, to a sight-impaired person, this is nothing but chaos. Keep in mind, a non-sight-impaired person can see the whole site at once. It’s two-dimensional. He/she can select whatever menu they like. A sight-impaired person doesn’t have this luxury. That’s because a screen reader can only read one word at a time. It’s a linear process, one-dimensional.

Also, he/she might tell the screen reader to only read navigation menus. So, if he/she starts hearing two or three different menus, it becomes hard to visualize in his/her mind how he/she might use the site. To a sight impaired person, they blend together as one. That’s frustrating. It’s also something else . . . inaccessible.

Yet, in most cases, as long as these menus are coded and tagged right, the software scan won’t catch them. Moreover, and back to the original point about measurability, it’s hard to quantify this user experience. The solution then is to code one of these menus invisible to screen readers. Of course, that means the remaining one has to be comprehensive and robust.

In the end, it’s a battle between easily measurable but unimportant PDFs and unmeasurable but important navigation. What gets measured gets done. Thus, the unimportant gets done and the important doesn’t. That’s why we can give compliance ratings to clients who still have issues on their software scans and non-compliant ones to clients whose scans show no issues.

In short then, invest in a screen reader. If not, partner with someone who has one. Banks can generate much goodwill by reaching out to groups and societies that support Americans with Disabilities. Remember, computers don’t use sites. People do. People also testify in court.

For more information on this article or to learn how Young & Associates, Inc. can assist your bank with its ADA website compliance, contact Mike Lehr at 1.800.525.9775 or mlehr@younginc.com.