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Evaluating the "Visions for Success" Program
Quick Quiz


Evaluating the "Visions for Success" Program

Do you agree with Hi that the "Visions for Success" program is a "smashing success"? Think about information you received during Hiram's presentation, Insights' financial reports (particularly the Basic Ratio Analysis and Financial Comparisons lessons), and the minutes from the previous board meeting.

Here are some specific questions to consider. Click on each question to reveal its respective answer.

Are there any hints in last month's board meeting minutes that give you an idea as to how successful the "Visions for Success" program has been?

In his report to the board, Hi notes that loan volume is increasing rapidly. He also states there has been an unexpected increase in nonperforming loans, loans where the borrower is 90 days or more behind in his/her payments.

What criteria would you use to judge the success or failure of the “Visions for Success” program?

Certainly the plan at Insights Bank and Trust is to grow the loan portfolio in order “to become the premiere lender in the market.” In this regard, the program is a success. However, this should not be the sole criteria for judging its success. Loan quality is also important. The program may result in the bank’s failure if borrowers do not repay their loans.

In his report to the board, Hi said “nonperforming loans are increasing, something not totally unexpected.” As a new bank director, with little banking experience, are there any questions you would ask Hi about this statement?

There are two questions worth considering. First, you might ask what the term “nonperforming loans” means, and second, why was the increase in nonperforming loans not unexpected?

Questions can be one of the most valuable management tools board members have. If you don’t understand the information being presented to you because of terminology, ask a question. If you don’t understand the logic or thinking behind items brought to the board table for your approval, ask a question. If the inherent risk or downside in a proposal is unclear, ask a question.

If the answer you receive does not make sense, ask that it be further clarified. Your goal is to thoroughly understand what you are voting for or against in order to avoid making decisions that may negatively affect the bank.

 


Quick Quiz

Portfolio risk is made up of credit, liquidity and market risk
True
 
False  
Portfolio risk is associated with a bank’s interest earning assets and interest paying liabilities.
True
 
False  
A bank building is an example of an interest-earning asset.
True
 
False
   
Deposit accounts are a form of borrowing from a bank’s deposit customers
True
 
False
   

 

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Meeting Materials
The Balance Sheet
The Income Statement
Basic Ratio Analysis
Making Financial Comparisons

Minutes from Previous Board Meeting
Basic Elements of Policies

Try This At Your Bank
Identify Sources of Risk
Derivation of Net Income
Your Risk Control Environment
Review Your Banks UBPR

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