John described the coverages provided by cyber insurance and compared the coverage to the more typical general liability, property and auto insurance policies. He explained how cyber insurance is composed of first party and third party liability insuring agreements designed to protect an institution’s network and information, communications and media as well as provide reimbursement for crisis management expenses and security breach and remediation costs. He noted that the average costs of a typical data breach exceed $1.6 million consisting of crisis management, legal defense and final settlement. John also noted that human error or a negligent employee are the cause of more than 75% of data breaches.

John outlined the components of the typical data breach cycle. He emphasized that “stopping the intrusion” is the primary response followed by initializing a legal review, conducting forensic analysis, managing public relations, informing the customers and monitoring fraud activity. John recommended a series of procedures that institutions should implement to protect against a cyber data breach. He concluded by answering a number of insightful questions from the membership.

Branch and Deposit Profitability: 2006 vs. Today was the topic of the afternoon mini-session presented by Gregg Wagner, Managing Director and Jeff Marsico, Executive Vice President of the Kafafian Group. Each of the speakers has more than 20 years of experience providing key management solutions to the community banking industry. The speakers described today’s “sorry state of branch profitability” which has declined significantly over the past ten years. They noted a 63% decline in direct branch profits and a 6.3% decline in the number of nationwide branches compared to 2006. Historically low interest rates, smaller asset-liability spreads and dramatically smaller fee income were described as the “culprits” of the decline.

Jeff and Gregg clearly showed how the current branch unit profitability has declined vs. 2006. The average deposits in each branch has increased due to a smaller number of branches. The dramatically smaller spread from low interest rates combined with lower fee income has reduced net pre-tax income from a significant profit in 2006 to an average net loss in 2015. The speakers concluded by providing key takeaways to improve branch profitability.