Minding your model

A community bank CFO shares how a draft of the CGMA Business Model Framework was used to create a new vision for the bank and better understand customers' needs.
Minding your model

Andy Bonner, CPA, CGMA, admits that he had some doubts about the benefits of the CGMA Business Model Framework.

Nevertheless, Bonner, the CFO of First Century Bank, a community lender with branches in the Appalachian Mountains of Tennessee, and fellow bank leaders and employees used a draft version of the framework to examine the bank's value proposition and its customers' needs.

"When I was doing it the first time, I had a lot of reservations," Bonner told members of the AICPA Council in May. With 28 years of public accounting experience and eight years of working with corporations, he was confident in his skills and wondered what the framework would have to offer.

"But we held to the framework. We went through it," said Bonner, who is also the chair of the Americas Region Advisory Panel of the Association of International Certified Professional Accountants. "And I was stunned. We simplified a very difficult subject to a level that everybody could participate at. ... We got information about what we were doing in our market that set us aside from everybody — nobody else was doing this."

Others shared his enthusiasm. A First Century executive officer praised the exercise for helping flesh out a new vision for the bank and identifying potential competitors. The bank's leadership discovered that an online lender seemingly far removed from the community was going after some of the same customers First Century was courting.

"We were blown away," Bonner said. "We had no idea that it was coming that fast. But we found out we've got a huge disruptor."

Another realisation that emerged from the framework discussion was an unintended consequence of First Century's overdraft checking rules. Limits around overdrafts had prompted some of the bank's customers to turn to payday lenders, businesses that specialise in short-term borrowing at high interest rates.

"We got a third party to come in and help solve that," Bonner said. "And now I can say that we've actually had customers come back to us and say, "˜Thank you. We need this.'"

The experience left Bonner bullish on the framework, which went through a consultation period that ended in September and was expected to be released in final form in 2018.

"This makes a difference, and it simplifies the message. It gets people involved, and you get great feedback," he said.

For more on the project, visit cgma.org/BusinessModelConsultation.