Interview with Denise McGlone
Interviewer: Andrew Zezas
Following is the transcript of a CFO Studio interview between Andrew Zezas of New Jersey based Real Estate Strategies Corporation and financial executive, Denise McGlone, CFO of Affinity Federal Credit Union.
Visit www.CFOstudio.com to read about this interview and to watch the entire on-camera interview.
Wall Street to Main Street
Zezas: This is CFO Studio and I am your host Andrew Zezas. I’m joined today by Ms. Denise McGlone, Executive Vice President and Chief Financial Officer of Affinity Federal Credit Union. Ms. McGlone has been CFO at Affinity since 2007 and was the Assistant Treasurer at Lucent Technologies prior to joining the company. She spent 10 years on Wall Street managing global derivatives companies. As the former CFO of Sally May, when Sally May had a $50 billion dollar balance sheet. Ms. McGlone is a noted risk management professional and the recipient of numerous awards including 50 Risk Managers of All Time, CFO of the Year, and 40 under 40 bankers. Affinity Federal Credit Union is the largest credit union in New Jersey, by assets, and the 55th largest across the United States. The company has concentrations in consumer and commercial lending and commercial and residential real estate. Affinity Federal Credit Union was founded in 1935 and is currently headquartered in Basking Ridge, New Jersey with fifteen branches throughout the state. Today Ms. McGlone is here to talk to us about Wall Street to Main Street. Denise it is wonderful to have you here at CFO Studio.
McGlone: Thanks Andy, and thanks so much for the opportunity.
Zezas: My pleasure. Wall Street’s derivative leader to CFO to a Fortune 100 Financial Institution. There’s got to be a common thread there, help me see it.
McGlone: Andy, when I think about that, everyone has a passion, and mine is capital and risk management. What is the range of risk you are underwriting, how much capital do you need to support those risks in order to serve your customers and grow the firm profitably? I’ve used that capital risk discipline through all of my positions, from Sally May, through to Lucent, now to Affinity bringing those disciplines in.
Zezas: You really have a passion for risk, don’t you?
McGlone: Risk management yes, I don’t take risks, I like to manage it.
Zezas: I understand and I appreciate that. Now, you’ve had a very interesting career, you have educated the industry in Japan, you’ve testified in Switzerland about risk and risk management. Tell me about your experience in Switzerland.
McGlone: This goes back a bit, when banks first had risk based capital introduced by Basel in Switzerland. And the big question at that time was how much risk do derivatives carry? What does a bank need in terms of capital to support them? And as a leader in the industry I got to go to Switzerland and testify before the central bankers and explain derivatives. It was quite fun.
Zezas: It must have been very exciting.
McGlone: It was.
Zezas: Now you are not a traditional CFO, we’ve talked about your background. I understand you are not even an accountant? How does that work having gone through your career and now you are a CFO, but you’re not traditional?
McGlone: I’m not an accountant in the sense of debits and credits, but I certainly understand accounting most of the FASB principles. What I do is, I don’t really look in the rear view mirror, I look going forward, and as I said, what is the range of risk your firm could face and how much capital could that cost you, and can you continue to serve your clients. I develop in my head, what I call “a cone of risk”, all the risks that can happen from various events to see how you can manage going into the future.
Zezas: So as a risk manager you got to be looking forward, of course you’re relying on historical data and the traditional rear view mirror approach to a CFO is probably foundational to your expertise, but what I am hearing is that it’s all about the future, it’s all about what could happen, this is a strategic view of being CFO.
McGlone: And it is, and you know what’s been very interesting we’ve worked in the board room to get them from the rear view up to the strategic so it’s been fun in a lot of ways.
Zezas: So the CFO’s ability to be strategic has a lot to do with the board.
Zezas: That makes sense. Now, in that realm, I have heard you use some very interesting analogies that takes me back to my childhood, you’ve explained the role of CFO in the context of spinning plates. So help me understand that.
McGlone: Okay. When I try to picture everything that is facing us as we enter into a planning season, I have three radials that affect us. I try to give the board one picture, one is the economy, two is what’s going on in D.C. with all the partisan politics, and three is the consumer financial protection bureau which is going to affect the profitability of all financials. They get there one radial. I looked at all these risks and I put a plate spinner in the middle, really it’s like spinning all these plates and managing all that simultaneously.
Zezas: I hear some music going and I have memories of the Ed Sullivan show. So how do these plates and various radials tie into things like anticipated anemic loan growth, the fact that interest rates will probably remain low and the cost of financial regulation?
McGlone: Managing a financial institution has been very difficult over the past couple of years as everybody knows. Terms of loan growth it is somewhat anemic because consumers have to confidence. Many of them are under employed or unemployed. So they are not borrowing, so your loan, getting profitable loan growth, is challenging. In terms of the cost of regulations, it’s killing you. Coming out all the time. And in terms of low interest rates, here is what is happening when you are a financial institution; to finance with deposits, rates can’t go much lower on those deposits, but your assets re-price lower and lower, in a low rate environment so to the extent you have a lot big 30 or fixed rate mortgage, your liability costs are here, and your asset returns are going to go down so a lot to manage in this environment.
Zezas: Rather challenging, I am sure. So given that and given your role as CFO of Affinity Federal Credit Union, let me ask you about Affinity. Is Affinity lending? Has it been lending through this morass?
McGlone: Affinity, we are so happy to say that through all this financial meltdown, we have been a consistent source of credit for our members. We were there for them, we never shut off our lending and in addition we modified a tremendous amount of loans, before low modifications were even the thing.
McGlone: Because you really get to help your members through crisis, as a credit union.
Zezas: And it’s all about the members, isn’t it?
McGlone: Yes, it is. It is. And that’s nice.
Zezas: Let me ask you this last question. I love the idea about your coming from where you came from and now running an organization member driven, but you came from a very cut throat industry, where the nature was literally, slit everyone’s throat to make an additional buck. What brought you from there to the credit industry and specifically to Affinity?
McGlone: You know, in terms of culture, I have always been most comfortable in a partnership culture.
Zezas: Even while you were in the derivatives industry?
McGlone: Yes. I ran these groups and part of my criteria is you had to work in a partnership culture, you had to enjoy that environment, you couldn’t be there just to raise your own P&L. And how you enforce that, how we enforced that, was really through rewards. Traditionally in Wall Street you get rewarded on what you produce. We rewarded people for being a partner in the business. If you had an idea, and one of your colleagues in Tokyo could use that idea to help his client, you get a reward for that because you’ve been a partner for him. If you introduce a new product that can be used in London, Tokyo, New York, you get rewarded. So that partnership culture was part of the groups that I built. Easy to transition into a credit union, very collaborated industry, everybody works together.
Zezas: So how does that tie back into Affinity, is that the same kind of culture here?
McGlone: Yes it is, when I first walked into Affinity, I didn’t really know what a credit union was, everybody was smiling, and I said “Wow, these people are happy people” And yes, it’s not only your partners in the business, you are collaborators with other credit unions across the country. They are not really your competition because credit unions, by definition, have a field of membership, and these people, they help each other all the time.
Zezas: Wow, wow. It must have been great to come out of the snow and feel the warmth. Denise this has been fantastic, obviously Affinity Federal Credit Union has done wonderful things under your guidance, and I truly appreciate you visiting us on CFO Studio. Will you come back and visit us again sometime?
McGlone: I sure will.
Zezas: This has been wonderful. Thank you so much.
McGlone: Thank you so much Andy.
Zezas: This is Andrew Zezas, your host at CFO Studio with Denise McGlone, CFO of Affinity Federal Credit Union. Saying, thank you very much for watching us and see you again.
Copyright Real Estate Strategies Corporation 2013. All Rights Reserved.