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As the economy rebounds from the lows of the pandemic, capital has re-emerged as an important topic in many ALCO sessions.  At the pandemic’s start, credit concerns and capital risk were top of mind with skyrocketing unemployment levels and government-mandated economic shutdowns.  Fiscal and monetary policy largely helped to support consumer/business credit, and the economy…

Much time and effort on the lending front has been hyper focused on secondary market mortgage and PPP activity.  While these have been worthy endeavors from a profitability and relationship standpoint, lenders are eager to replenish core loan footings that may have eroded since 2019.   Fiscal and monetary stimuli have enlarged financial institution’s cash positions…

During most of 2020, Treasury yields remained very low with a flat yield curve as investors wrestled with the pandemic’s impact on global growth prospects and inflation.  As we turned the page to 2021, market optimism emerged, with some data indicating the pandemic was waning due to global vaccine roll-out.  As a result, investors began…

Recent ALCOs have focused on the rising tide of deposits that have surged on balance sheets throughout the pandemic.  Cash drag has undoubtedly been a critical factor pressuring margins in 2020, and many institutions spent the latter half of the year searching for quality productive assets to absorb excess funds.  With accelerating vaccine rollouts and…

Executives should understand where their institution ranks, compared to institutions in their market. To evaluate your institution’s performance relative to peers, start by studying the most recent quarterly data. Back in the summer of 2018, we published Deposit Diaries: FDIC Rate Caps and Hidden Liquidity Risk outlining flaws in the FDIC’s national rate calculation and the…

How important is Net Interest Margin (NIM) to your institution?  Community financial institutions are heavily dependent on net interest income (NII).  With the majority of earnings coming from NIM, implementing a disciplined approach around “NII management” will make the difference between underperforming and outperforming institutions. To see how your institution ranks vs national and in-state…

Investment portfolios and overnight cash positions have grown significantly at many financial institutions due to a recent surge in deposits and slower portfolio loan demand.  With record low interest rates, carrying excess cash on the balance sheet has been costly.  These factors are forcing executive teams to re-focus on the investment portfolio to help relieve net interest margin pressure from declining earning asset yields.    In general, financial institutions have two options for managing the investment portfolio.  We will refer to these as the Broker and the Advisor approach.  The Broker Approach  An institution’s financial executive (CFO, President,…

That was then…this is now. The concluding wave of the longest business cycle in US history has brought changes for financial institutions when it comes to liquidity.  Just less than 12 months ago, the economy was moving along fine with low unemployment, growing productivity, strong consumer spending and overall business growth.  The community financial industry…

In 2019, banks nationally were 87% dependent on net interest income. With the lions’ share of earnings coming from Net Interest Margin (NIM), implementing a disciplined approach around NIM management to capitalize on opportunities and avoid mistakes will make the difference between underperforming and outperforming institutions. As Financial institutions across the nation cope with market…

At the onset of COVID-19, financial institutions were hyper-focused on liquidity and ensuring ample available funding to meet potential demands from depositors and borrowers.  However, over the course of the past three months, we have seen unprecedented growth in deposits.  This deposit resurgence has primarily come in the form of non-maturity deposits, reminiscent of the…