Taylor Advisors is leading the pack when it comes to finding creative solutions designed to increase profitability and promote sustainable growth. Learn more about the waves we’re making and industry happenings in our blog.
Taylor Advisors is leading the pack when it comes to finding creative solutions designed to increase profitability and promote sustainable growth. Learn more about the waves we’re making and industry happenings in our blog.
Market Update Bankers track many key interest rates, but surely mortgage rates get a lot of attention, as they can have a significant impact on a community bank’s earnings and profitability. Residential mortgage loans typically represent a meaningful earning asset for many financial institutions. Additionally, an average bank investment portfolio often holds an allocation of…
Amidst the persistent rally in U.S. Treasury prices and the problematic inversion in the yield curve, loan pricing is beginning to take center stage, over deposits, as a key concern for financial institutions. Residential mortgage refinancing volumes are accelerating and commercial loan pay-offs and refinancing may pose a distinct risk to loan portfolios and earning…
Back in the summer of 2018, we published “FDIC Rate Caps and Hidden Liquidity Risk” outlining the flaws of the FDIC’s national rate calculation and the liquidity traps inherent in the interest rate cap restrictions. Since then, liquidity has become a key focus for regulatory examinations, specifically as it relates to Contingency Funding Plans and…
The London Inter-bank Offered Rate (LIBOR) has been the preeminent reference rate in the financial markets for assets, liabilities, and derivative contracts, with an estimated $200 trillion in notional value currently referencing various tenors of LIBOR. Coming out of the financial crisis, it was widely reported that global banks had been manipulating the LIBOR survey,…
Over the past year, financial institutions across the country have seen an acceleration in funding costs. Historically, institutions have been successful in delaying rate increases on deposits during the initial stage of the rate cycle, then slowly increasing deposit rates for the second third of the cycle. From late 2015 through 2017, institutions enjoyed the…
Rising interest rates have certainly been on the minds of many bankers over the past year. The Fed has hiked the Fed Funds target rate eight times in its current effort to tighten monetary policy and the FOMC’s Dot Plot telegraphs several more rate hikes through 2020. With credit conditions generally strong, (despite some challenges…
Investment Guide for a Flat Yield Curve Treasuries yields started 2018 moving higher across the yield curve. Continued U.S. GDP growth, an optimistic Fed, and very early signs of increasing inflation have all contributed to the run up. Longer-dated Treasuries took a breather during the summer months mostly moving sideways. However, Labor Day kicked off…
Accelerating Deposit Costs At the beginning of the Fed’s march to higher rates, depositors had become numb to near-zero rates on deposits. Memories of 5% 1yr CDs from 2007 faded along with the 1st iPhone. Since December 2015, Fed’s initial target rate increase, the frequency of rate changes has gone from an annual adjustment to…
During the 2008 Financial Crisis liquidity conditions tightened for the entire banking industry in a very short time span. Many financial institutions were caught off-guard as the impact was far greater than they had modeled. Various liquidity counterparties shut off funding lines in an effort to preserve their own balance sheets. Unlike commercial banks and…
Margin Depression From the end of 1992 to the beginning of 2018, net interest margins in the Banking industry have declined about 100 basis points, with earning asset yields declining from 8.1% to 4.2%, and funding costs falling from 3.8% to 0.5%. This margin compression has been offset by either lower credit losses and/or lower…