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The Benefits of the ‘Held to Maturity’ Classification

By Nicole Burczyk

To avoid significant fluctuations in capital due to increases in unrealized losses, many bankers are evaluating designating securities as “Held to Maturity” rather than “Available for Sale.” While these losses are not realized and therefore not included in a bank’s net income calculation, they are a key component of accumulated other comprehensive income.

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Doing the FOMC Policy Math

By Jeff Goble

A pattern emerges when we carefully research the last three Federal Reserve interest rate tightening cycles since 1989, as you can see in the chart presented here. We have compared their slopes and percentage changes with the current rate normalization program, which began in December 2015.  The basic investment premise here is that markets have a very strong tendency to repeat themselves, usually with an unexpected twist of some sort.  Doing the math helps removes the market emotion, in my opinion.

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Digitizing the Bank

Is your institution ready for the cashless economy?

By Mike Kane

Cashless payments are undeniably rising in popularity. In Sweden, only 20 percent of payments are made using cash. While the United States isn’t as far along in this process as those in Sweden, cashless payments are still on the rise. In 2013, the Federal Reserve Bank of Boston found that while noncash payments were steadily rising, cash still accounted for more than 25 percent of U.S. transactions. The good news is that this means there is time for banks to get prepared for the fast approaching digital banking revolution.

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Fifty Million Municipal Bond Fans Can’t Be Wrong!

By Chris Thompson

In 1959, RCA Victor sold a compilation of Elvis Presley’s greatest hits, officially titled “Elvis’ Gold Records.” Later presses added the boldfaced phrase “50,000,000 Elvis Fans Can’t Be Wrong” to the cover and this became the de-facto album title.  The phrase referred to the voluminous record sales the King of Rock ‘n’ Roll amassed to date in his legendary career.  In modern parlance and on any topic whatsoever, it’s not unusual to hear a pundit defend a challenge with the universal justification “50,000,000 Elvis fans can’t be wrong!”

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Got Yield?

A challenging bond market has fixed-income investors studying their portfolios.

By Jeffrey P. Goble

It’s December, and it is safe to say it has been another challenging year in terms of the search for yield for bond investors. I think this makes it year number eight for the challenging bond market, which was basically fueled by the Fed’s historic $4.3 trillion quantitative easing program started in November 2008.

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How Much Optionality Is Too Much?

By Jeff Goble
One of the main negatives for bond investors related to falling interest rates  is the fact that any higher-yielding bonds with call options you own may be called away, thus sharply reducing your bond income.

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Try This at Home

By Jeff Goble

This is my 151st  investments column for BankNews and it occurred to me recently that I should be starting to figure out this bank investing game. Please read on.

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Key Traits of the Trusted Partner

By Stephen DuMont

When looking across any industry or sector, one attribute often separates the highest-performing institutions from the rest: the presence of key trusted partners. These trusted partners perform important functions for their higher-performing clients and while the functions they perform may be different, there is one important trait in common. That is, these leading institutions rely upon trusted partners that provide consistent holistic insight informed by their overall knowledge of the client and the key stakeholders impacted by any decision. Any vendor can attempt to sell products in its inventory. The trusted business partner will work closely with the client to identify its goals and then make recommendations based on an understanding of the institution’s unique financial situation. The solutions provided to the client are not constrained by the inventory of their firm, but rather informed by their understanding of their institutional partner.

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Developing Rational Balance Sheet ‘Bogeys’

By Lonnie Harris

Balance sheet management has always been difficult but never more so than in today’s extended low-rate environment. Since December 2008 when the Fed dropped overnight funds to a range of 0-25 basis points, many of the “routine” decisions were replaced with uncertainty and downright confusion. In retrospect, it is apparent that most managers were initially too conservative, as they expected rates to increase almost immediately. This period was followed by impatience and more accurately, market pressure, which has resulted in duration extension in both the loan and investment portfolios, at historically low rates. These phases were not necessarily knee jerks, but it is questionable how much planning and modeling actually preceded those decisions.

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Economic Forecast 2016, Part 2: Headwinds and Tailwinds

By KC Mathews

 

As I mentioned in part 1 of our economic forecast (March BankNews), I expect our economy to continue to grow at a slow and steady pace in 2016, due in part to the several tailwinds and a few headwinds.

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