By Matthew Maggi
I love the mountains. Hiking, taking photos of the majestic peaks, being a part of nature makes me feel like I am a part of something larger than myself. Although I may be small in comparison to the mountain, I do not feel insignificant. Living in a city provides me with a similar feeling: I am a part of a larger community and have a role to play. When choosing fixed-income investments, each bond should have a purpose in helping you achieve your desired investment strategy: playing a role in the larger community of investments.
By Lonnie Harris
We are fortunate enough to work with many community banks in several states. We lead or participate in asset/liability committee meetings almost every single day and are constantly working with bankers to prepare and respond to examiners’ very detailed questions. While helping bankers meet their regulatory requirements is satisfying, it is far more rewarding to help bankers efficiently manage their banks.
By Dennis Zimmerman Jr.
While decision making at the community bank level relies on management’s experience, reason and careful deliberation, analysis derived from the use of financial models play an important role in proper decisioning. Models turn information into analysis, which then is used to make better decisions. While financial institutions use models in a wide range of applications, today’s focus is on the asset/liability simulation model — the tool that best measures the possible adverse effects on earnings and equity precipitated by movements in interest rates. Recent shifts in the Treasury yield curve have elevated the importance of an effective asset/ liability management program. As such, management should consider, not just as best practices but as regulatory expectations, incorporating the following items into this year’s deliverables:
Do the Math.
By Jeff Goble
Many banks throughout the Midwest have been overweighting mortgage-backed agency securities issues for their portfolios during the period when the Federal Reserve has been conducting historic amounts of quantitative easing. These bonds have nearly replaced the traditional agency and Treasury holdings held in most bank bond portfolios since the Fed has been purposely driving up their prices in order to lower mortgage rates.
The one thing that almost everyone agreed on over the past two years is that after almost a decade, the Fed needed to gradually increase rates from the near zero rate level. Now that the Fed is completing its second year of increases and overnight rates have eclipsed 2 percent, there is an increased feeling of angst in the world of business.