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Proactively Managing the Bond Portfolio

By Dennis Zimmerman Jr.

There are three important elements to achieving long-term excellence in the performance of the fixed income investment portfolio. The first is attention to detail. The second is to craft then follow a strategic plan that fits the overall goals of the institution. The third simply requires management to be proactive rather than reactive. While the first two are certainly important, this article will primarily focus on the third element — proactively managing the bond portfolio. Successful community bank investment officers understand that when it comes to proactively managing the portfolio, best practices generally follow one of two basic themes: What to do and what NOT to do. Select key best practices are listed below:

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Forecasted Returns and Other Great Stories of Fiction

By Chris Thompson

Dan Brown, author of the bestseller The DaVinci Code, states that “History is always written by the winners. When two cultures clash, the loser is obliterated and the winner writes the history books — books that glorify their own cause and disparage the conquered foe. As Napoleon once said, ‘What is history, but a fable agreed upon?’”

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Pre-Purchase Analysis Files Help Track Investment Performance

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.

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Make the ALCO Process Meaningful, Not a Checkbox!

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.

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Managing the Simulation Model

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:

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