Tuesday, July 15, 2014

The Logistics of a Fed Rate Hike

by Dallas Wells

Although we are still squinting towards the horizon to see the eventual rate increase from the FOMC, the market is definitely telling us that we have shifted from "ZIRP Forever!" to "ZIRP for a couple more years!"  A subtle shift, but a meaningful one nonetheless.  We can see the evidence in the belly of the yield curve, with volatility arriving first in the 5 year area and now in the 3 year (chart via US Department of the Treasury):

As you can see, the 3 year yield has been rising steadily since the spring of 2013.  (And as an aside, isn't it really hard to fathom the 3 year yielding 5% again?)

Since the timing of the rate increase is slowly gaining clarity, I thought this post from Sober Look (More clarity from the FOMC on the mechanics of liftoff) would be helpful.  The post is short and worth the read, but here is a quick snippet:

The latest FOMC minutes provided some clarification on the approach the Fed is expected to take as it begins normalizing short term rates in the US. Here is a quick overview of the Fed's strategy and potential implications.
The Fed has chosen the interest rate on excess reserves (IOER) as the primary tool to control interest rates during the normalization process. While working with IOER is certainly more effective than the Fed Funds rate, there are a some drawbacks.

CLICK HERE for the rest

Thursday, July 3, 2014

Lending to Small Business

by Dallas Wells

I thought that this infographic from Intuit (found here) would be interesting to bankers.  Most community banks pride themselves as being the primary source of credit for small businesses in their market.  According to this data, we still have a lot of work to do:

The numbers that jumped out at me:
  • Large banks still winning by a mile over community banks as the source for loans (60% to 47%)
  • 27% of small businesses have changed banks in the last four years.  That is HUGE turnover (and a big opportunity), and finding a better deal was not the leading cause of the turnover.  Remember that for small businesses, feeling mistreated might be code "the bank said no."
Anyway, interesting food for thought since we all seem to be chasing the same few viable deals out there...

Tuesday, June 17, 2014

The Fed's Flawed Forecasts

by Dallas Wells

I think we can all agree that the effectiveness of the Fed's actions during financial crisis starting in 2008 will be debated for many years to come.  One thing we can already agree on, though, is that the Fed (specifically the FOMC) is really terrible at providing forward guidance.  Check out this picture that Barry Ritholtz posted at the Big Picture courtesy of BofA Merrill Lynch:

I think that nicely sums up how the last few years have gone.  Basically, the Fed keeps saying "we're almost there, and rates will have to rise just around the corner."  And then the recovery is weaker than expected.  Wash.  Rinse.  Repeat.

We saw a lot of banks structure bond portfolios in 2009 and 2010 (when the balances were growing like crazy) so that they had a giant block of maturities to reinvest in 2012 when the Fed said rates would be higher.  Oops.  We also saw (and still see) bankers holding giant cash and Fed Funds Sold positions to keep as "dry powder" for the higher rates that are coming soon.  Bigger oops.

So now the Fed is saying that the increases may start in the second half of 2015.  Maybe they will, but the chart above sure disagrees.  So, what do you do?  Our answer is the same - don't try to outsmart the markets.  Decide on a consistent and disciplined investing strategy and stick to it.  The banks that have done that since 2008 have wildly outperformed.  The added income far outweighs the slight (and temporary) advantage to be found if you happen to time the rate change exactly right.

Anyway, I thought it was good food for thought as we wait for the latest from the Fed this week...

Tuesday, June 10, 2014

Why is Interest Rate Risk a Regulatory Priority?

by Dallas Wells

Industry regulators have been stressing the importance of interest rate risk for the last few years, and at the end of 2013 they publicly stated that it would be a focal point in exams for 2014.  With bankers struggling to process thousands of pages of new regulations, a few common questions emerged.  Why this specific topic?  And why now?  Aren't there bigger to fish to fry at this point in the cycle?

The answers to these questions can be found by digging around in some of the trends in the call report data.  We will start by looking at net interest margins, in this case for all FDIC insured institutions since 1994:

As you can see, after a spike immediately following the Fed's crisis rate cuts, margin compression resumed and we are now sitting at all time lows.  Now let's look at the same metric over the same time frame, but divide between larger and smaller institutions (larger being any bank over $10 billion in assets):

As expected, the large banks (red line) look like the overall industry trend, since they make up the bulk of industry assets.  What is interesting is the area that is highlighted, where the margins of small banks flatten out while margins at larger banks drop like a rock.  What is causing this?  Are small banks doing a better job at managing margins? 

Unfortunately, this is another case of one of our favorite sayings here at AMG:  not all margin is created equal.  Let's look at one more chart, this one comparing the percentage of long term assets in small and large banks, and how those percentages changed from 2010 (when the lines diverge) to the most recent quarter (3/31/14):

This chart shows that the larger banks (on the left side) extended slightly, with the share of long term assets (more than 5 years until maturity or repricing) moving from just under 25% to just over 25%.  However, smaller banks doubled their long term assets, moving from around 18% to over 36%!  Community banks have gone from being shorter (and more conservative) to far longer than the larger banks.  What's worse is that the trend is still intact - the assets continue to get longer each quarter. 

While rates have moved off their record lows, we are still inarguably in a very low rate environment, meaning small banks have locked in low rates for a very long time.  While we can argue the timing of a rate increase, it is inevitable that rates will someday go up from current levels.  Which group has made the right call?  The large banks that have stayed consistent at the sake of short term earnings, or the smaller banks that have extended out on this steep yield curve, forsaking tomorrow's earnings to maintain margins today?

Regulators are concerned that community banks are ill equipped to manage interest rate risk of this magnitude, and worse, they fear that small banks are victims of "duration drift."  In other words, the asset extension has not been intentional, but has instead happened over time without the banks necessarily even seeing it happen.  Because of this, expect regulatory scrutiny of interest rate risk to not only stay high, but perhaps even increase.  Are you taking on more risk than you have in the past?  And is your model up to the task of helping you manage through that risk?  Let us know if we can help.

Saturday, May 31, 2014

Vendor Management

by Dallas Wells

We have heard loud and clear that bankers are wrestling with the growing expectations in vendor management.  We are feeling the pain ourselves, as clients and prospects both have a much longer laundry list to go though in vetting us.  As with all of the other regulatory expectations, the difficulty comes from he fact that we are having to rewrite processes from scratch. 

For help with vendor management, I urge you to check out a post from Carl Ryden, the CEO of PrecisionLender.  Here is Carl's intro:

The Five C’s of Bank Vendor Assessment and Selection
In the earliest days of society, “banking” was pretty straightforward. We loaned money to people we knew and trusted, and we had a pretty good idea if they were going to pay us back. But today, things are a bit more complicated… lenders and borrowers aren’t nearly as connected, but we still need to underwrite each borrower’s ability to repay. So how do we get to that same comfort level BEFORE we hand over the cash? The answer: The 5C’s of Credit… the modern framework for understanding the credit worthiness of each and every borrower.
The story isn’t so different when it comes to buying subscription-based software solutions. Today’s landscape is like the Wild West, and knowing which vendors we can count on is getting more and more difficult. So, how do we choose? How do we ensure that the vendor we select is going to “pay us back?” We already have a framework that we know and trust, so what if we took a credit underwriter’s approach to vendor selection? Enter, The 5 C’s of Vendor Assessment and Selection… Company, Culture, Customers, Churn, and Conditions.

The whole post is great - click here to read the rest.

Friday, May 30, 2014

Managing Risk With Lizard Brains

by Dallas Wells

Last week I read a short article on Bloomberg View by Barry Ritholtz called "What Kills You and Your Investments."  Barry has been one of my favorite reads in the finance world for years, and his The Big Picture blog was a daily must read during the height of the financial crisis.  In this Bloomberg piece, Barry touches on one of his recurring themes, which is the fact that human brains are actually hard wired to be really bad at investing:

You don’t understand risk.
I don’t mean you, in your professional capacity. I mean you, the human being whose brain is desperately trying to keep you alive. An endless procession of mortal threats are trying to end your particular genomic variation, forcing your brain to respond first and think later.
Your existence is threatened by hungry predators, roving bands of Neanderthals, poison mushrooms and all manner of germs.
What’s that you say? You don’t live on a savannah where lions hunt, and there haven’t been any Neanderthals for 30,000 years?
That is irrelevant to your risk-calculating engine. Your wetware was optimized during a period when those were the highest potential threats to your well-being. 


...what does this have to do with investing?
Plenty. It turns out that investors fear things that are relatively rare, such as market crashes. They also ignore little things that are likely to do damage over the long term, namely trading too much, paying too much in commissions, generating a big and unnecessary tax bill.
These are the cholesterol of investing. They won’t kill you tomorrow in a spectacular fireball or shark attack. But they will kill you in the end, slowly and quietly, and with great finality.  

While Barry is specifically referring to investing and managing equity portfolios, the same basic premise applies to managers of financial institutions.  As a general rule, our brains, which over the years learned some impressive survival tricks, work against us as we try to manage risk in a prudent and practical way.  Our instincts, or what I would call the "lizard brain," reacts to things in a way that ensured our survival for thousands of years, but that now works against us.  There are numerous ways that this happen, but here are a few of the most common that I see.

Confirmation Bias
This is the natural tendency of people to favor information that confirms a preexisting belief or hypothesis.  In fact, we don't just favor this confirming information, we actually seek it out at the exclusion of any contradictory information.  So, you know the perpetual market bears that always see a crash around the corner (and yes, every office has at least one)?  They go seeking ugly data that confirms that expectation, and are much more likely to remember and believe that data than any positive economic data they might find.  We are all guilty of this one to a certain degree, but it can be dangerous, especially in today's world where there is an unlimited supply of data and opinions that are easily accessible.  The banking world and the markets in which we operate are dynamic and ever changing, and we need to be able to adjust our opinions and strategies as we go.

Various Misunderstandings of Statistics
There are enough of these to write an entire book, so I will group them together.  They include things like total disregard for sample size (or believing results we have a seen a few times in a data set too small to actually be useful, or seeing patterns in data that is actually random), the anchoring effect (our brain's inability to move far enough away from an initial number once it has been lodged in our conscience), and the gambler's fallacy (thinking that past results have any effect on future results of a random pattern, or something be "due" to happen). 

However, the most important in managing risk in banks is probably "regressive bias."  Regressive bias refers to the fact that we grossly overestimate events that have a high likelihood, and we grossly underestimate events that have low likelihood.  If we hear "there is a 95% chance that these loans will pay as agreed," then our brains think of it as a certainty.  In reality, if our loans only pay as agreed 95% of the time, we will be out of a job.  The flip side is essentially the "black swan" issue.  Rare and unexpected events are actually more likely to happen than our brains allow us to believe, and can be catastrophic to our business (see 2008).

Sunk Costs
And finally, my pet peeve.  Banking, of all businesses, should always be about evaluating where we are at the moment, and making the optimal decision for going forward.  Unfortunately, that is not how decision making works at all.  Instead of ignoring sunk costs (those costs that have already been incurred and cannot be recovered), they are often a major driving force in determining ongoing strategy.  We spent X dollars on the software, so we are sticking with it even though it is clearly not the best solution.  We took those advances to hedge those specific loans, so we cannot pay them off early.  We started moving rates down last month, so we can't move them up this month.  We have invested too much time and money in that branch to close it. You get the idea.

Lizard Brains in Action
Some of the risks in banking are direct, tangible, and a little easier for our brains to process.  For example, on an individual loan, it is fairly easy for us to process the probability of default, and the loss given a default.  The risk is also quantifiable and easy to see; if the loan goes bad, we see the direct effect on the income statement.

Other risks are not so easy to see.  Interest rate risk is just that kind - we can be subject to sunk costs, and anchoring, and the gambler's fallacy all in one transaction.  Our lizard brains keep us from making the optimal decision, and what's worse, we do not see the direct cost of that mistake.  Instead, the risks accumulate over time, and when this risk shows up, we just see it in the form of underperformance, or a growing potential exposure, or a lost opportunity that would have been much better.  For example, we feel like rates have been low for too long, and are "due" to go up.  Our lizard brain finds a pattern where there really isn't one (sample size error), and so we stay in Fed Funds Sold making 0.25% instead of buying a bond that will earn 1.50%.  Or maybe we price a long fixed rate loan at an aggressive rate when a shorter bond was the better risk adjusted investment.  We never have to make a loss provision, and we never write a check, but we definitely underperformed.

So, I've laid out the problem.  What is the answer?  There is no easy answer, but a combination of a few things should help:

  1. Be openly and consistently aware of these weaknesses.  We need to know that our initial instinct, especially when managing complex risks, is often going to be wrong.  We need to back up, shut down the lizard brain, and try to take a more clinical approach to decision making.
  2. Invest the time and resources in an understanding of statistics.  Data becomes a bigger part of our business every day, and those that do not know how to properly interpret data will be fooled by it.  They will see patterns where there are none, be confident in faulty data, and not ask the right questions about data driven decisions and conclusions.  The entire team may not have a knack for this, but someone in the room should have a firm grasp of the basic principles.
  3. The management team needs to be comfortable with challenging each other.  We will all be victims of our lizard brain occasionally.  The danger is in groupthink, where we are afraid or unable to challenge and question every strategic and risk management decision we make.  Is the organization's leader willing to be questioned?

Banking is tricky business, as we operate on razor thin margins.  Properly managing the risks in front of us is vital, not only for success, but for the business to merely survive.  So, while our brains are organized for spotting and avoiding danger like saber toothed tigers, we have to take the extra step to translate that into an ability to spot and avoid complex financial risks.

Thursday, May 8, 2014

Chasing Yield

by Dallas Wells

One of the persistent themes over the last five years or so is the almost desperate level of yield seeking in the marketplace.  With nominal yields hitting (and staying near) all time lows, investors of all types, including banks, have had to search far and wide for a yield high enough to keeps the light bill paid.  With a gradual improvement in the economy and interest rates ticking up during 2013, many pundits predicted that spreads would also widen, finally giving investors some breathing room.  However, as we have seen during 2014, this simply has not been the case.  There are still simply too many dollars chasing yield.

This is seen across the fixed income landscape, with spreads on everything from agencies to MBS to munis to sovereign debt shrinking to all time lows.  Here is a good post from Sober Look describing some of this action:

The major market surprise of 2014 so far has been the extent of investors' appetite for yield in the developed fixed income markets. It has been quite spectacular. The Eurozone in particular has been a key beneficiary of this trend. We've seen German government bond yields hit a low not seen in almost a year (see Twitter post), but the real action has taken place in the periphery bonds. We are seeing multi-year and even all-time lows in government bond yields.

However, while these shrinking spreads have gotten plenty of attention, we are seeing what may be the most extreme example in the bank lending markets.  Have you increased your loan rates along with the increase in market rates?  The answer is generally a resounding no, with the exception being in 1-4 family real estate.  This article at cfo.com describes this trend in commercial loans.  Entitled "Banks Cut Spreads to Win Borrowers" they state:

The Federal Reserve’s quarterly survey of senior loan officers, released Monday, found that many domestic U.S. banks continue to ease underwriting standards on commercial and industrial (C&I) loans, particularly for large and middle-market companies, in a bid to attract and retain business borrowers.
The most widespread easing trend over the last three months came in tighter spreads — the rate charged a C&I borrower over the bank’s cost of funds. But banks also said they had reduced the cost of credit lines, decreased the use of interest-rate floors and loosened loan covenants.   

We see the exact same trend in community banks lending to smaller borrowers.  If you want to see how your loan pricing compares to market rates, don't forget about our Loan Builder.   The Loan Builder will tell you what your loan structure translates to as a floating rate equivalent (stated as a spread over LIBOR).  We have in general seen these spreads drift down from 300+ bps over LIBOR to the low 200s for solid CRE loans.  I realize that this is the market price to book loans - just make sure you are not loosening credit standards at the same time.

You can use Loan Builder to ensure pricing consistency in all of the various structures you put on the books by setting some thresholds for minimum credit spreads.  We have also recently added terms as short as 1 year.  Again, we don't believe we can tell you what spreads are acceptable for any particular loan.  Only you can decide how low is too low.  But, at the bare minimum, we need to be quantifying what that spread is so we can make our decisions with eyes wide open. 

It's tough trying to find yield out there, so good luck, and remember that not all margin is created equal.  We still have to make sure we get compensated for the risks we take.

Sunday, April 13, 2014

Is this the best of times, or the worst of times?

by Dallas Wells

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness

   ~ Charles Dickens, A Tale of Two Cities

Last week there was a very interesting piece from the FDIC that was making the rounds, but I did not have a chance to get to it.  I think it is important, though, and wanted to touch on it while it is still fresh.  As a part of its quarterly industry update, the FDIC released this article, called "Community Banks Remain Resilient Amid Industry Consolidation."  It happened to make think of what may very well be the greatest opening line of any book I have read.  So, for community banks, are these the best of times, or the worst? 

I hear many community bankers continuing to lament the demise of the smaller banks at the expense of the large money center banks.  We have all seen the data on the decreasing number of charters, and more importantly, the growing concentration of industry assets in the hands of a few.  This chart sums up all of those statistics (the definition of community bank for this chart is a little cumbersome - click here for the explanation):

In short, we as community bankers have seen our slice of the pie shrink substantially over the last 3 decades.  This has caused a growing sentiment among community bankers that the future is all about gloom and doom.  I hear lots of complaining about the growing regulatory burden, and the fact that the little guys "just can't compete anymore."  I also hear a lot of people saying that the size threshold to be viable is somewhere around $1 billion in total assets.

I will concede that the current environment is tough, and that some of the smallest banks' days are numbered.  However, to say that the community banking business model is doomed and you need at least $1 billion in assets to survive is ludicrous.  The FDIC article digs a little deeper into the data, and finds some support for my doubts.

The key finding of this study is that institutions with assets between $100 million and $10 billion—most of which can be considered community banks—have increased in both number and in total assets since1985. The number of banks with assets between $100 million and $1 billion increased by 7 percent between 1985 and 2013, while the number of banks with assets between $1 billion and $10 billion increased by 5 percent. These groups of institutions also experienced growth in terms of total assets. The assets of banks between $100 million and $1 billion increased by 27 percent between 1985 and 2013, while the assets of banks between $1 billion and $10 billion grew by 4 percent.

I'll also include a couple of my favorite charts:

As the charts show, the big industry changes are happening to the very smallest and the very largest of banks.  Banks with assets less than $100 million are shrinking (and seeing performance decline relative to peers), and the overwhelming majority of the industry asset growth has landed at banks with assets over $10 billion.  Of course some of this is due to inflation, as $100 million just ain't what it used to be.  However, the bottom line is that community banks over $100 million in assets have done quite well, and are positioned to continue that success going forward.

This article, which I recommend reading, combined with the performance statistics by asset size and direct experience with community banks leads me to a couple of takeaways:

  • There might be an asset size that most banks have to target to cover the growing overhead burden, but it is not $1 billion.  It looks a whole lot closer to $100 million.
  • The smallest banks that do hope to prosper probably cannot do so by trying to be a generalist that is "all things to all people."  Instead, they will need to find a specific niche in which they can specialize and excel.
  • Community banks of all sizes are seeing a divergence in performance.  There are very few that actually look like the "averages" from these studies.  Instead, there are high performers and there are those lagging behind.  Banking truly is getting more complex and moving at a faster speed.  Bankers that embrace this fact and are seeking new strategies, better techniques, updated technology, and partnerships with the right experts are the ones that are far outpacing the averages.

Overall, I think the negativity from community bankers is overdone.  Our business is recovering, and the future still looks bright.  Instead of spending too much time on what is wrong and how unfair new regulations might be, those that are succeeding are embracing the change and seeking the new opportunities that will inevitably come from shifts of this magnitude.  Good luck, and let us know if we can help!

Wednesday, April 2, 2014

Does Cost of Funds Matter When Pricing Loans?

by Dallas Wells

Bankers live by the old 3-6-3 rule.  Pay 3 on deposits, charge 6 on loans, and be on the golf course by 3 o'clock.

I have heard that tired old joke more times than I can count.  I still chuckle at it, as I do all banker jokes (just don't make the "Banker's Hours" joke to my wife - she does not find it amusing).  So while the days of getting in that much golf are long gone, does the basic pricing philosophy still have merit?  Are we making this business way too complicated?

I get some version of this question on a regular basis.  In fact, I would say that the majority of community banks still use dome form of what I call "cost plus" pricing.  That is, to price a loan, you take your current cost of funds and add some spread to it based on the perceived risk level of the loan.  If you get a request for a longer term fixed rate loan, then you find some way to match fund it and add your spread to that funding cost.  In fact, this is exactly how I was taught to price loans earlier in my career.  Our rule of thumb was to seek a spread of 4% - that was 3% to pay the bills, and that left us a roughly 1% profit (targeting a 1% R.O.A.). 

There are several issues with this approach.  I'll cover what I see as the 2 biggest problems.

1.  Not all Margin is Created Equal
Focusing on a "cost plus" method to create margin leads us to take on more incremental risk.  First, banks using this approach will invariably over-value loans and under-value their securities portfolio.  Compared to their cost of funds, many banks barely make a profit.  However, a 150 basis point spread over cost of funds on a short, highly liquid portfolio of agency bonds should not be compared directly to a 350 basis point spread over cost of funds on a commercial real estate loan portfolio.  Which would you rather earn?

Second, and more problematic, is that this often leads to bank charging too much for short floating rate loans and too little for longer term fixed rate loans.  Earlier this week I spoke with a bank that was pricing a large commercial real estate loan for a strong prospect.  The deal was to be a 5 year term, based on a 20 year amortization.  The prospect had an offer in hand for a floating rate at 1 Month LIBOR + 2.50%.  They told the bank that if they matched that rate, the deal was theirs.  They thought that was way too cheap, so they countered with a 5 year fixed rate of 4.35%.  With a cost of funds of around 0.30%, they felt that this rate got them a better spread, as they are fighting against margin compression.

Did they make the right decision?  I plugged the loan into our Loan Builder calculator to find out.

The structure they proposed translated to a spread of 2.20% over LIBOR (the calculator used the swap market to translate a fixed rate loan to a floating rate loan).  This is a VERY common mistake.  We see banks loading up on 5 and 10 year fixed rate loans.  They tell us that is "all the borrowers want."  However, that is largely due to the fact that they are way over pricing shorter loans.  They have "sticker shock" with the floating rate loans, and so are pushing borrowers to what is a much better deal out on the curve.  This is all driven by the fact that a 3 handle (or even a 2 in this case) does not meet the hurdle of the "cost plus" pricing.  (By the way, if this bank had wanted a 5 year structure, they could have made the floating rate loan at LIBOR + 250 and used an interest rate swap to make it a 5 year loan at 4.65%.)

2.  A loan rate prices the deal for its prospective term - cost of funds is a historical number
When we price a loan, we are setting the rate at which we will be compensated for all of those future cash flows.  Cost of funds is a historical number.  Even if you determine the current rate on all liabilities for cost of funds (as opposed to interest expense from accounting statements), that number was still built in the past as those liabilities were put on the books.  This means that if rates rise, our cost of funds is built on lower rates, and we will be under-pricing our loans.  Conversely, if rates fall, our cost is based on higher rates, and we will over-price our loans.  A picture tells the story better than I can.  This chart shows cost of funds for all banks between $100 million and $1 billion in assets (from FDIC call report data) compared to 3 month T-bill rates:

At inflection point sin the markets, these numbers can diverge quickly.  The highlighted area shows how T-bills dropped quickly late in 2008 and early 2009 (as the financial world came unhinged and the stock market crashed).  We entered a much lower rate environment, but our cost of funds had not yet caught up with the markets.  If you continued to use "cost plus" you were likely way out of the market on most new deals.  The loan market is simply too competitive now.  Why would borrowers care if you have a high cost of funds?  Do they want to pay more because of your funding structure?  Do they care if you have high overhead that you need to cover?  Conversely, should you charge much less than the market will bear for loans just because you have a funding advantage?  Of course not - that advantage should show up as wider spreads and better earnings.

So, if using cost of funds is not right, how should we price loans?  After all, we are not actually match funding every deal that comes through the door, are we?  of course not.  However, that does not mean we should ignore the yield curve.

This post is already long enough without jumping into a full blown methodology for pricing loans, so instead I will summarize.  We need to price with the yield curve in context.  If we can focus on what we call "Managed Spread" (that is, if we can consistently price on the right side of the curve at any given duration), then we can ensure that we have efficiently priced for interest rate risk.  If we are taking more risk, we should be paid accordingly.  If we are taking less risk, then we can and should expect a lower return. The yield curve tells us what the markets are expecting in terms of future rates, so using it to price is the best way for us to prepare our balance sheet for that future.

This has been an ongoing conversation for us with most of our clients, so there will be more posts to come on this topic.  Stay tuned - a feel free to contact us if you want to discuss your specific situation.

Tuesday, April 1, 2014

Upcoming Webinars

by Dallas Wells

Over the last couple of years, our firm has worked with LexisNexis (formerly Sheshunoff) to provide webinars as a part of their banking series.  These events are well done by LexisNexis, and are an excellent resource for community bankers as they cover a wide variety of topics.  Today I wanted to point you to a couple of sessions that we will be leading in April.

First up, on April 15, is "Interest Rate Risk: Prepare Now, Prosper Later" by Chris Thompson from our Country Club Bank Capital Markets Group.  Chris is an entertaining speaker, and will cover the impact that the Fed's tapering of asset purchases will have on fixed income markets, and how banks can best respond in their investment portfolios.  Click here for a description and to register if you are interested.

Next up, on April 23, is "Managing Liquidity Risk" with yours truly.  My session covers the evolving world of liquidity risk.  Regulators view liquidity issues as one of the eventual problems of the longer duration assets growing on bank balance sheets, and we must also contend with new expectations from Basel.  Since we also face low overnight rates and a very steep yield curve, bankers are facing a tough balancing act between current earnings and future risk.  We will cover regulatory expectations as well as some suggestions on how to continue making money while also managing the risk.  Click here for a description and to register if you are interested.