Click Here to Print
Wednesday, November 27, 2024
 

MANAGING DIRECTOR:
Scott Carrithers
 
PORTFOLIO SALES AND SERVICE:
Chris Thompson • Sean Doherty • Kevin Doyle • Mark Tranckino • Brian Schaff
Natalie Regan • Aaron Stoffer • David Farris • Jeff Macy 
Josh Kiefer • Tom Toburen • Todd Czinege • Trey Valentine • Cody Kreutziger

US Treasury Market
Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
11/20/24 4.57 4.54 4.47 4.37 4.32 4.27 4.28 4.34 4.41 4.70 4.60
11/21/24 4.59 4.55 4.48 4.39 4.35 4.30 4.30 4.36 4.42 4.68 4.60
11/22/24 4.58 4.55 4.50 4.42 4.38 4.31 4.30 4.34 4.40 4.67 4.59
11/25/24 4.64 4.49 4.50 4.38 4.25 4.21 4.19 4.21 4.31 4.57 4.48
11/26/24 4.63 4.53 4.48 4.37 4.27 4.19 4.18 4.24 4.28 4.55 4.47

The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P.  As of: close of business 11/26/2024.

                                                                                                                                                                                        

Traits of Top Performing Banks

Given the Fed has made the decision to cut short term rates, we are finding ourselves in a position to look at various strategies to reposition or rebalance the balance sheet.  Many banks have a cash position that is depleted, the use of wholesale funding has increased and loan demand increased during the previous rapid rising rate environment.  As such, many banks have been letting the roll-off from the bond portfolio go to fund loan demand, which has kept overall investment portfolio yields lower.  The migration from the bond portfolio to the loan portfolio has helped income and margin for many.  With rates projected to move lower, what strategies have separated top performing banks from bottom performing banks?  The following information is from Call Report data and is looking at banks in the Midwest ranging in size between $300MM and $3B.
 




 

When rates start falling, we often use the slowing loan demand to build cash, pay down borrowings, and then participate in the bond market, usually in that order.  However, what the data shows us is that banks that don’t forego participating in the bond market earlier, then pay down borrowings, followed by building more cash often outperform peers by a healthy margin.  While all or none strategies often work against us, we recommend that you can do all three phases of shifting the balance sheet at the same time.  Early in the rate down cycle, we recommend weighing bond buying heavier than building cash, and when we get to the bottom, build more cash versus buying bonds.  If we are too quick to pay off borrowings in the falling rate environment, then when overall balance sheet cash flow increases in the lower rate environment from loan prepayments, you end up being forced to reposition in lower yielding assets, or buy longer maturity assets to find more yield at the wrong time.  

If we can help with additional information, or assist with developing a strategy for this next rate cycle, please reach out to your Country Club Bank Representative.
 



This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

•Not FDIC Insured •No Bank Guarantee •May Lose Value