Author Archives: Jim Reber

Cash Whiplash: Changing interest rates can create volatile cash flow

Before 2018 gets too much further into our rearview mirrors, it may be worthwhile to review what investment portfolio lessons we can derive for future reference. The popular notion among community bankers is that, for all the positives that the industry enjoyed last year (record earnings, continued loan growth, and solid credit metrics), the bond… Read more

How ’Bout Them Dogs? Put unrealized losses to good use

This just in: community bank investment portfolios have lost value in 2018. The rest of this column contains good news. At least, it does for those community bank portfolio managers who are interested in improving future earnings, creating a more diversified collection of bonds, tweaking their risk profile and, yes, deferring income. I hope that… Read more

Can’t keep a good bank down: Last decade has seen struggles, successes for the industry

September 7, 2008 is the mortgage finance industry’s date of infamy. It’s now been a full decade since the secondary market siblings, Fannie Mae and Freddie Mac, have been in legal custody of the Federal Government. For many community banks, that date was the tipping point of a tortuous era of poor loan demand, sketchy… Read more

Muni Madness: A lot of variables affect tax-free performance

“Now that interest rates have finally risen…” is a phrase I wrote in jest, a mere six months ago, in this very column. I can now use these words in sincerity. And your collection of investments is potentially the better for it. We have contended that while the discussion of portfolio performance in the board… Read more

Push and Pull: Two-sided SBA market doubles your chance for success

Rufus Thomas, the late R&B impresario whose hit list included “The Funky Chicken” and “Walking the Dog,” was not known to be a market maker of Small Business Administration (SBA) 7(a) loans. It’s ironic, then, that he was talking about the two-sided benefits of both lending and investing in these products when he released his… Read more

Call Protection at Rock-Bottom Prices

It can be difficult to discern what securities are of value these days. Even though we seem on the precipice of rate hikes, short-term yields (in particular) remain mired in cyclical lows. The two-year Treasury yield, for example, hasn’t been over 1 percent in over five years. The five-year note hasn’t seen 2 percent for… Read more

The Old Switcheroo: Instead of buying bonds, why not sell loans?

If your duties include the management of your community bank’s investment portfolio, you have my undying respect. It’s hard enough to stay current on new products, regulatory expectations and viable strategies while, oh yeah, keeping an eye on the rest of the balance sheet. In the last seven years, you’ve also contended with generational-low interest… Read more

Is the Curve Going to Flatten? Why it does and what to do about it.

Before we get too deep into this investment column, I’d like to be on record that I’m not predicting anything about interest rates. Not that they’re going higher, not that they’ll be range-bound, not that this so-called curve flattening is about to happen. Nonetheless, it is probably a good time to talk about the consequences… Read more

Roll or Flow? Amortizing bonds require some analysis

It seems a popular parlor game is in session this fall, amongst community bankers. The question at hand, and it’s a big one, is “when do you think the Fed is going to start raising rates?” Of course, it’s a subject that never really escapes the mind of a prudent manager. What’s changed this year… Read more

Shop Till Rates Drop: Fed to continue its buying spree

Banking professionals have dealt with a non-stop series of precedents for an extended period of time, which now has stretched into fully five years.  Most of these events have not been particularly welcome by community banks.  As we get into 2013, we have been fully warned that there will be another externality that will, at… Read more