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The Case to Convert to Fee-based Checking from Thought Leaders at IZALE on FMStv

9/25/2018

New choices in the marketplace, means banks and credit unions may struggle to maintain market share for their checking accounts. One solution is to update outdated free checking accounts to a fee-based model. This fee income strategy simultaneously increases revenue and delivers these value-added services to customers. Find out more from this short Thought Leader Video from the Financial Managers Society then click here where you can join one of our upcoming Fee-based Income webinars and learn more about this strategy for change from your friends at IZALE.

For more information about FMS, click here.

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Margin Management: Earning Asset Yields - Mix, Selection, Pricing

9/20/2018

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by Todd Taylor, CPA & CFA, Taylor Associates

Todd Taylor, CPA & CFA, Founder & President of Taylor Associates, Lexington, KY

Margin Depression

From the end of 1992 to the beginning of 2018, net interest margins in the financial institutions industry have declined 100 basis points, with earning asset yields declining from 8.1% to 4.2%, and funding costs falling from 3.8% to 0.5%. This margin compression has been offset by either lower credit losses and/or lower net non-interest expense. So the question remains, where do margins go from here?

As the yield curve flattens, the focus shifts to earning asset yields and whether institutions will be able to pass along increases in the Prime Rate

and other rates along the yield curve. We will examine factors impacting earning asset yields and suggest strategies to stabilize risk-adjusted returns.

What's In the Mix

It is interesting to point out that large institutions (80% of the loan market), have loan to asset ratios near historical lows while community institutions are moving back to pre-crisis levels as their ability to generate fee income has not kept pace with the large institutions.

Behind the Curve

The Fed has raised rates 175bps and is expected to increase them 125-150bps by year end 2020. The Fed's DOT plot indicates they intend to lower rates over the long-term, averaging 2.75%, so adding duration to your earning assets isn't necessarily a bad thing. The challenge comes in identifying assets that compensate you for the remaining rate increases, but also protect you in the event that short term rates don't increase. Most floating rate and amortizing assets don't fit this profile.

Prime Loans to Go

With quality loans hard to find in the expanding economy and institutions hungry for even more loans to meet budget, some institutions have relied on traditional indirect channels to drive loan production while others have ventured into non-traditional fintech platforms to boost lending. This new growth into out-of-market signature lending is further increasing credit risk.

Conclusion

We are definitely in uncharted territory, with massive amounts of stimulus being removed from the system, funding costs accelerating and earning asset yields struggling to come off their lows. If your institution is experiencing or is concerned about earning asset yield compression, feel free to contact Taylor Advisors to learn about how we strategize prosperity. A final word of advice: Stay disciplined when evaluating unproven lending practices just to meet budget. Don't forget what happened to all those stated income prime & sub-prime loans. When extending terms on assets, reserve them for the highest quality borrowers and incorporate a call protected barbell strategy in the investment portfolio to improve duration-weighted returns.

Note From Scott Richardson, IZALE Founder & CEO:

Featured Expert this quarter, Todd Taylor CPA, CFA, is Founder and President of Taylor Advisors. I've known Todd for almost 20 years. After working in banks, he founded Taylor Advisors in 2002. They are an SEC Registered Investment Advisor and a balance sheet consulting firm serving financial institutions, including banks and credit unions. Todd has spoken at numerous state and national conferences on balance sheet management, investments, and risk management. He has written several articles for industry publications on capital, liquidity, investments, and more. Don't hesitate to contact Todd if this article triggers a question or two, or you just want to comment on it.

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Hazards of the Next Two Years

8/23/2018

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Economic Wisdom From Guggenheim Partners

Macroeconomic and Investment Research

In this five-part video series, Brian Smedley, Head of Macroeconomic and Investment Research, discusses how investors can navigate a broad range of market risks as we approach the end of the current business cycle.

Part 1: Credit Cycle Downturn
The markets will be tested by passive investors’ reaction to ratings downgrades.
Watch Video

Part 2: Crowding Out
Government borrowing and the Fed balance sheet runoff are flooding T-bill supply, contributing to rising rates, and affecting other borrowers.
Watch Video

Part 3: Oil and Geopolitical Risk
Geopolitical tensions could give rise to substantial supply disruptions.
Watch Video

Part 4: The Pig in the Python
The transitory effects of fiscal stimulus won’t offset a slow growth outlook.
Watch Video

Part 5: Navigating Your Portfolio
Ideas for portfolio positioning amid tight credit spreads and a flattening yield curve.
Watch Video

Brian Smedley

About The Guggenheim Expert

Brian Smedley has been Managing Director and Head of Macroeconomic and Investment Research at Guggenheim Investments, Inc. since November 16, 2015. Mr. Smedley joined Guggenheim Investments from Bank of America Merrill Lynch, where he served as its Director of U.S. Rates Research. He served as United States Rates Strategist since June 2010. Prior to this, he spent five years at the Federal Reserve Bank of New York, including Senior Trader and Analyst for the Buy-Side Analysis and Relationship Management Staff and Foreign Exchange and Investments Staff, and Senior Economic Analyst for the Emerging Markets and International Affairs Group. Previously, he was employed at the FX desk and in the emerging markets group as a Senior Economic Analyst covering Latin America macroeconomics, commodity markets, and sovereign risk issues. He served as Director of BofA Merrill Lynch. As a graduate student he worked at the U.S. Treasury Department and the White House Council of Economic Advisers. He ranked number three in the Short Duration category of the Institutional Investor Fixed Income Research survey in 2011 and 2012. Mr. Smedley graduated Summa cum Laude with a B.S. in Finance and Economics from Utah State University and an MA in International Development Studies from the Elliot School of International Affairs at George Washington University.

Important Notices and Disclosures

Investing involves risk, including the possible loss of principal. This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

This material contains opinions of the author or speaker, but not necessarily those of Guggenheim Partners or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Past performance is not indicative of future results.

© 2018 Guggenheim Partners, LLC. All rights reserved. Guggenheim, Guggenheim Partners and Innovative Solutions. Enduring Values. are registered trademarks of Guggenheim Capital, LLC.

IZALE Financial Group is hereby authorized to use the copyrighted report “Hazards of the Next Two Years,” by Guggenheim Partners, solely for the purpose of posting on its company blog, found here.

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Positioned for Choppier Waters from Guggenheim Partners

5/18/2018

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After several quarters of low volatility, tight spreads, and abundant liquidity, financial conditions are shifting.

Here are the key takeaways from our latest report:

The complacent environment, characterized by low volatility and a scarcity of bonds to buy, is changing.
The shift from quantitative easing to quantitative tightening took its toll in the first quarter of 2018 as rate, credit, and equity volatility all spiked.
We expect more of the same going forward and are preparing portfolios accordingly.
As we approach the turn in the credit cycle, our portfolio managers have been shortening portfolio duration, opportunistically moving up in credit, and maintaining a reasonable liquidity buffer for picking up undervalued credits in periods of market weakness.

Steve Brown and Matt Bush share insights from
the Second Quarter Fixed-Income Outlook

www.guggenheimpartners.com

Important Notices and Disclosures

Investing involves risk, including the possible loss of principal. This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

This material contains opinions of the author or speaker, but not necessarily those of Guggenheim Partners or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Past performance is not indicative of future results.

© 2018 Guggenheim Partners, LLC. All rights reserved. Guggenheim, Guggenheim Partners and Innovative Solutions. Enduring Values. are registered trademarks of Guggenheim Capital, LLC.

IZALE Financial Group is hereby authorized to use the copyrighted report “Fixed-Income Outlook: Second Quarter 2018,” by Guggenheim Partners, solely for the purpose of posting on its company blog, found here.

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Thought Leaders at IZALE on FMStv Share Their Wisdom on Executive Benefits

4/24/2018

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The Risks and Rewards of Executive Benefit Plans

Just launched today, the experts at IZALE share in less than 4 minutes why executive benefit plans are an integral part of attracting, rewarding, and retaining top talent for financial institutions today.

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Blog

The Case to Convert to Fee-based Checking from Thought Leaders at IZALE on FMStv

Margin Management: Earning Asset Yields - Mix, Selection, Pricing

by Todd Taylor, CPA & CFA, Taylor Associates

Note From Scott Richardson, IZALE Founder & CEO:

Hazards of the Next Two Years

Economic Wisdom From Guggenheim Partners

Positioned for Choppier Waters from Guggenheim Partners

After several quarters of low volatility, tight spreads, and abundant liquidity, financial conditions are shifting.

Thought Leaders at IZALE on FMStv Share Their Wisdom on Executive Benefits

The Risks and Rewards of Executive Benefit Plans

IZALE Financial Group

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