Western Independent Banker - March/April 2009 - (Page 11)

By Chris Bledsoe Profitable Liquidity: Yes, You Can MOST BANKS BELIEVE that liquidity is never profitable and actually costs them money. Nevertheless, it’s something every bank must have, especially in today’s environment. Perhaps it’s time for banks to start looking at liquidity differently—taking advantage of other aspects to lower the cost of funds, fuel future loan growth and build franchise value. There’s no question that liquidity is top of mind for most community bankers. In fact, in a recent survey more than 600 financial managers across the country indicated that it’s currently among their banks’ top three priorities (see note at the end of this article). There are two critical areas where bankers should be focusing the majority of their “liquidity efforts” right now—meeting regulatory requirements and overcoming the future liquidity roadblock. Managing Liquidity Risk This first area is the “necessary evil” side of liquidity—the regulatory side. As you know, the credit crisis and bank failures have created a more stringent regulatory climate, and staying on top of evolving mandates and meeting rigorous reporting requirements has become increasingly burdensome. If you haven’t yet, you need to automate all that you can and establish a regular routine for managing, measuring and reporting liquidity from a regulatory perspective. The key is to continually track and maintain liquidity ratios from several different angles. You must be able to look at the whole picture and know at all times exactly how much in wholesale funds the bank has outstanding and how much can be drawn on each line; knowledge of capacity is a primary area regulators are examining. It’s crucial that you test and understand best and worst case scenarios, and that you have a contingency plan, such as a line at the Federal Reserve, in place. Do you know where the bank stands today? How about next week? Set and be liberal with target ranges. And, finally, routinely communicate your standing and trends to your team, board of directors and of course, regulators. This will allow you to turn your attention to an even more important side of liquidity. There are two critical areas where bankers should be focusing the majority of their “liquidity efforts” right now—meeting regulatory requirements and overcoming the future liquidity roadblock. Western Independent Banker March/April 2009 11

Table of Contents Feed for the Digital Edition of Western Independent Banker - March/April 2009

Western Independent Banker - March/April 2009 Contents A Message from the President & CEO Profitable Liquidity: Yes, You Can Non-Performing Assets: The Keep Versus Sell Decision Is BOLI the Way to Go? The Troubled Asset Relief Program and Its Eff ect on Executive Compensation TARP Money or Not, Secondary Offerings Belong in Your Plan 52nd Annual Conference Private Equity: Another Capital Option Strengthening Your Bank’s Bottom Line by Adapting to Difficult Times Managing Your Branch Network Capital Dealing with a Hard Insurance Market WIB Service Corporation Report WIB Calendar New Members Index of Advertisers Advertiser.com

Western Independent Banker - March/April 2009

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.