Independent Banker - August 2024 - 32

PORTFOLIO PORTFOLIO MANAGEMENT
Moving on up
Bond portfolios' yields are beginning to catch up.
By Jim Reber, ICBA Securities
inally, mercifully and happily,
community banks are beginning
to book respectable returns from
their collection of bonds. And it
stands to reason: Fed funds have
been stuck at a 23-year high for every
bit of a year.
We can use tired old yarns about
the burgeoning improvement-rising
tides, blind hogs, etc.-but the fact
remains this is an environment that
F
you'll probably be wishing for in
the future.
This factoid may surprise you:
Community banks' portfolio yields
are now at their highest level since
at least 2007. There are reasons why
it doesn't seem like the bonds are
carrying their share of the weight.
For one thing, portfolios have shrunk
in the past two years. According to
the FDIC, total investments owned
by community banks are down 15%
since 2022, even as total assets have
pretty much run in place.
Another reason-more tangibly-is
that costs of funds have skyrocketed,
so the spread between income and
expense has dwindled. Still, there are
lots of opportunities and plenty cause
for hope as we enter the third quarter
of 2024.
Rarely, if ever
The Figure 1 graph (right) shows just
how far the bond market has run in
front of bank securities portfolios.
The data series for portfolio yields
come from the more than 400
community banks who use Stifel,
ICBA's exclusively endorsed broker,
for their bond accounting.
When compared with the historical
yields for the three-year treasury
note, we again are in new territory.
Historically, a bank's own bonds
yield more that similar-maturity
treasuries, which makes perfect
sense. Most bond portfolios consist
of securities that have yield spread
over and above treasuries, such as
mortgage-backed securities (MBS)
and tax-free municipals.
Since 2022, however, quite the
opposite has been the case. Not only
are treasuries available at higher
returns than seasoned " spread "
product; the difference is also quite
noticeable.
While all of this may be painfully
obvious to you portfolio managers
out there, this does drive home the
32 // ICBA Independent Banker // August 2024
Illustration by AITTHIPHONG/Adobe

Independent Banker - August 2024

Table of Contents for the Digital Edition of Independent Banker - August 2024

Contents
Independent Banker - August 2024 - Cover1
Independent Banker - August 2024 - Cover2
Independent Banker - August 2024 - Contents
Independent Banker - August 2024 - 2
Independent Banker - August 2024 - 3
Independent Banker - August 2024 - 4
Independent Banker - August 2024 - 5
Independent Banker - August 2024 - 6
Independent Banker - August 2024 - 7
Independent Banker - August 2024 - 8
Independent Banker - August 2024 - 9
Independent Banker - August 2024 - 10
Independent Banker - August 2024 - 11
Independent Banker - August 2024 - 12
Independent Banker - August 2024 - 13
Independent Banker - August 2024 - 14
Independent Banker - August 2024 - 15
Independent Banker - August 2024 - 16
Independent Banker - August 2024 - 17
Independent Banker - August 2024 - 18
Independent Banker - August 2024 - 19
Independent Banker - August 2024 - 20
Independent Banker - August 2024 - 21
Independent Banker - August 2024 - 22
Independent Banker - August 2024 - 23
Independent Banker - August 2024 - 24
Independent Banker - August 2024 - 25
Independent Banker - August 2024 - 26
Independent Banker - August 2024 - 27
Independent Banker - August 2024 - 28
Independent Banker - August 2024 - 29
Independent Banker - August 2024 - 30
Independent Banker - August 2024 - 31
Independent Banker - August 2024 - 32
Independent Banker - August 2024 - 33
Independent Banker - August 2024 - 34
Independent Banker - August 2024 - 35
Independent Banker - August 2024 - 36
Independent Banker - August 2024 - 37
Independent Banker - August 2024 - 38
Independent Banker - August 2024 - 39
Independent Banker - August 2024 - 40
Independent Banker - August 2024 - 41
Independent Banker - August 2024 - 42
Independent Banker - August 2024 - 43
Independent Banker - August 2024 - 44
Independent Banker - August 2024 - 45
Independent Banker - August 2024 - 46
Independent Banker - August 2024 - 47
Independent Banker - August 2024 - 48
Independent Banker - August 2024 - 49
Independent Banker - August 2024 - 50
Independent Banker - August 2024 - 51
Independent Banker - August 2024 - 52
Independent Banker - August 2024 - 53
Independent Banker - August 2024 - 54
Independent Banker - August 2024 - 55
Independent Banker - August 2024 - 56
Independent Banker - August 2024 - 57
Independent Banker - August 2024 - 58
Independent Banker - August 2024 - 59
Independent Banker - August 2024 - 60
Independent Banker - August 2024 - 61
Independent Banker - August 2024 - 62
Independent Banker - August 2024 - 63
Independent Banker - August 2024 - 64
Independent Banker - August 2024 - 65
Independent Banker - August 2024 - 66
Independent Banker - August 2024 - 67
Independent Banker - August 2024 - 68
Independent Banker - August 2024 - 69
Independent Banker - August 2024 - 70
Independent Banker - August 2024 - 71
Independent Banker - August 2024 - 72
Independent Banker - August 2024 - 73
Independent Banker - August 2024 - 74
Independent Banker - August 2024 - 75
Independent Banker - August 2024 - 76
Independent Banker - August 2024 - 77
Independent Banker - August 2024 - 78
Independent Banker - August 2024 - 79
Independent Banker - August 2024 - 80
Independent Banker - August 2024 - 81
Independent Banker - August 2024 - 82
Independent Banker - August 2024 - 83
Independent Banker - August 2024 - 84
Independent Banker - August 2024 - Cover3
Independent Banker - August 2024 - Cover4
https://www.nxtbook.com/mspc/independentbanker/september2024
https://www.nxtbook.com/mspc/independentbanker/august2024
https://www.nxtbook.com/mspc/independentbanker/july2024
https://www.nxtbook.com/mspc/independentbanker/june2024
https://www.nxtbook.com/mspc/independentbanker/may2024
https://www.nxtbook.com/mspc/independentbanker/april2024
https://www.nxtbook.com/mspc/independentbanker/march2024
https://www.nxtbook.com/mspc/independentbanker/february2024
https://www.nxtbook.com/mspc/independentbanker/january2024
https://www.nxtbook.com/mspc/independentbanker/december2023
https://www.nxtbook.com/mspc/independentbanker/november2023
https://www.nxtbook.com/mspc/independentbanker/october2023
https://www.nxtbook.com/mspc/independentbanker/september2023
https://www.nxtbook.com/mspc/independentbanker/august2023
https://www.nxtbook.com/mspc/independentbanker/july2023
https://www.nxtbook.com/mspc/independentbanker/june2023
https://www.nxtbook.com/mspc/independentbanker/may2023
https://www.nxtbook.com/mspc/independentbanker/april2023
https://www.nxtbook.com/mspc/independentbanker/march2023
https://www.nxtbook.com/mspc/independentbanker/february2023
https://www.nxtbook.com/mspc/independentbanker/january2023
https://www.nxtbook.com/mspc/independentbanker/december2022
https://www.nxtbook.com/mspc/independentbanker/november2022
https://www.nxtbook.com/mspc/independentbanker/october2022
https://www.nxtbook.com/mspc/independentbanker/september2022
https://www.nxtbook.com/mspc/independentbanker/august2022
https://www.nxtbook.com/mspc/independentbanker/july2022
https://www.nxtbook.com/mspc/independentbanker/june2022
https://www.nxtbook.com/mspc/independentbanker/may2022
https://www.nxtbook.com/mspc/independentbanker/april2022
https://www.nxtbook.com/mspc/independentbanker/march2022
https://www.nxtbook.com/mspc/independentbanker/february2022
https://www.nxtbook.com/mspc/independentbanker/january2022
https://www.nxtbook.com/mspc/independentbanker/december2021
https://www.nxtbook.com/mspc/independentbanker/november2021
https://www.nxtbook.com/mspc/independentbanker/october2021
https://www.nxtbook.com/mspc/independentbanker/september2021
https://www.nxtbook.com/mspc/independentbanker/august2021
https://www.nxtbook.com/mspc/independentbanker/july2021
https://www.nxtbook.com/mspc/independentbanker/june2021
https://www.nxtbook.com/mspc/independentbanker/may2021
https://www.nxtbook.com/mspc/independentbanker/april2021
https://www.nxtbook.com/mspc/independentbanker/march2021
https://www.nxtbook.com/mspc/independentbanker/february2021
https://www.nxtbook.com/mspc/independentbanker/january2021
https://www.nxtbook.com/mspc/independentbanker/december2020
https://www.nxtbook.com/mspc/independentbanker/november2020
https://www.nxtbook.com/mspc/independentbanker/october2020
https://www.nxtbook.com/mspc/independentbanker/september2020
https://www.nxtbook.com/mspc/independentbanker/august2020
https://www.nxtbook.com/mspc/independentbanker/july2020
https://www.nxtbook.com/mspc/independentbanker/june2020
https://www.nxtbook.com/mspc/independentbanker/may2020
https://www.nxtbook.com/mspc/independentbanker/april2020
https://www.nxtbook.com/mspc/independentbanker/march2020
https://www.nxtbook.com/mspc/independentbanker/february2020
https://www.nxtbook.com/mspc/independentbanker/january2020
https://www.nxtbook.com/mspc/independentbanker/december2019
https://www.nxtbook.com/mspc/independentbanker/november2019
https://www.nxtbook.com/mspc/independentbanker/october2019
https://www.nxtbook.com/mspc/independentbanker/september2019
https://www.nxtbook.com/mspc/independentbanker/august2019
https://www.nxtbook.com/mspc/independentbanker/july2019
https://www.nxtbook.com/mspc/independentbanker/june2019
https://www.nxtbook.com/mspc/independentbanker/may2019
https://www.nxtbook.com/mspc/independentbanker/april2019
https://www.nxtbook.com/mspc/independentbanker/march2019
https://www.nxtbook.com/mspc/independentbanker/february2019
https://www.nxtbook.com/mspc/independentbanker/january2019
https://www.nxtbook.com/mspc/independentbanker/december2018
https://www.nxtbook.com/mspc/independentbanker/november2018
https://www.nxtbook.com/mspc/independentbanker/october2018
https://www.nxtbook.com/mspc/independentbanker/september2018
https://www.nxtbook.com/mspc/independentbanker/august2018
https://www.nxtbook.com/mspc/independentbanker/july2018
https://www.nxtbook.com/mspc/independentbanker/june2018
https://www.nxtbook.com/mspc/independentbanker/may2018
https://www.nxtbook.com/mspc/independentbanker/april2018
https://www.nxtbook.com/mspc/independentbanker/march2018
https://www.nxtbook.com/mspc/independentbanker/february2018
https://www.nxtbook.com/mspc/independentbanker/january2018
https://www.nxtbook.com/mspc/independentbanker/december2017
https://www.nxtbook.com/mspc/independentbanker/november2017
https://www.nxtbook.com/mspc/independentbanker/october2017
https://www.nxtbook.com/mspc/independentbanker/september2017
https://www.nxtbook.com/mspc/independentbanker/august2017
https://www.nxtbook.com/mspc/independentbanker/july2017
https://www.nxtbook.com/mspc/independentbanker/june2017
https://www.nxtbook.com/mspc/independentbanker/may2017
https://www.nxtbook.com/mspc/independentbanker/april2017
https://www.nxtbookmedia.com