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  • Writer's pictureJoe Kennerson

Searching for the Silver Bullet

Searching for the Silver Bullet

ALCO | Deposits | Loans

“Any silver bullet strategies?”

This is a question we have received more this year than in any past year. The silver bullet quest is to fend off earnings pressure emanating from lower expected fee income (PPP and mortgage gain-on-sale), limited funding cost relief, and new loans originating at coupons lower than the portfolio level.

The answer, of course, is that there is no silver bullet. If there were then we wouldn’t be stressing about 2022 earnings pressure. It comes back to changing the conversation at ALCO. We are in a basis point game over the next two years, and if your ALCO is backward-looking then you run the risk of leaving basis points on the table.

Below are five ALCO initiatives to shift the silver bullet quest toward a forward-looking and strategically-focused ALCO meeting.

1. Quantify Margin Pressure

By now, you should have a good idea of what 2021 net interest income (NII) levels will look like. Uti