The Cash Conundrum

Deposits | ALM Strategy | Liquidity

"What do I do with all this cash?” is the question that keeps most bankers awake at night. Deposit growth has not slowed and, oddly, bankers are looking to shed deposits rather than grow them. The prospect of another stimulus package and PPP loan forgiveness could result in even higher cash levels. Putting cash to work in the lowest rate environment ever is no easy task, yet we must get buy-in from our stakeholders. First, quantify your margin pressure this year. Margins will fall for most if rates stay low – and putting a number to this downward trend helps identify if there is a level of urgency to redeploy cash. We should be able to answer this question with our ALM model.

Second, forecast deposit expectations. Although extremely challenging, forecasting potential deposit outcomes can be addressed with a little digging and some data analysis. We have found the inability to articulate the deposit outlook may hinder the ability to convince stakeholders that we should be redeploying excess cash.

1. Quantify Surge

Looking back at 2020, what was your expected deposit growth target and where did you end up? Through our Deposits360°® analytics, it would not be unusual to see non-maturity deposit surge in the ballpark of 15%. Breakdown the attribution to PPP, consumer, business, and public funds. Go a layer deeper into understanding how much growth came from new accounts vs. existing accounts. The goal is to gather as much intel as possible.