c. myers live – Living in a 0% Rate Environment
March 23, 2020
Welcome to c. myers live
We recognize that credit union leaders are facing uncertainties now more than ever. Conversations with our clients are happening daily to help with strategic thinking, strategic planning, and financial modeling. C. myers live is an opportunity to take these conversations to the masses. Stay tuned for a future opportunity to join c. myers and others in a live conversation.
There is power in understanding potential financial impacts of living in a 0% rate environment.
Remain calm. The industry net worth ratio is about the same today as it was entering the last economic crisis.
Just a few What-Ifs to consider. Run your what-ifs individually to isolate the impact of each. Then run a combination to see ahead-of-time the possible financial outcomes of multiple events.
- Show 2nd mortgages being refinanced to first mortgages and lower the rate on the 1st mortgage portfolio due to a refinancing boom
- Stress testing prepayment speeds for 1st mortgages, 2nd mortgages, and HELOCs
- Repricing all loans to a 0% rate environment
- Reprice overnights, variable rate, and short-term investments to 0% rate environment
- Take non-maturity deposits to 0% and CDs down drastically. Factor in what you may do with respect to current CD promos. This is to understand how deposit pricing can help offset a drop in the yield on assets, not necessarily what a credit union would do.
- There is a delicate balance with respect to deposit strategy as no one knows if people will hoard cash, or if there will be a flight to safety, or both
- Test flight to safety
- Test liquidity crunch
- Test increasing credit risk. Using the last economic downturn can be a good place to start, fully recognizing that the external forces in play this time are dramatically different
- Operating expenses could go up short term. Consider keeping operating expense ratio and non-interest income ratio constant as you are running options for this quick view
- Actively use business intelligence to monitor trends and provide options to help your membership through these trying times
These types of What-Ifs are helping decision-makers quickly get a high-level view of what could be. This “quick view” can be used to facilitate deeper strategic discussions. Keep in mind, not all financial impacts will occur simultaneously, and as you take action, consider how it may impact your desired brand.
Send us your questions, we can address on a future c. myers live or reach out to you directly. We are here to help you think and explore options. We have experience working with over 600 financial institutions, including 25% of the credit unions over $100 million in assets and 50% of the credit unions over $1 billion in assets.
We can appreciate how recent events are impacting the normal course of business and are happy to schedule time outside of normal business hours – early in the morning, late at night, or on the weekend, as needed.
You can reach us at 800.238.7475 | 602.840.0606 or email firstname.lastname@example.org.
About the Hosts:
Brian, one of five c. myers owners, has worked closely with credit union Boards and managements of all sizes in a variety of capacities. As a strategic planning facilitator, CEOs regularly praise Brian’s industry knowledge, calming communication skills, ability to authentically engage anyone with whom he interacts, and ability to keep discussions focused on linking strategy with desired measures of success.
Learn more about Brian
Sally is a founder of c. myers corporation and one of five owners. Driven by a deep commitment to helping credit union leaders and regulators for more than two decades, her guidance has shaped c. myers’ focus on client support and leadership development. Sally has facilitated hundreds of strategic planning, governance, and business model evaluation sessions, and has spoken at countless national and regional industry conferences.
Learn more about Sally
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