Writing this article makes me think about what 2024 will be like for us as bankers. It will surely be different than 2023, as the FED has indicated that rates could fall several times in 2024 and that their inflation goal is getting closer to being met. We are reading information from regulators about risk and commercial real estate and how banks need to stay on top of this segment of our portfolios. Liquidity will still be a hot topic, and it appears that banks with large AOCI balances are getting some relief with the markets adjusting for upcoming rate declines.
After the large deposit inflow from the past few years, banks have looked at their investment portfolios as more of an income generator and less of a liquidity tool. This will be challenging for the investment officers as they need to look closely at their own portfolio and where the holes and needs will be, not only looking at the highest return but what will be the best returns possible in 3-7 years. Strategies will need to be discussed, documented and followed to get the best returns possible in the future. Staying short-term and getting the best return now may not help in the long run.
Rates moving up the past couple years and now forecasting to move downward is different than banking has been for the past decade as rates were low for quite some time. This will make for some very interesting times and discussions among banking executive teams during 2024. Looking forward will be a must, and planning for changes and outcomes will be required. Strategic planning is always important, but in today’s financial landscape, it means more to the desired outcome for each bank. Communicate with your teams, share thoughts, ideas and outcomes. This will be the time some banks will rise to the top.
The bankers that are more mature (older) remember when rates would fluctuate regularly both up and down. For some of the younger bankers, they are accustomed to rates being low and stagnating; these recent rate hikes were their first taste of rate fluctuations. Now, they will be working with a falling rate environment. This could all be new to some of the younger team members. Include them in your planning and discussions; they are the future of our industry.
Looking forward to a great 2024 for MIBA and all the Missouri banks and bankers!
