January 25, 2021

With LIBOR’s days being numbered, financial institutions have the option of choosing their new interest-rate benchmarks, including fed funds. Yet, the Alternative Reference Rates Committee (ARRC) has recommended the Secured Overnight Financing Rate (SOFR) as the best option. Any widely used interest-rate benchmark should have three key qualities, according to ARRC:

This year has presented bank management teams with many issues to juggle, many of which seemingly pull in opposing directions, and most of which were not firmly on the radar to start the year. Such was life in 2020. Some banks’ primary concerns stem from the fact that the industry has seen a shift in liquidity. Balance sheets are flush with deposits relative to recent periods, while securities holdings have come down relative to assets. The build-in balance sheet liquidity has come in the form of cash, with an unusually high 7.6% of assets held in cash and equivalents as of June 30.

To start the year, I’d like to both properly memorialize the late, great Alex Trebek and provide some helpful suggestions for investment management in this challenging rate environment in which we find ourselves. And I’d like to do it in the space of this column, so let’s pick up our signaling devices and see what answers we have in front of us.

The new year brings with it a fresh start. We continue to face no shortage of challenges in 2021, from a divided nation to an ongoing health crisis. Yet, as community bank leaders, we need to flip our perspectives and find the potential in the moment. I recognize that’s easier said than done, and that’s precisely why we must lead by example, inspiring our teams and communities to keep moving forward. It’s our job to raise spirits so we can keep advancing in support of our communities.

As the calendar flipped to 2021, we didn’t magically return to a simpler, pre-pandemic era, unfortunately. We are still grappling with a global health crisis and a hefty amount of ambiguity around what comes next. Amid such uncertainty, it’s easy to focus on what we don’t know. But, as community bankers, we have a North Star in our mission, and we can find consistency in what we know to be true in this rapidly changing world: Community banks serve the needs of their communities.

We’d like to introduce our newest associate member who can offer the Montana banking community a great solution! Upgrade recently joined the Montana Independent Bankers as an associate member. Upgrade partners with community banks to provide access to prime credit quality consumer assets. Upgrade is a marketplace platform, founded in 2016. Upgrade currently employs 357 nationwide and has facilitated origination of ~$3 billion in loans since inception. Upgrade offers affordable and responsible credit

Headquartered in Fargo, North Dakota, Bell Bank is one of the largest independently owned banks in the nation, with assets of more than $8 billion. When Bell Bank opened its doors in 1966 with a single location in a north Fargo shopping center, our founders couldn’t have dreamed of the growth the company would have. For decades, having happy employees and happy customers has been at the heart of the organization. Our values — being a family, treating our customers well and making our community a better place — are at the core of all we do.

You have been a Montana community banker for many years. Tell us about your industry background, how you got into banking, and what Montana’s community bankers may not know about you.

Happy new year, 2021. Thank goodness the calendar has flipped over, and thank goodness for new beginnings.
What a wild and strange year 2020 was. We experienced a global pandemic and associated travel restrictions, unprecedented federal economic stimulus programs, lobby closures, wildfires, a presidential election, and high national unemployment. To say the least, the outgoing year was challenging both professionally and personally for each of us.

To say 2020 was a tumultuous year would be the understatement of the century. For bankers, it was an interesting year, to say the least. Most of us were flooded with the liquidity we desperately lacked just a few months prior. Real estate departments and title companies have wilted under the weight of non-stop re-finances and purchase money loans as real estate continued to trade at unprecedented levels. Interest rates hit rock bottom, and we are facing management decisions covering unfamiliar topics. Interesting times, indeed.