Too Much of a Good Thing? Why the Recent Surge in Low Cost Deposit Funding—and What to Do About it Now

by William J. McGuire, President and CEO
McGuire Performance Solutions

You would think that unprecedented growth in the lowest cost footprint deposits on record would be viewed with jubilation by financial managers at institutions of all sizes. But unlike Mae West—for whom too much of a good thing was supposedly viewed as good—most bank and credit union managers are focusing on the excess of deposits relative to high margin investment or lending opportunities. A pity I say, because the current deposit situation is, in fact, a golden opportunity.

This article outlines how the surfeit of deposits came to be, provides guidance on how to identify traditionally motivated deposits from hot money, considers the likely path of deposits when interest rates eventually increase, and discusses deposit strategies to undertake now to succeed in the current too-much-of-a-good-thing environment. More >

The Auction Advance: The Seattle Bank’s “Silent Auction”

by John P. Biestman, CFA, Director of Business Development
Federal Home Loan Bank of Seattle

One often associates an estate, charity, or even a livestock auction, with the cry of the auctioneer or the pounding of the gavel. In the case of the Seattle Bank’s Auction Advance, however, your regular perusal the “Rates” page on the Seattle Bank’s website offers access to highly competitive short-term rates.

Simply defined, the Seattle Bank’s Auction Advance is an advance that is funded through a sale of short-term consolidated obligations or discount notes that are often at a lower rate of interest than short-term fixed-rate advances.’ Recent auction levels have accorded our members access to funding that is almost 10 basis points below posted short-term advance rates. As an example, last week’s earlier auctions yielded available levels of 22 basis points for 28-day maturities and 30 basis points for 182-day maturities. More >