23 Hoosier Banker August 2015 balance sheet elements, like loans and deposits, is an ongoing process that precludes the non-strategy of waiting on the sidelines for rates to rise. The creation and maintenance of a stable, predictable cash flow stream can be a community bank’s best defense against rising rates, and the right cash flow distribution doesn’t happen all by itself: It has to be built and managed. When carried out effectively, a strategy that spreads cash flows throughout future periods is one that does not require speculation, but it does require a bit of planning. A manager who utilizes the various security selection alternatives at his or her disposal in order to foster those stable, predictable cash flows is ready for any interest rate environment. If rates begin to rise, the liquidity elements are available to provide transactional ammunition with which to participate in a higher-rate environment. If rates don’t rise, longer-term cash flows deployed in higher-yielding elements, like tax-free munis help maintain yield during rate troughs. If something happens in between, amortizing elements ‒ such as the right kind of mortgage-backed securities ‒ provides that steady, monthly drip of principal and interest, while avoiding 2015 BSA/AML Compliance School Graduates of the Indiana Bankers Association’s 2015 BSA/AML Compliance School, held June 2-3, gather at the IBA offices. Shown left to right are (row 1): Ashley West, MutualBank, Muncie; Stephanie Fisher, Horizon Bank, NA, Michigan City; Karen Loehr, German American, Jasper; Erin Noakes, Logansport Savings Bank; Jennifer Peveler, United Bank, Evansville; Denise Maines, Salin Bank, Indianapolis; Johanna Downey, Kentland Bank, Lafayette; Chris Crabb, Bank of Wolcott; Jessica Hanger, Harding Shymanski & Company PSC, Louisville, Kentucky; and Katie Browning, First Bank Richmond, NA; (row 2) Diana Booker, First Federal Savings & Loan Association, Greensburg; Malinda Pyles, Home National Bank,Thorntown; Cheryl Walker,Terre Haute Savings Bank; Renee Reed, Lafayette Bank & Trust, a division of First Merchants Bank, Lafayette; Jodi Wynn, First Federal Savings Bank, Rochester; Amber Noble, First Federal Savings Bank, Rochester; Deborah Moyars, Farmers & Merchants Bank, Boswell; Jan Jones, First Internet Bank of Indiana, Indianapolis; Lanie Schmitz, First Savings Bank, Clarksville; Jeni Royalty,The Farmers Bank, Frankfort; Debbie Wilson, Springs Valley Bank & Trust Company, Jasper; Diann Verkamp, Springs Valley Bank & Trust Company, Jasper; Amy Shepherd, State Bank of Burnettsville; Jan Lord, State Bank of Burnettsville; and Rise Buzzard, First Federal Savings Bank, Huntington; (row 3) Lisa Herd, First Federal Savings & Loan Association, Greensburg; Tim Dubach, Bank of Geneva; Sarah Beck, German American, Jasper; Deanna Maller, Crossroads Bank,Wabash; Katie Sweeney, Farmers & Merchants Bank, LaOtto; Lynette Lafuse, First Bank Richmond, NA; DeeAnn Hammel, First Federal Savings Bank, Huntington; Judy Yust, Salin Bank, Indianapolis; Jessica Sawyer, First Savings Bank, Clarksville; Joshua Riggins, Farmers and Mechanics Federal, Bloomfield; Peter Prichodko, First Merchants Bank, Daleville; Lisa Kizer, First State Bank of Porter; Lil Konermann, Peoples Trust & Savings Bank, Boonville; Ashley Langdon, First National Bank, Cloverdale; Sara Zolman, 1st Source Bank, South Bend; and Lisa Williams, 1st Source Bank, South Bend. Cletus Bulcher, First Bank of Berne, was not pictured. the damage to current income that characterizes hyper-liquidity. Investment decisions, like pretty much all decisions, are made in a setting of incomplete information. The missing information is usually unknowable, because it is derived from events that have yet to occur. That information will never be available. If it were, the appropriate course of action would be obvious, and no decision would be necessary. Until that happens, having a wellreasoned, prudent and methodical plan of action that is flexible enough to adapt to changing conditions is your best bet. Actually, that’s not a bet at all. That’s a strategy. t Video Bonus: The second video of the IBA Instructional Video Series is available. “Online event registration” explains in simple terms how to sign up for various IBA events, including schools, seminars, webinars and large-scale offerings, such as the IBA Annual Convention. The video is posted on the How-To Instructions page of the IBA website, available in the upper right corner online at: indianabankers.org/about. Or access the video through Hoosier Banker Digital at indianabankers.org by clicking on the red YouTube arrow. For questions for more information, please contact IBA’s Tracy Wainscott, IT and facilities manager, at 317-387-9380, email: twainscott@indianabankers.org. t Online Event Registration
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