PUTTING YOUR INSTITUTION’S BEST FOOT FORWARD FOR A LOWER-RATE ENVIRONMENT By Kent Musbach, Senior Vice President, and Marc Gall, Senior Vice President and Asset/Liability Strategist, BOK Financial Capital MarketsA fter transitioning from near-zero rates to one of the fastest rate-hiking cycles we’ve ever seen, financial institutions are now in the position of waiting for rates to fall. As we wait for the Fed’s next move, it’s important for management teams to understand how lower rates will impact their institutions’ income statements and take steps to better position themselves for the lower-rate environment likely to come. Many Financial Institutions Funding Their Balance Sheet Short First, let’s consider where we are now. Federal and consumer spending have been driving economic growth, despite the higher interest rates. This growth, in turn, has the markets thinking the Fed will delay rate cuts until later this year or possibly into 2025. Funding short has not yet worked out, with funding continuing to roll at nearly the highest cost on the curve. Coupled with continued deposit migration within the bank, cost of funds is continuing to rise at many institutions. 8 NEBRASKA INDEPENDENT BANKER
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