MAY 27, 2016
FMS Quick Poll: Investment Portfolios
By Financial Managers Society

With interest rate uncertainty continuing to flummox many community institutions and growth prospects still in short supply, questions surrounding how to manage balance sheets in this challenging environment have rarely been more critical.

In a pair of recent articles for the FMS Upda... and an ensuing white paper, we asked several ALM experts to share their thoughts on how community institutions should be positioning their balance sheets right now. So it only made sense that our next step would be to take the question directly to the membership in an FMS Quick Poll.

Asked what percentage of their balance sheet is currently in their investment portfolios, about one-third of the nearly 240 respondents indicated 11-20%, while an almost identical number put the percentage at 21-30%. While both the 0-10% and 31-40% ranges also garnered double-digit responses just above 10% each, every specified range above the 40% level registered 5% or less.

In terms of how members classify the investments making up those portfolios, the results were overwhelmingly and not surprisingly in favor of available-for-sale (AFS) over held-to-maturity (HTM), with nearly two-thirds of respondents indicating that 91-100% of their portfolios are AFS instruments and 70% noting that HTM issues make up only 0-10% of their investment portfolios.

In terms of demographics, respondents were equally represented across the asset size spectrum, with roughly one-quarter of participants from each of four categories – under $250 million, between $250 and $499 million, between $500 and $999 million and over $1 billion. Banks and thrifts made up 80% of poll respondents, while credit unions comprised the remaining 20%.

Investment portfolio trends were fairly consistent across both banks and credit unions, with a few notable exceptions. For example, while 30% of banks under $250 million reported having 0-10% of their balance sheets in the investment portfolio, the corresponding figure for credit unions in this asset category was 0%. On the opposite end of the spectrum, 20% of the largest credit unions ($1 billion +) reported HTM securities making up 80% or more of their investment portfolios, while their banking counterparts at this asset size were steering completely clear of HTM issues at 0%.

In some areas, meanwhile, asset size proved to be a diverging factor regardless of charter. For example, while 22% of institutions under $250 million had 0-10% of their balance sheet in the investment portfolio, only 12% of those $1 billion and more and 7% of those in the $500-$999 million range kept a similarly low percentage in their portfolios.

Thank you to all of those FMS members who participated in this Quick Poll.