2024 Journal of Community Bank Case Studies

FIRST PLACE: Commonwealth University of Pennsylvania THIRD PLACE: Southeastern Louisiana University

Asset and Liability Management (ALM) Asset and liability management, ALCO committee, and its importance Asset and Liability Management (ALM) allows b1Bank to mitigate key risks like interest rate fluctuations and liquidity constraints. b1Bank’s policies ensure that the bank meets all obligations in times of financial stress without unfavorable asset sales, regulatory compliance, and stakeholder confidence including regulators, investors, and depositors. The proactive ALM practices of stress testing and scenario analysis boost efficiency and profitability by optimizing capital use and aligning funding strategies with the bank’s risk appetite. b1Bank’s ALCO committee, which includes President and CEO Jude Melville, CFO Greg Robertson, and other highly experienced professionals from the banking, business, and regulatory sectors, brings a diverse background to its operations. This committee addresses risk management from multiple perspectives, enabling them to make well-informed financial decisions and communicate them effectively to bankers. Liquidity planning post-closure, contingency funding plan, borrowing lines testing Following the 2023 bank closures, b1Bank revised its liquidity management approach to enhance financial stability and adapt to new regulatory and market conditions. One includes participation in the Bank Term Funding Program (BTFP). In response to the temporary drop in their liquidity ratio due to the securities pledged in the BTFP, b1Bank chose to maintain excess cash reserves of $150 million on their balance

...most people view banks as a utility, like the power or water, where they are just expected to be there. A bank is not noticed or thought about unless there is a problem.

sheet. Leveraging underwater securities to increase cash reserves allows the bank to enhance its Federal Home Loan Bank (FHLB) capacity and provide a readily available liquidity buffer (Robertson et al, personal interview, 21 Mar 2024). b1Bank annually conducts rigorous tests of its contingency funding plan to ensure that all the accessibility of identified liquidity sources during times of stress, beyond mere procedural adherence (Robertson et al, personal interview, 21 Mar 2024). The bank simulates various stress scenarios that could impact different parts of the balance sheet, thereby testing the robustness of its liquidity plans. Moreover, b1Bank adopted a more aggressive and integrated funding strategy in 2023 post-crisis. The strategy focuses on a dynamic deposit campaign coupled with the strategic management of broker deposits and other funding sources. The plan allows greater operational flexibility to optimize the bank’s

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