Quarterly Asset Liability Management Considerations

The report analyzes the 4Q25 ALM landscape following the Fed's 75bps of rate cuts in late 2025, noting the un-inversion of the yield curve and its impact on bank margins. It highlights the transition from rising funding costs to managing declining asset yields and persistent deposit migration to higher-yielding alternatives.

Key Takeaways

• 1.The Federal Reserve resumed rate cuts in Q4 2025, with 25bps reductions in both October and December meetings.
• 2.The yield curve (Fed Funds to five years) has un-inverted for the first time in three years, providing margin optimism for depositories.
• 3.Asset yields are facing pressure as floating rate assets react to rate cuts, while legacy fixed-rate assets provide a fading tailwind.

Table of Contents

• 4Q25 Asset Liability Management (ALM) Landscape
• Considerations for 4Q25 ALM Modeling & Tactics
• The Fed Cut Rates, While Expectations Accelerated Slightly for Further Cuts
• Yield Curve Shape Expectations Little Changed
• Dot Plot: Fed + Market Expectations
• Funding Repricing
• Deposit Flows Stabilizing, But Alternatives Still Increasing Share
• CD Roll
• Asset Yield Repricing
• New Loan Yield Origination Expectations
• Piper Sandler Disclosures

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