Correspondent Blog

The Fed just finished their July meeting and there are many banker that will be further waiting for rates to drop. By the same token, many borrowers are grappling with the decision of when to lock their permanent financing. Some borrowers are choosing short-term financing in anticipation of the Federal Reserve embarking on an interest…

Bank deposits are evaluated by the investment market and industry analysts on how non-correlated they are to interest rates. We are concerned with growing beta as it is an indication of poor deposit management and/or a challenging interest rate environment. In this article, we evaluate and test four deposit strategies to see which performs the…

We recently published an article (here) that demonstrated how return on equity (ROE) (and return on assets (ROA))  were the main predictors of community banks’ survivability.  Conversely, community banks’ NIM and credit quality were not, in themselves over the last four years, predictors of which community banks survive or become acquisition targets.  Community banks’ average…

We often talk about “frictionless banking,” making it easy for the customer to open an account or add deposit balances. However, as banks design future products, they should consider taking into account the “Ikea Effect” to help increase customer lifetime value. In this article, we explain what the Ikea Effect is and how to apply…

Bankers should consider the shape of the yield curve when structuring, marketing, and pricing loans to maximize return and reduce risk.  The shape of the yield curve can also help lenders understand borrowers’ needs and better position the bank against competitors. Definition of The Yield Curve A yield curve plots interest rates with different maturity…

For decades community banks bolstered ROA/ROE by booking 5-year fixed-rate term loans funded with short-term deposits – called a carry trade.  The carry trade has historically worked for banks because interest rates were in a long-term pattern (approximately 40yrs) of decline prior to the pandemic, resulting in improving NIM for most banks. What some bankers…

On July 4th, the President signed into law his expansive policy and economic package that will bring sweeping changes to banking and America’s finances. In this article, we breakdown not only where the Big, Beautiful Bill (HR 1) helps and hurts banking, but we provide strategies on how to take the best advantage of these…

It is not every day that you get to own a portion of a banking vendor without putting capital in upfront. ModernFi, a company that provides reciprocal deposits providing access to insurance through network banks (subject to certain conditions) and competitor to legacy deposit networks, is in the process of building a bank-owned consortium to…

Through most of 2025, the Fed Funds futures market has been predicting multiple imminent interest rate cuts by the Federal Reserve. Many banks have bet their budgets on a lower cost of funds and better credit performance. While this market was consistently forecasting rate cuts just a few months in the future, those cuts did…

Every bank has some percentage of deposits that they “hand” or bespoke price. Exception pricing occurs when a rate sensitive customer requires a higher rate to maintain or grow their deposit balances at the bank. Deposit exception pricing is both an art and a science and, in this article, we discuss five tactics that will…

We are not big proponents of loan pricing grids. We find pricing grids to be rudimentary – lacking the myriad of inputs that distinguish risk-adjusted return on capital (RAROC), such as acquisition and maintenance costs, fees, interest rate, credit risk, and cross-sell opportunities (some of the most important drivers of banking profitability).  We believe that…

The banking industry’s average return on assets (ROA) for Q1/25 was 1.16% – an improvement from the prior quarter and the one before that.  Community banks between $100mm and $10Bn in assets recognized 1.13% ROA.  Community banks are facing several primary challenges.  If your community bank management team aims to improve your bank’s financial performance,…