Here is Our Digital Banking Playbook

You might need a new digital banking platform. Chances are your bank chose your current digital platform because it was easy. Maybe your core vendor provided it, or perhaps you were sold a platform by a vendor you happened to meet at a conference. Likely, your vendor has little relationship to your strategic needs and…

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Statistical Evidence on What Hurts Bank ROE

FDIC-insured “Problem Banks” list has been increasing over the past two years.  For the community banking industry (banks under $10B in assets), this is particularly troubling as the number of community banks earning negative return on equity (ROE) spiked to 237 institutions in Q1/24, or 5.71% of all community banks. Bank ROE is now a…

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S&P Global’s CBC Annual Banking Conference – Here are the Key Insights

S&P Global’s annual Community Banking Conference (CBC) should be on every executive banker’s agenda. This banking conference is designed to highlight top performing banks, their strategies and tactics. The 2024 conference covered a wide range of topics that matter and has the highest ratio of top-performing banks to attendees of any conference in the industry….

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Here is the Future of Bank ROE and What to Do About It

The average return on equity (ROE) for the banking industry declined to 11.10% in Q1/24 (a 23 percent decline in the last year). For banks under $10B in assets, ROE declined to 10.53% in Q1/24 (an 11% decline in the last year). The typical published analysis considers the industry in aggregate which conflates the challenges…

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ERC for Banks – Told You Are Not Eligible? Find Out

In discussing ERC (Employee Retention Credit) with banks over the last year, we discovered a common theme. Most banks have either been told they are not eligible or come to this conclusion on their own because they did not experience a decrease in revenues. Many banks performed better than expected during the pandemic due to…

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Get This Fixed vs. Floating Loan Calculator to Help Borrowers

Most borrowers are implicitly expressing a view that interest rates will be lower in the future than the current market expectation. This view is reflected by a sharp decrease in the average contractual loan commitment term at community banks and an increase in floating vs. fixed rate structures. Borrowers are choosing short-term financing in anticipation…

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Office Lending – Here is Why It is Not as Bad as The Market Thinks

Between now and the end of 2027, it is estimated that $2.2T of office loans is coming due. Much of this product lies on banks’ balance sheets. A high percentage of those office loans on banks’ balance sheet are balloon structures where the bulk of the loan’s principal is due. Equally worrisome is the large…

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Reduce Credit Spreads to Increase Return

In last week’s article (here), we discussed why category and geographic diversification may be unfeasible for many community banks.  We concluded that after a community bank sets limits on loan categories, the added benefit of geographic or loan category diversification is nullified.  We discussed three main reasons why community bank diversification by geography and loan…

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Why Diversification Fails at Banks

Bankers have been taught to diversify their loan portfolio to reduce idiosyncratic (individual borrower) risk and to stabilize earnings. The thinking is that diversification-induced lending leads to banking resiliency. We believe that while lending diversification leads banks to lend more in normal times (especially for banks over $50B in assets) and does benefit the general…

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10 Lessons We Learned at the Nacha Smarter Faster Payment Conference

Last week, Nacha held its Smarter Faster Payments Conference in Miami, a significant event for over 1,800 bankers and vendors. With 142 presentations and panels, the content was tailored to the needs of every bank interested in payments. The major themes of fraud, artificial intelligence (AI), expansion of instant payments, open banking, and regulation were…

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Here Is the Latest Credit Data To Keep Your Bank Safe

As the risk of a recession gets pushed out by the market, so does the risk of credit. This is not to say bank credit is without risk, as higher rates, inflation, and a slowing economy have taken their toll. Three essential credit metrics – probabilities of default (POD), POD rate of change, and POD…

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What Banks Can Learn from the Republic Bank Failure

On April 26, 2024, Republic First Bank (DBA Republic Bank) was seized by state regulators and the long running bank drama came to an end.  With the assistance of the FDIC, Fulton Financial acquired certain assets, debt and deposits of Republic Bank. This first bank failure in 2024 is reported to cost the Deposit Insurance…

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