Correspondent Blog

Areas of improvement in banking abound, which is part of the problem. Banks often struggle with how and where to focus their resources to produce innovative products and services. Do you tackle digitizing the consumer loan process, or do you push into cryptocurrencies? Do you introduce a new treasury management product or upgrade your online…

Every year we analyze the industry’s cost of funding earning assets (COF) and track how community bank’s COF behaves relative to larger banks and how COF moves with various indices. The information is critical for all banks as it is helpful to understand how sensitive your balance sheet is to rising or falling rates. We…

Examining Bond Portfolio Trends: Second Quarter 2021 Beginning in May 2012 we started tracking  portfolio trends of our bond accounting customers here at the Correspondent Division of SouthState Bank.  At present, we account for over 130 client portfolios with a combined book value of $15.8 billion, or $122 million on average per portfolio.  Twelve months…

Powell on Capitol Hill and June CPI Headline the Week This week Chair Powell will address committees in both houses of Congress as part of his semi-annual Humphrey-Hawkins testimony.   While we don’t expect more tapering details we could get a clearer view of the Chairman’s thoughts on the inflation threat and the implications for rate…

A funny thing happened on the way to the expected 2% 10yr yield in the second half of 2021. It hasn’t happened yet, and it doesn’t look like it’s going to happen anytime soon. Remember the story early in the year was that with the vaccination roll-out going well, and service-related businesses reopening in larger…

We looked at the average NIM and ROE for all operating banks in the country (4,973 of them) for the past ten years. We started with the thesis that the wider a bank’s NIM is, the more profitable the bank would be. We also looked at the NIM and ROE for almost 11,000 defunct banks…

There appears to be some complacency regarding the Federal Reserve’s monetary policies in 2021 and 2022. The ten-year Treasury, around 1.35%, may be sending a short-term signal on liquidity versus a long-term prediction on inflation.  Community bankers need to factor in the high probability (50% to 75%) that tapering will start in 2021 and not…

The Treasury market is definitely trading like the best days of the economic recovery may have already past. The latest clue to that is the ISM Services Index for June posted a 60.1 which indicates an expanding sector but it disappointed against a 63.5 expectation and 64.0 print in May. Higher prices, it seems, are…

The reality is bankers are fantastic problem solvers. It’s in their blood. The problem is that, as an industry, we leave much to be desired about DIAGNOSING the right problem. Present a challenge to a banker, and they will quickly switch to solution mode without first analyzing what the issues are. They don’t fully understand…

We have published multiple articles, economic bulletins, and podcasts on inflation (including here and here).  In this article, we will not make a case for or against the market’s expectation of inflation.  We will assume current gauges such as CPI and PCE accurately reflect the current inflation environment (many arguments can be made for why…

Personal Income and Spending Numbers Finish the Week This morning we get personal income and spending numbers for May and while those will certainly get some attention, the inflation numbers in the report will also get their fair share of scrutiny. The income and spending numbers have been buffeted in the last few months from…

The Fed leadership always prefers a unified picture of its members to its policies. Sometimes, however, some skirmishes break out over those policies and other desired directions and I think we are in the midst of such a time.  The Fed governors are still very wedded to the idea of the recent inflation thrust as…