Correspondent Blog

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…

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…

For inspiration in banking innovation, we often look to other industries. Honkook Kim and his Gentle Monster Brand is a perfect example. With financial hardship, competition from dominant players, and a startup budget, Gentle Monster faced many of the same challenges as a community bank. Instead of thinking traditionally, Gentle Monster pursued a strategy of…

An inverted yield curve, continued bank failures, and the desire to manage risk and offer clients higher service are all factors that are driving more community banks to adopt a loan hedge program.  Community banks’ main goals are to diligently support their local communities and make an acceptable return on capital in these challenging times….

The “Three-Body Problem,” currently made popular by our new favorite author, Cixin Liu, is the concept of instability when three similar-sized celestial objects interact. The problem is currently unsolvable. Banking has a similar physics problem when management juggles strategy, risk/profitability, and customer behavior. This article will discuss the challenge of managing three potentially opposing forces…

In a few short months, stronger economic data (higher GDP, stronger job market, and stubborn inflation) changed the market’s and the Fed’s view on the future path of interest rates. The market and the Fed are now aligning on only one rate cut in 2024 – obviously this will change over the course of the…

Bankers often overlook how much money is stored in digital wallets away from their bank. While the amounts are relatively small on an individual basis, they are massive in aggregate. While some of these are stored at the banking-as-a-service banks such as Goldman Sachs, or The Bancorp, many digital wallets, like Starbucks, reside at the…

Robert Wilmers, the CEO of M&T, used to write one of the best bank investor letters. With Mr. Wilmers retired, we are down to two “must read” letters: Berkshire Hathaway’s and JP Morgan Chase’s (JPM). We feel that as community bankers, we can learn from Jamie Dimon (Chairman and CEO of JPM) and from Warren…

Now that 1Q is in the books, if you are a public bank, you may have an earnings call coming up in some form. We want to better prepare you and get you ready for bank earnings call questions. To do that, we wrote a Python script to analyze a representative sample of earnings call…

We estimate that the average contractual loan commitment for term credit at community banks has decreased from just under five years in 2022 to just under three years currently. The primary reason for this shift is not a change in borrowers’ business models or banks’ preference for repricing term loans, but rather, borrowers’ decision to…

The 2024 annual Consumer Banking Association conference (CBA Live) took place in Washington, D.C., over three days last week. Overarching topics (by word count and sentiment) include the imperative for greater consumer protection, the required more significant effort to fight fraud, rapid innovation (particularly in A.I.), and the need to keep evolving your workforce. We…

The Federal debt is already impacting banking. Cyclical economic changes are driven by business cycles. These changes may occur swiftly, such as interest rate changes, inflation changes, or unemployment rate changes. Cyclical changes and their impact on the economy dominate the news and the attention of corporate boardrooms because they are immediate and need to…