Correspondent Blog

During first-quarter updates, many US banks amended their expectations because of economic uncertainty and a possible business downturn. How should community banks interpret the current economic uncertainty, the possible reset to the business environment, and how should managers address risks? Economic Uncertainty We considered two bellwether indices that measure policy-related economic uncertainty.  The indices measure…

When it comes to bank performance, there are lots of metrics to manage. The two that we would submit are the most important, are risk-adjusted return on capital (RAROC) and customer relevancy. While we have spoken at length about managing loans, deposits and customers around RAROC, in this article we focus on measuring relevance. Producing…

When it comes to bank acquisitions, there are metrics that matter. We analyzed all community banks acquired from 2020 to the end of 2024 (approximately 600 banks), and we measured those defunct banks’ performance compared to surviving banks.  The defunct banks were all under $10Bn in assets and our hypothesis was that return on assets…

In the quest for deposits, one successful tactic at top-performing banks is to target the right types of customers. While desiring to bank everyone in your community is noble, it can be a poor use of resources. Some customers offer better returns because they use more banking services and have more deposit balances. Not to…

We compared community bank profitability on hedged commercial loans to those same banks’ reported return. The goal of our analysis was to investigate if community banks can improve their performance by utilizing a hedging program.  We want to caution readers that our analysis may not extend to all banks, borrowers, or regions, but the results…

It is a long held notion in banking that you only move deposit rates when the Federal Reserve moves rates. However, if you think about this practice, it doesn’t make much sense in terms of a bank’s profitability. Markets are dynamic. Interest rates, and funding costs, move independently from the Fed.  In this article, we…

Many bankers are struggling to analyze the current business environment and need help predicting the future.  Community bankers are especially concerned about economic forecasts such as GDP, interest rates, inflation, consumer and business demand, and default rates.  The difference between a good decision and a bad one may not lie in spreadsheets or economic charts…

When a bank makes a loan, it’s stepping onto a multidimensional terrain of risk. Credit, interest rate, liquidity, optionality, legal and operational risk all interplay with each other to expose the bank, and the borrower, to a set of risk that can be visualized as a three-dimensional area. Given the current state of the economy,…

Customer profitability is often talked about but rarely understood. We analyzed the commercial loan portfolio of a regional bank to determine what products, scale, cross-sell opportunities, and expected life translates to profitability.  The results may be surprising to some readers. The granularity of this data reflects the state of the banking industry, and the lessons…

At present, we track 150+ AI agent platforms that households and business can use right now to manage banking products. While the public is currently focused on booking travel, restaurants and events, soon they will be using agents to optimize their banking. These agents can now compare different banking products, to include researching fees, and…

In previous articles (here and here), we discussed how a portfolio of commercial loans with various expected average lives results in different net present value (NPV) of income and return over a ten-year period.  We also identified ten variables that are responsible for extending the average expected life of a commercial loan. As we continue…

“Liberation Day” brought a 10% baseline tax on all imports plus a 15% to 49% tariff rate on a defined set of nations (below). The move shook the markets, threatening to upend much of the architecture of the global economy and fueled broader trade wars. The recent uncertain shifts in trade policies, particularly increased tariffs…