Correspondent Blog

There have been few times in modern memory when small businesses and middle market companies faced so much uncertainty in the market. With recent DOGE government spending cuts, escalating trade tensions, immigration reform, and the implementation of tariffs, U.S. businesses find themselves navigating complex economic waters. This week, for example, is a critical time to…

In a previous article (HERE), we discussed how a portfolio of commercial loans with various expected average lives resulted in different net present value (NPV) of income over a ten-year period.  Our analysis shows that an average community bank can expect $9.7mm NPV of income (about 1% ROA) on a $100mm loan portfolio when the…

Expected average loan life measures the amount of time that principal is outstanding on a loan.  This average life is driven by many factors, including amortization period, economic circumstances, nature of the loan and the expectations of the borrower, and most importantly, by contractual term and prepayment provisions.  The biggest surprise for many lenders is…

We work with hundreds of community banks across the country that utilize forward rate locks to decrease risk, increase fee income, and stave off competition from national and regional banks.  If your bank is not currently offering forward rate locks (in its various forms) to borrowers, you may be interested in how to incorporate such…

For the last few years, SouthState Bank Correspondent Division has been hosting lender lunches across the country. At these events, we invite local executives and lenders to discuss what drives community bank performance, we highlight challenges and opportunities for community banks, bankers have a chance to network over a short period (and eat lunch), and…

A credit tenant loan (CTL) is typically structured as a loan secured by the real estate pledged as collateral, with or without personal borrower guarantees, and, most importantly, the obligation of a credit-rated tenant of that real estate to pay rent.  These loans have both bond and loan qualities.  They are like a bond in…

Should borrowers pay commercial loan points to lower future interest payments? Loan or mortgage points are upfront fees paid by the borrower to the lender to reduce the interest rate on a loan or mortgage.  For example, assume that a borrower is considering a loan, structured as a 25-year amortization, due in ten years, at…

Over the last few years we have published various articles on the pros and cons of commercial loan prepayment provisions, how those prepay provisions impact marketing and sales, loan prepayment speeds, and the relationship between prepayment provisions and customer return on equity (ROE) (some of the recent articles are here, here, and here).  We are…

In a previous article, we discussed how a loan’s maturity and amortization impacts credit risk and profitability from the bank’s perspective (HERE). In that article, we pointed out that the average commercial loan term at community banks has been decreasing and is now between 3.5 and 4.5 years.  Much of the explanation for the decrease…

We recently worked with a community bank in the Southeast that wanted to win a piece of credit business for a manufacturing company.  The manufacturing company had a long-time relationship with a national bank and the community bank lender was struggling to make inroads with the company’s CEO and owner.  The CEO finally agreed to…

In Q2/24 the average return of asset (ROA) for community banks (under $10B in assets) was 1.08%.  But within the community banking sector, performance varied among banks significantly and a large swath of banks need to improve ROA.  While the average ROA was 1.08%, approximately 5.7% of community banks reported negative ROA.  Another 16.2% of…

Commercial lending is more competitive than ever. To effectively differentiate their services, commercial lenders will need to be thought leaders, understand their market and industries, and provide more insightful advisory services.  Commercial lenders can differentiate themselves by running return on investment (ROI) scenarios for their borrowers to help them make better financing decisions – especially…