Correspondent Blog

We are not big proponents of loan pricing grids. We find pricing grids to be rudimentary – lacking the myriad of inputs that distinguish risk-adjusted return on capital (RAROC), such as acquisition and maintenance costs, fees, interest rate, credit risk, and cross-sell opportunities (some of the most important drivers of banking profitability).  We believe that…

Community bankers need actionable recommendations.  For example, if your bank has a higher efficiency ratio, lower fee income, or higher loan prepayment speeds than its competitors, then advising management to decrease efficiency ratio, increase fee income, or reduce loan prepayment speeds is not actionable.  How does management achieve those recommendations?  We are big proponents of…

We have the privilege of using our risk-adjusted return on capital pricing (RAROC) model, and various other profitability tools, to analyze individual and multi-bank performance.  Our data and analysis strongly suggest that banks that can measure instrument and relationship-level performance for return on assets (ROA) and return on equity (ROE) can improve simply by reallocating…

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…

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…

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…