Correspondent Blog

Most community bankers manage their lenders by loan volume, loan count and credit quality.  Few community banks look at the client level contribution to overhead or the risk-adjusted return on capital (RAROC) for each lender’s portfolio profitability .  We analyzed one lender’s portfolio of 146 relationships, and a very uneven picture emerged.  This picture is…

Community banks have long debated whether profitability is driven by pricing discipline, balance sheet optimization, or credit selection. While each of these factors matters, analysis of client-level profitability across thousands of commercial relationships tells a more decisive story: bank profitability is not built through isolated transactions; it is built through relationships largely characterized by multiple…

In 1963, American Express rolled out an initiative of embossing “Member Since xxxx” on its credit cards and marketing material to signify customer loyalty, relationship longevity, and prestige of brand. Several other banks, including Wells Fargo, have followed suit with similar success. A member tenure program signals recognition, belonging, and continuity. In this article, we…

Over the last few months, we have been hosting dozens of banks to lender lunches across the country.  At these lender lunches we discuss credit and pricing trends, deposit gathering strategies, loan pricing and structuring, and fee generation opportunities for community banks.  While we will author a separate article about what we heard from community…

For any business to succeed, managers need to understand their competitive landscape. What the competition is offering, delivery channels, pricing methods, and service levels helps community banks differentiate their offering and enhance their competitive advantage. Unfortunately, the competitive analysis for the broadly defined banking industry is challenging to understand because of the rapid innovation in…

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…