Correspondent Blog

If you were ever to pay attention to the consumer, the time is now. Even if your bank has limited consumer exposure, given that the consumer composes approximately 66% of the US economy, and, according to the yield curve and market pundits, we all could be staring into a recession. Paying close attention to consumer…

Since our last update on 2Q credit HERE, 3Q commercial loan pricing trends start with a better economic picture as higher than-planned growth and softer inflationary data have changed part of the market’s outlook. The fear of recession has decreased in 3Q, and the new primary concern shifts back to interest rate risk and deposit…

When banks talk about a “sidecar,” they speak about a modern, lightweight, real-time core system alongside a traditional core. The concept is that a “big bang” type conversion will never happen, so a slower, controlled transition is the path to getting a more modern core architecture. In this article, we argue why banks should consider…

We estimate that approximately 50% of the community banks in the industry have a credit department that exerts influence or sets standards on loan pricing.  While this process appears appropriate and benign, it increases credit risk, decreases bank profitability, and undermines the proper function of bank credit/yield tradeoff.  Many bankers feel that since credit officers…

Seasoned bankers call it “The Distributor Tactic,” and it is a little-discussed technique used for ages in banking to speed up the sales cycle to land commercial bank deposits and treasury management accounts faster. The key to this tactic is to know that very few commercial checking customers utilize any medium or high-value treasury management…

The banking industry’s return on equity (ROE) was 14.42% as of Q1/23 and so far is looking materially lower for Q2/23. How should community banks target and compare their ROE to the industry and their peer group, and what defines a top-performing bank?  Most importantly, is there an ROE level ensuring a bank remains long-term…

The bigger risk to community banks’ business model is not a moderate recession induced by aggressive interest rate increases by the Federal Reserve.  Instead, the more painful scenario for the banking industry is the following: no recession, short-term interest rates holding steady in anticipation of inflation reaching target rates, and a prolonged inverted yield curve….

Maybe you saw Oppenheimer over the weekend, maybe it was Barbie, or perhaps you did the “Barbenheimer” thing and did both. Maybe you opted for Mission Impossible – Dead Reckoning, Part I. No matter your choice, there was a clear winner: Barbie. Film quality aside, there have been few movies in the history of the…

If you are looking to see the future of how banks will utilize artificial intelligence (AI), look no further than marketing. Even if you are not a bank marketer, this article is worth a read to understand AI’s capabilities. Bank marketing AI is ground zero to showcase the transformation that is already taking place. We…

Our previous article discussed how the banking industry is taking advantage of interest rate swaps to offer borrowers lower rates, allowing banks to earn higher yields, generate substantial fee income, and protect deposit relationships.  Of the largest 250 banks, 90% are using interest rate swaps, and because these largest 250 banks hold 83% of all…

Next week, FedNow goes live, ushering in the next era of faster payments. Some 57 financial institutions will start with FedNow, including about 42 banks (plus a handful of core systems providers and fintechs). FedNow joins The Clearing House, which has offered real-time payments (RTP®) for the last five years. Banks are about to win…

With an inverted yield curve, borrowers have a pricing advantage to lock in long-term fixed-rate loans, while lenders strongly desire to limit loan duration.  One possible solution to this dichotomy is for banks to offer interest rate swaps to hedge individual loans.  This article will review domestic banks’ adoption of interest rate swaps.  Next week’s…