Correspondent Blog

Most banks have still not committed to RTP® or FedNowSM for their commercial customers – a bank’s most significant single profit driver. Most banks ignore instant payments or are still worried about fraud. The irony is that of the estimated $25 trillion in B2B payments in the U.S., 33% are still made via check that…

On September 7, 2023, the FDIC released its banking profile.  This quarterly publication provides a comprehensive financial results summary for all FDIC-insured institutions (4,645 commercial banks and savings institutions insured by the FDIC).  While banks under $10B in assets comprise 97.8% of all banks by number, those same banks comprise only 14% of all banking…

We have discussed the importance of bundling or packaging deposit account services to speed up customer choices, increase profitability, and enhance deposit performance. However, many banks still offer just two choices, whereas if they offered three, they would increase profitability. In this article, we examine how behavioral deposit pricing works and how to use it…

We analyzed the loan performance (return on equity, loan yield, fee income, and loan size) of hedged borrowings in a large group of community banks and compared this to the community bank industry averages.  We conclude that loan-level hedging offers community banks a strong competitive advantage in the current interest rate and competitive commercial loan…

One challenge in banking is that many banks know data is the bank’s future but lack a data framework. As a result, their progress in leveraging data and machine learning is slow. In this article, we explore what a data strategy looks like, how that translates into tactics, and how the “Next Best Action” should…

Bankers need to consider the term structure of rates, also known as the yield curve shape, when structuring and pricing commercial loans to maximize return and reduce risk.  Many bankers and borrowers are convinced that a recession is imminent, but the current term structure of rates does not necessarily establish this conclusion.  The yield curve’s…

If one product is the future of banking, it is treasury management. With a competitive offering, it will be easier to attract the small business and mid-sized companies that a bank needs to fuel its core growth. In this article, we detail the five steps to building a treasury management strategy, provide some tools to…

Earlier this month, on August 7, 2023, Moody’s Investor Services (“Moody’s”) published a banking sector review.  That publication was referenced in the media as a US bank rating action, with a downgrade to ten larger banks (and a negative outlook to 11 other larger banks). However, that publication, directly and indirectly, identified three discrete risks…

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…