Correspondent Blog

Your bank is likely full of silos. Deposits rarely coordinate with Loans, Loans seldom talk to Mortgage, Risk is often on the outside looking in, and no one talks to Marketing until it is too late. These silos frequently prevent executing a single strategy, hinder communication, and interfere with collaboration. As a result, banks often…

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…

You oversee pricing your checking accounts and you are trying to decide between $10.00 per month, $9.99, or $9.95. Which one do you choose? In a prior article where we tested “charm” account pricing, where we showed that conversion rates were almost twice as high when we used a $1.99 price point for a product…

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…

Intelligent agents, or “agentic AI,” are poised to change the face of bank operations. At the same time, banks are striving to figure out how to employ generative AI (gen AI) in their operations; part of the answer lies in the intelligent agent. Like how the Internet and smartphones changed banking, these autonomous reasoning models…

How does a commercial loan’s maturity and amortization impact credit? Many credit officers would prefer to set shorter maturities for loan repayment terms.  The logic is that it is better for the bank to control the credit with a hard stop and revisit credit appetite at shorter intervals.  If credit conditions are appropriate, the bank…

Banking is woefully inefficient. There is a myriad of manual processes that take place everyday in banking driving up unit economics and causing the average bank to operate with a 77+% efficiency ratio. To be competitive in the future, banks need to be operating at an efficiency ratio of below 40%. Part of the issue…

In Q2/24 the average return on assets (ROA) for community banks (under $10B in assets) was 1.08%, with an average ROE of 10.44%.  But within the community banking sector, performance varied among banks significantly.  We analyze the drivers of ROA for the community bank segment last quarter and consider what financial variables explain bank performance….

As a general statement, banks offer too many options for certificates of deposits (CDs). Consider that the average bank offers 12 different maturities, some “specials,” plus several different tiers of pricing within each maturity. We have seen banks with as many as 42 different CD options which is inefficient for every party. The problem is…

In Q2/24, the average return on equity (ROE) for the entire banking industry increased to 11.67% (from 11.11% in the previous quarter).  However, for community banks (under $10B in assets), the ROE declined to 10.44% (from 10.57% in the previous quarter).  When we analyze the causes of the decline in ROE for community banks we…

Is Copilot for Microsoft 365 (M365) worth it for banks? Microsoft’s integration of ChatGPT into its suite of apps has created a set of productivity tools that some bankers will instantly use. However, Copilot does come with a set of risks, one of which is that some bankers will only reluctantly use the product. This…

Most community bankers we talk believe they will get a boost to bank performance with declining short-term rates.  The thinking is that a lower Fed Funds rate will mitigate credit risk, spur loan demand and potentially soften competition for deposits, leading to wider NIM and more profitability.  Unfortunately, the empirical evidence shows otherwise.  While the…