Helping Borrowers Quantify Volatility Risk

In a recent article (Here), we discussed how lenders might help borrowers decide if and when to refinance debt and why lenders, as trusted advisors, should have a borrower’s best interests as their primary objective.  We also addressed how lenders should compare a borrower’s refinancing costs now versus waiting, and we shared an Excel model…

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Labeling Customers To Boost Bank Marketing

If you are reading this, you are likely a high-performing banker. Like us, you are likely passionate about banking, looking to improve, and you are more quantitative than the average non-reader. While we suspect that supposition to be true, we really have no idea. Regardless of how you perform, the fact that we labeled you…

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Improving Strategic Planning – The Four Layers of Bank Strategy

A good bank strategy is a multi-layered cube. In this article, we present the four horizontal layers and then follow this article up with the vertical layers to round out the construction of the basic framework that can be used to set any bank’s strategic planning. The reality is that many banks fail to plan…

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When To Advise A Borrower To Refinance Their Loan

The most common question we hear from borrowers is, “Should I refinance my debt?”  This can be a difficult question for lenders to answer, but as a trusted advisor, every lender should understand the strategy, and the process to answer that question for every client.  We will address the knowledge that commercial lenders must have…

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The Impact of Last Week’s FOMC Meeting on Bank Lending

The Federal Reserve Chair, Jerome Powell, was clear last week that the central bank is highly likely to start reducing asset purchases in November and complete the process by mid-2022.  As shown in the dots plot, the FOMC members also expressed an inclination to raise interest rates next year (see graph below) – a shift…

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Is Your Bank Operating At The Right Capacity?

As we have discussed before, your bank is a manufacture of credit, liabilities, and fee services. Whether you know it or not, you have a certain production capacity for each.  In today’s current environment, some banks are running at full and even overcapacity while some banks are operating at a 50% utilization level. The question…

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How Growth Can Destroy Bank Performance

As we say – every bank must pay for growth. The most obvious case is when a bank hires staff to bring in and service new customers. People. marketing, branches, technology, capital, and many other items are all inputs or investments into growth. The need to grow is probably the single biggest driver for bank…

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Why Fixed Rate Loans Are Essential For Bank Performance

Competition for quality commercial loans is intense, and currently, the majority of borrowers favor fixed-rate loans for as long as possible.  We cannot blame borrowers for wanting to lock in financing costs at historically low index rates and low credit margins.  After all, the real economic carrying cost for these loans after tax and after…

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Optimizing The Credit Review Process

Once a loan is booked, it needs to be reviewed over time for changes in credit. The problem is that many banks have only one type of commercial loan review.  This standard review usually requires approximately eight hours of work from credit, loan administration, and management. When this effort is combined with data expense, the…

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Changing Commercial Loan Pricing To Manage Loan Average Life

One trick every bank lender should have up their sleeve is the ability to meet a client’s maturity and amortization targets but limit the risk of the bank by adjusting the rate on a loan. This tactic is especially germane in today’s market as certain sectors in certain cities are likely reaching the end of…

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Here is a Better Way To Stress Test Borrower Financials

Every community bank has a set of financial statement reports and ratio analyses to assess underwriting and credit risk.  The advent of credit spreading software such as CreditQuest has made this job very easy.   However, few banks take the extra step of modifying their reports and analysis based on the current economic cycle and market…

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How To Use the “Pricing Multiple Tactic” in Bank Product Marketing

Show a potential banking customer information, and their brain will quickly try to organize and synthesize the information. The easier the information is to organize, it turns out the more the viewer will like your ad. Our own Dr. Chris Janiszewski from the University of Florida and Dr. Dan King of the University of Singapore…

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