Correspondent Blog

Many community banks are searching for ways to increase fee income, and many bank CEOs have concluded that fee income is a significant driver of revenue and profitability.  We argue that larger banks do not have an inherent advantage over community banks in generating fee income because of their scale.  Most fee income generated by…

Banks don’t respect the power of understanding customer lifetime value (CLV). It is the one performance metric with the highest correlation to long-term bank profitability, around 88%. It is more important than margin, cost of funds, non-interest income, and loan profitability COMBINED. Not only do few banks calculate it, but many banks also spend resources…

For decades community banks have structured fixed-rate loans with adjustable features – the most popular structure is a ten-year fixed-rate loan with a five-year reprice. With short-term interest rates expected to rise through 2022, many community banks are reconsidering their ALCO strategies.  What percentage of a community bank loan portfolio should be fixed-rate, and what…

While every bank talks about delivering on their service promise, only about 35% of banks have a formal effort and track key performance indicators (KPI). It is no surprise that these banks not only have higher customer experience performance but have a higher return on equity numbers. A better customer experience means less churn, a…

Customers and competitors are challenging community banks to extend loan duration – borrowers are eager to lock fixed rates before they rise further, and many competitors are happy to oblige.  But what are the optimal fixed terms for community banks given today’s interest rate, credit, and liquidity environment?  While every bank’s mix of deposits and…

If your bank truly wants to be known for service, the very first step is to get your problem resolution process right. When it comes to problem resolution, the two metrics that matter the most are the number of interactions required to solve the problem and the time it takes to solve the problem. The…

In two recent articles, we reviewed the banking industry’s deposit behavior with regard to cost of funding earning assets (COF) (HERE), and we compared how community banks’ COF behaves relative to national banks in a rising interest rate cycle (HERE).  We demonstrated that the average community bank’s COF is highly correlated to short-term interest rates…

The most significant problem with bank innovation is that bankers see or hear about a sexy piece of technology at a conference or at another bank and then acquire it. The new piece of technology ends up solving a known problem but, in the process, creates more problems, and risks, than it solves. It’s called…

Your bank’s  deposit beta is going to rapidly change. In our previous article (HERE), we reviewed the banking industry’s cost of funding earning assets (COF), and we compared how community banks’ COF behaves relative to national banks in a rising interest rate cycle.  We showed that the average community bank’s COF is highly correlated to…

Most banks think in terms of linear growth. As a result, bankers love the idea of a sales funnel – put enough prospects at the top of the funnel, and a certain number of customers will fall out the bottom. Add more resources, and you get more customers. It is easy to understand. Unfortunately, there…

Based on the futures market, the Federal Reserve is expected to raise the Fed Funds rate to 3.00% at its December 2022 meeting. The Fed will also aggressively shrink its balance sheet to tame unwanted inflation. These two Fed moves, along with the economic environment and customer behavior will impact your forecasting of your cost…

Banks that focus on the customer experience have come to learn that it is not the forward-facing customer experience that matters, but the “total experience” that now counts. Total experience is the business strategy for creating superior customer AND employee experience. In this article, we walk through why banks should focus on total experience (TX)…