Correspondent Blog

The average bank closes about 35% of their loans on their commercial loan pipeline report. Hearing this number begs the question – is that the optimal level for that metric? Put loans on that have a greater percentage of closing, and you potentially deprived transactions from getting the support they need. Put more loans on,…

Most customers are borrowing neophytes.  We estimate that the majority of community bank borrowers have a rudimentary financial and accounting understanding, and these borrowers may focus solely on the interest rate on a loan when comparing their options.  Even “sophisticated” and seasoned borrowers do not know how to compare their borrowing options to optimize outcomes. …

More than a year ago, the Federal Reserve changed Regulation D, Section 19 to allow an unlimited amount of withdrawals or transfers from a customer’s savings or money market account. Most banks immediately changed their policies to pass on this freedom to their customers. Some banks proactively left the limit in place or modified the…

Recent regulatory messages have reinforced the importance for commercial banks to prepare for the end of LIBOR after 2021.  However, banks cannot wait until the end of 2021 to find replacement index(es)  because the transition from LIBOR requires changes to systems, vendors, training, and marketing that can take several quarters to finalize and implement.  To…

Areas of improvement in banking abound, which is part of the problem. Banks often struggle with how and where to focus their resources to produce innovative products and services. Do you tackle digitizing the consumer loan process, or do you push into cryptocurrencies? Do you introduce a new treasury management product or upgrade your online…

Every year we analyze the industry’s cost of funding earning assets (COF) and track how community bank’s COF behaves relative to larger banks and how COF moves with various indices. The information is critical for all banks as it is helpful to understand how sensitive your balance sheet is to rising or falling rates. We…

We looked at the average NIM and ROE for all operating banks in the country (4,973 of them) for the past ten years. We started with the thesis that the wider a bank’s NIM is, the more profitable the bank would be. We also looked at the NIM and ROE for almost 11,000 defunct banks…

There appears to be some complacency regarding the Federal Reserve’s monetary policies in 2021 and 2022. The ten-year Treasury, around 1.35%, may be sending a short-term signal on liquidity versus a long-term prediction on inflation.  Community bankers need to factor in the high probability (50% to 75%) that tapering will start in 2021 and not…

The reality is bankers are fantastic problem solvers. It’s in their blood. The problem is that, as an industry, we leave much to be desired about DIAGNOSING the right problem. Present a challenge to a banker, and they will quickly switch to solution mode without first analyzing what the issues are. They don’t fully understand…

We have published multiple articles, economic bulletins, and podcasts on inflation (including here and here).  In this article, we will not make a case for or against the market’s expectation of inflation.  We will assume current gauges such as CPI and PCE accurately reflect the current inflation environment (many arguments can be made for why…

After talking about the role of bank product managers (HERE), many bankers and bank board members asked the question – How do you know when to start a new product? This article covers seven rules that form our framework for when banks should consider either building or buying a new product. The Rules will help…

The average commercial loan term for amortizing credit facilities at community banks is between four and five years. Banks need to understand the optimal loan term for amortizing credits to maximize profit and minimize risk. We analyzed the average community bank’s preferred loan term based on risk (probability of default, loss given default, and expected…