Correspondent Blog

We have blogged about how low-interest rates, COVID-19 credit strain, and tough competition for quality commercial loans create a challenging environment for community banks. One way that community banks are responding to deterioration in net interest margin (NIM) is by embracing commercial loan hedging programs. These hedging programs can appeal to borrowers in today’s interest rate…

Office lending for banks has been one of the better-performing sectors of commercial real estate (CRE) for banks for some time. Even during the pandemic, the credit on office loans is doing surprisingly well. The question arises, what happens in the future? Will it be business as usual post-pandemic? Will companies take more space to…

Between low-interest rates, the concerning rise in COVID-19 cases, and tough competition for quality commercial loans, community banking is a tough business.  While there has been a nominal deterioration in credit quality thus far, a deterioration in the business environment related to the pandemic and lack of fiscal stimulus may change that. Net interest margins…

Being able to adapt and pivot is the hallmark of success in 2020. There are many new skills that we picked up, how to work various video conferencing applications, how to do remote check-ins, and, of course, how to run your entire bank from your home dining room table. One skill that still can use…

It may seem counter-intuitive, but many banks are loosening CRE underwriting standards instead of continuing to tighten them. With a new presidential administration, it is likely that we will face more stringent pandemic mitigations in the near future. While this is likely good for public health, it increases the short-term risk for commercial real estate…

In the last five years, one of the new disciplines in banking that has emerged is the combination of machine learning and satellite imagery to gather bank intelligence on fraud, credit, and bank marketing. While this sounds daunting, in this article, we will show you some relatively simple applications of both artificial intelligence (A.I.) and…

On October 23, 2020, the International Swaps and Derivatives Association (ISDA) published the Fallback Protocol (Protocol) that allows firms that use LIBOR to transition to SOFR if LIBOR becomes unavailable in the future. CenterState Bank’s ARC program allows community banks to offer up to 20-year fixed-rate loans to customers, but retain an adjustable asset priced at…

On October 23, 2020, the International Swaps and Derivatives Association (ISDA) published the much anticipated IBOR Fallback Protocol (Protocol).  Firms that sign up for the Protocol agree to the spread adjustment and the fallback rates if LIBOR becomes unavailable in the future.  Most community banks have some loans or deposits tied to LIBOR, and many…

Since the election falls right in the middle of bank’s budgeting and planning cycles, it is worth spending some time looking at potential outcomes. With a little more than two weeks before the election, the current polls and betting odds favor a Democratic Administration and both houses of Congress.  According to FiveThirtyEight, Biden has a +10.5%…

Last week a seven-year-old asked us what banks do.  That question got us to pause.  How do we explain a whole industry to a seven-year-old in less than a minute, keep his interest, and do justice to the answer?  The simplest answer is that banks allow customers to change the timing of their cash flows….

The Covid-19 pandemic has decimated the US economy, and the recovery may take longer than initially suspected.  However, currently, community banks have an opportunity to identify and win or retain longer-term, credit-worthy relationships at better credit spreads. There are also substantial challenges facing the entire banking industry. One major challenge is to understand is that…

The combination of the COVID-19 pandemic and the interest rate environment drives every bank to rethink their branch delivery. In a world with six percent net interest margins, banks can have all the branches they want. However, in an environment with sub-three percent margins, banks can no longer afford an extensive bank network. Banks that…