Correspondent Blog

In these challenging times, both bankers and bank customers are stressed and exhausted. Typical schedules are disrupted, work environments are upended, and business models are challenged.  Because this pandemic shock has brought us into new territory, there has never been a better time in modern banking history than now to enhance your value as a…

While we discussed our framework for deciding WHEN to call bank employees back to the branch lobbies and workplace, in this article, we cover HOW. The two decisions are interrelated since the sooner you look to reopen, the more risk you take, and the more resources you have to invest in a reopening plan. Since…

The rate that the Federal Reserve pays on bank deposits, called the Interest on Excess Reserve Rate (IOER), is currently at ten basis points and will be the subject of an interesting discussion at the upcoming Fed Open Market Committee Meeting this week. At the end of last week, the Fed Funds effective rate was…

If we are going to “reopen America,” it helps to have a quantitative approach to make sure we are making the right decision. Since we are dealing with people’s lives and livelihood, this will be the most critical decision that most of us will ever have to make in their entire professional careers. Everyone wants…

Community bankers are busy serving their customers and protecting their balance sheets as we respond to the Coronavirus pandemic and the resulting economic havoc.  Just as prudent bankers were strategically planning for the next recession before any signs of this downturn, forward-thinking community bankers will very soon be contemplating their strategy for doing business after…

If you are in the military or public safety and have participated in a tactical operation center, you are likely familiar with the “Planning P.” The Planning P is a national framework that helps quickly assimilate information and drive to decisions. This is exactly what is needed in any fast-moving event, such as if your…

The Coronavirus is simultaneously disrupting supply and demand in the world economy.  The shock to the economy will have a profound effect on the US economy, and community banks will not be immune from this disruption.   It appears that a global recession is inevitable, but the full extent of damage to the banking industry is…

We have often characterized banks as being “manufacturers of credit.” Like any manufacturing process, banks need to produce a product, in our case loans, to meet the customer’s demand. Loan production takes inputs such as capital, analysis, and documents and combines them in a standardized process to produce an end product. The Paycheck Protection Program…

We have been writing on the various strategies available to community banks when structuring commercial loans in this current challenging business and credit environment. With the flat and low yield curve, we have discussed how banks may offer commercial loans through the ARC hedge program using two different strategies: 1) embedded floors, and 2) forward…

Go to any Trader Joe’s market and then go to a competing market, and you will be likely to find a significant difference. Trader Joe’s has produced a COVID-19 response that is thoughtful, practical, relatively inexpensive, and caring. From their increased staffing to their small gestures like a preferred senior’s line, the handing out of…

Last week we took a look at why and how bankers must triage their credit portfolio first before taking action. We also looked at some initial restructuring steps banks can take in a related article. In today’s article, we model a $1B commercial loan portfolio and look at what could happen to probabilities of defaults,…

The impact of coronavirus on community banks will be widespread, and, with some borrowers, the restructuring efforts may take a long time and will sap substantial bank resources. Even as bankers are exerting time and effort to help some borrowers stay in business and continue to service their bank debt, other borrowers are looking for…