Correspondent Blog

The 2024 annual Consumer Banking Association conference (CBA Live) took place in Washington, D.C., over three days last week. Overarching topics (by word count and sentiment) include the imperative for greater consumer protection, the required more significant effort to fight fraud, rapid innovation (particularly in A.I.), and the need to keep evolving your workforce. We…

The Federal debt is already impacting banking. Cyclical economic changes are driven by business cycles. These changes may occur swiftly, such as interest rate changes, inflation changes, or unemployment rate changes. Cyclical changes and their impact on the economy dominate the news and the attention of corporate boardrooms because they are immediate and need to…

The Biden Administration “Investing in America” agenda continues with many programs opening in June of this year. If your bank has not done so already, it should consider getting involved for the benefit of customers and shareholders. The various programs are wide ranging, complicated, and impactful which is why now is an excellent inflection point…

In our previous articles (here and here and here) we discussed some of the drivers of commercial relationship profitability. In this article, we consider and define relationship banking and how relationship banking can increase commercial loan profitability. What is Relationship Banking We define relationship banking as a model focused on a consultative banking approach.  Bankers…

Most banks completely ignore odd digit pricing. Instead of offering that competitive commercial loan for 7.00%, you offer the loan for 6.99%. Conversely, in a non-competitive situation, instead of offering a 6.20% rate, you offer a 6.23% rate and pick up three basis points per year. However, those banks that do are religious about it…

In two previous articles (here and here) we discussed how loan size and loan term affect the profitability of commercial loans.  We continue this theme of major drivers of loan and bank profitability and discuss the importance of cross-selling and upselling, and its impact on bank performance.  In this article, we consider the common features…

When it comes to bank planning, your strategic horizon has a huge influence on your success. Recently, we published a piece urging banks to set their strategic planning horizon out longer (HERE). We were inundated with questions and opinions. Our overarching point was that banks underperform, in part, because their strategic planning time horizon is…

In a previous article (HERE), we discussed several factors that drive loan and bank profitability. We covered in detail how and why community banks can increase loan size to improve return on assets (ROA) /return on equity (ROE).  In this article, we will consider how and why loan term is a significant driver of profitability…

By now your bank is likely convinced on the merits of generative AI. Microsoft’s Office 365 CoPilot, the integration of the Microsoft version of OpenAI’s Chat GPT into the Office suite, represents the fastest, and likely safest way, to integrate the latest technology within your bank. Earlier this year, Microsoft dropped the 300 licenses minimum…

Several measurable factors drive loan (and, by extension, bank) profitability, including loan size, credit quality, term, cross-sell, and upsell.  In this article, we will consider how and why loan size is one of the most significant drivers of profitability for community banks and what community banks can do to improve performance. Relationship Between Loan Size…

Since our last update on pricing and credit HERE, commercial loan pricing trends for the first quarter of 2024 continue to be driven by the perceived increase in credit risk, tighter credit supply and banks’ need for wider margins. This article provides an update on pricing trends driven by our Loan Command aggregated community bank data and…

Community bankers need to practice realistic loan pricing discipline. However, we need to understand the meaning of pricing discipline and its effect on community bank performance. In this article, we would like to define loan pricing discipline and cover bid, why it matters, and demonstrate how most community banks currently are not using loan pricing…