Correspondent Blog

Community banks face intense competition for profitable borrowers and relationships.  With short-term interest rates rising and long-term rates still at historically low levels, all bankers should understand how swap spreads may provide a competitive lending advantage.  In this current market, swap spreads are negative, and banks that can utilize swap spreads in pricing loans gain…

In our article last week (HERE), we discussed how the yield curve is currently flat between the three and 20-year points.  This makes term loan pricing between three years and 20 years virtually identical.  Banks that cannot offer competitively priced term loans out to 20 years may be at a significant disadvantage when competing or…

We see three expected developments in 2022 that will make a loan hedging program an essential competitive advantage for community banks. Increasing short-term rates, higher expected inflation, and increased need for fee income will significantly benefit those community banks that can offer a seamless and document-friendly loan hedging program.  While we have our ARC Program…

The FOMC’s recent hawkish pivot and indications of multiple rate hikes in 2022 have created market volatility and an increase in longer-term interest rates. In a period of rapid change (or high volatility), we see about 50% of banks fall into a common trap of mispricing their commercial credits.  This loan pricing mistake does not…

Community banks have historically generated less non-interest or fee income than larger lenders.  One reason for this is the lack of analytics on how fee income translates to revenue and profitability.  While there are many ways that community banks can increase fee income, one specific source of non-interest income should be particularly appealing to community…

The graph below demonstrates loan repricing changes quarter-over-quarter from June 2020 to June 2021 for banks in three asset bands (under $1B, $1-3B, and over $25B).  The top three stacks of the bars show fixed-rate loans that reprice 3-5 years, 5-15 years, and over 15 years.  The bottom three stacks show floating and adjustable-rate loans. …

The Federal Reserve Chair, Jerome Powell, was clear last week that the central bank is highly likely to start reducing asset purchases in November and complete the process by mid-2022.  As shown in the dots plot, the FOMC members also expressed an inclination to raise interest rates next year (see graph below) – a shift…

Competition for quality commercial loans is intense, and currently, the majority of borrowers favor fixed-rate loans for as long as possible.  We cannot blame borrowers for wanting to lock in financing costs at historically low index rates and low credit margins.  After all, the real economic carrying cost for these loans after tax and after…

Because competition is intense and every lender is looking for a competitive advantage, at SouthState Bank, we strive to develop lending tools to help our bankers win more loans.  A better product, faster service, or insightful advice can translate into additional loans, better credit spreads, or additional fee income.  In this article, we explore our…

At SouthState Bank, we are using a tested strategy to increase loan revenue by 20% and decrease interest rate risk by 80%.  We are achieving this result on our better credit quality commercial loans without any gimmicks or confusion to the borrower.  We have developed a technique and a loan structure to assist bankers who:…