Correspondent Blog

When it comes to bank performance, there are lots of metrics to manage. The two that we would submit are the most important, are risk-adjusted return on capital (RAROC) and customer relevancy. While we have spoken at length about managing loans, deposits and customers around RAROC, in this article we focus on measuring relevance. Producing…

When it comes to bank acquisitions, there are metrics that matter. We analyzed all community banks acquired from 2020 to the end of 2024 (approximately 600 banks), and we measured those defunct banks’ performance compared to surviving banks.  The defunct banks were all under $10Bn in assets and our hypothesis was that return on assets…

We compared community bank profitability on hedged commercial loans to those same banks’ reported return. The goal of our analysis was to investigate if community banks can improve their performance by utilizing a hedging program.  We want to caution readers that our analysis may not extend to all banks, borrowers, or regions, but the results…

Customer profitability is often talked about but rarely understood. We analyzed the commercial loan portfolio of a regional bank to determine what products, scale, cross-sell opportunities, and expected life translates to profitability.  The results may be surprising to some readers. The granularity of this data reflects the state of the banking industry, and the lessons…

Bankers love rules and formulas. Here are 20 banking rules that have served us well over the years. Use these and save yourself much time and stress. These “hacks” are a combination of rules and shortcuts that we use daily in our decision-making. We have tried to pick some non-obvious shortcuts that have historically produced…

For the last few years, SouthState Bank Correspondent Division has been hosting lender lunches across the country. At these events, we invite local executives and lenders to discuss what drives community bank performance, we highlight challenges and opportunities for community banks, bankers have a chance to network over a short period (and eat lunch), and…

Most bankers would refuse to accept risk without reward (or revenue).  It would make no sense to risk the bank’s capital without adequate compensation. However, some banks are inadvertently taking risk without any additional revenue. The yield curve is currently flat, and the average community bank’s cost of funding is highly correlated to Fed Funds…

Based on the 2007 to 2010 bank failure experience, we modeled the financial health of every bank using the last 16 quarters of historical performance.  We have also created projections for the next 18 months. There are 150 banks that currently have a Grade of “8” out of 10, with 10 being the safest. In…

The Federal Reserve Bank of New York published three articles on why banks fail (the first one here).  While the aim of the research was to identify the cause of approximately 5,000 US bank failures over the course of 160 years, the research also infers what factors bank executes can influence to not only avoid…

Bankers love easy. Who doesn’t want an easy way to have a more profitable bank? We also love to keep things simple. It is a common refrain. Compounding the problem is that in banking, we often think that “simple” and “easy” as synonymous. In this article, we will touch on innovation, technology and banking strategy…

In our previous article (here) we analyzed the data on community bank M&A and performance, and we concluded that there is no relationship between community bank size and profitability, as measured by return on equity (ROE).  While superficially it makes sense that bigger is better, size itself does not lead to better bank performance.  Combining…

In Q2/24 the average return of asset (ROA) for community banks (under $10B in assets) was 1.08%.  But within the community banking sector, performance varied among banks significantly and a large swath of banks need to improve ROA.  While the average ROA was 1.08%, approximately 5.7% of community banks reported negative ROA.  Another 16.2% of…