Correspondent Blog

As interest rates go back up and volatility continues to remain high, banks’ cost of capital has undergone a significant shift up. Your cost of capital is essential to know for several reasons. Mostly, it gives your board and shareholders a yardstick in which to gauge a bank’s return. Produce over your cost, and you…

While we believe in “Wowing” your customers as a concept, we don’t believe in it as a strategic focus as a bank. The idea is too challenging to execute. However, we do believe that every banker should understand what “customer delight” (we will use interchangeably with “wowing”) quantitatively looks like so delight can be operationalized….

A couple of weeks ago, we delved into the origination and operating costs of manufacturing commercial loans (HERE). In this article, we delve into deposit profitability and highlight the cost structure of deposits. The goal here is to give bankers that don’t utilize a funds transfer pricing and activity analysis methodology a glimpse into the…

Most financial institutions never see the actual cost of originating their products. To do so would require at least a rudimentary funds transfer pricing methodology, and many banks have not invested the time to derive a workable framework. Understanding a product’s cost structure is the first step towards accurate pricing and, more importantly, process improvement….

A common strategy for community banks, when faced with a borrower that wants a 10-year fixed rate loan, is to offer a five-year fixed rate that adjusts in five years. Historically, this has worked for some customers and banks because, over the last 40 years, five-year rates have generally fallen.  As interest rates fall, a…

With 100+ public banks reporting, we have more than a representative sample to see 2Q 2022 bank earnings trends and derive some operational insights on bank performance. We touched on the 33 Items That Stakeholders Want to Know, which highlights some of the industry’s concerns and serves as a good checklist of items to touch…

A yield curve is a relationship between yield and different maturity dates. The yield curve’s slope can provide insight into future interest rate changes and economic activity. There is much discussion in the market about the current inverted yield curve between the two and ten-year Treasury yields. However, for bankers, the critical dates on the…

In the last 30 years, the total number of bank charters has declined by 65% (as shown in the graph below). There are many reasons for this industry consolidation.  We believe that the most significant factor driving consolidation is that banks tend to underperform using a risk-for-pay bank business model, and banks that have properly…

Get your process right, and all else will follow. Most banks do not have an evolved process when it comes to bank product growth through product development, marketing, and sales. Growing a product is a quantitative effort that takes capital, planning, math, and a laser focus. In this article, we provide banks with a proven…

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…

While the branch still has its place in banking, it has radically changed since the pandemic. Branch profitability is now harder than ever to achieve. Driven by changing traffic patterns (data HERE), we talked about how these changes permanently altered branch strategy HERE and gave readers five new tactics HERE. In the past, we also…

On Friday, Congress passed the $1.2T Infrastructure Investment and Jobs Act (the “Act” or “IIJA”) which goes to the President’s desk next week when Congress returns to become law and starts to go into effect January 1, 2022. IIJA targets our electricity grid, transportation infrastructure, the digital divide, and economic resiliency. In this article, we…