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Ask a banker about the value of their bank, and they will either talk about some derivation of book value or earnings multiple. While these bankers are not wrong, they are not exactly right. While both valuation methods provide everyone with a nice, tidy sum of value, the data could be more actionable. You might…

One of the lessons that was driven home at the recent American Banker Small Business Banking Conference in Nashville was the difference in marketing between large national banks and community banks, particularly deposit marketing. Most national and regional banks allocate marketing resources to recently acquired customers to get them to build deposit balances and purchase…

Community banks are striving to increase loan yield and maintain their cost of funding (COF).  Unfortunately, pressure on COF is expected to remain, and loans will reprice slower than expected as borrowers with below-market rates will wait until the last maturity day to refinance their credits.  We have created and used a novel structure to…

Grid-based pricing is typically used to set the applicable margin of a loan based on specific performance measures, such as credit rating or cash flow coverage.  However, grid-based pricing can also be used to increase deposit balances.  The average borrower does not calculate their cost of borrowing and return on deposits on the economic value…

Today Chris Nichols, our Director of Capital Markets, sits down with Richard Buttermore from Paramount Financial Technologies. Paramount Financial Technologies is a fintech corporation, and is the product of 20 years of first-hand experience working with regional and community banks. Chris and Richard discuss how banks can leverage technology to increase the profitability of their…

Many banks pride themselves on superior customer service, and approximately 90% of all community banks believe that they provide an above-average level of customer service (the math cannot work that way).  The reason bankers should want to provide an above-average level of service is to increase profitability, which translates to charging customers more in the…

2022 will go down as one of the worst years for community bank loan mispricing when viewed on a spread basis. Rapidly rising rates crushed performance as many banks held a fixed rate constant and/or booked a fixed rate loan at a misguided level. Even though many loans were booked at below-par value (more information…

Funds transfer pricing (FTP) has been an essential tool for financial institutions for several decades.  FTP was introduced to banks in the early 1980s to help manage interest rate risk on a transactional basis.  FTP gained further focus after the 2007 financial crisis when financial firms failed partly because of the lack of funds transfer…

Many community banks are searching for ways to increase fee income, and many bank CEOs have concluded that fee income is a significant driver of revenue and profitability.  We argue that larger banks do not have an inherent advantage over community banks in generating fee income because of their scale.  Most fee income generated by…

This week on How Community Banks Are Offering Financial Advice to Their Clients at Scale with Evan Siegel we sit down with Evan Siegel from eGain to discuss how community banks are using AI technology to offer their customers financial advice at scale. Download our loan pricing series here: https://southstatecorrespondent.com/loanpricing/ The views, information, or opinions…

Community banks pride themselves on superior customer service. Approximately 90% of all community banks believe that they provide an above-average level of customer service (of course, the math cannot work that way, as half of all banks should be providing a below-average level of customer service). Research by various consultants shows that 80% of companies…

Community banks have structured fixed-rate loans for many years with an adjustable repricing feature where a loan is fixed for a number of years and then resets based on a stated spread and an index. However, adjustable term loans have several drawbacks for banks, especially in a rising interest rate environment.  One of the most…