Correspondent Blog

In a previous article (here), we discussed why commercial loan prepayment protection would be a critical return on asset (ROA) driver for community banks in 2023. We outlined the four main reasons why prepayment provisions increase profitability for banks. We also discussed the four standard prepayment provisions for commercial loans (step-down, lock-out, defeasance, and symmetrical…

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…

Banks have ceased using LIBOR to price assets and liabilities after 2021. However, some community banks are still deciding on the correct term lending index to adopt. Many banks are uncertain that they have chosen the best term index for their products and markets. We believe that having more options for community banks is beneficial….

Community banks refine their products and services to compete for better borrowing relationships – the better borrowing relationships are associated with better credit quality, meaningful cross-sell opportunities, acceptable margins and fee income, and higher return on equity (ROE).  Unfortunately, current market dynamics are making it hard for community banks to outcompete for these better borrowing…

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…

If you want to know how you can improve your bank’s profitability, one place that you can start is better loan pricing. While chances are your bank prices most of its loans correctly, it is the fringe cases that, in aggregate, end up having a large impact on bank profitability. In this article, we look…

One trick every bank lender should have up their sleeve is the ability to meet a client’s maturity and amortization targets but limit the risk of the bank by adjusting the rate on a loan. This tactic is especially germane in today’s market as certain sectors in certain cities are likely reaching the end of…

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…