Correspondent Blog

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…

The average bank closes about 35% of their loans on their commercial loan pipeline report. Hearing this number begs the question – is that the optimal level for that metric? Put loans on that have a greater percentage of closing, and you potentially deprived transactions from getting the support they need. Put more loans on,…

Most customers are borrowing neophytes.  We estimate that the majority of community bank borrowers have a rudimentary financial and accounting understanding, and these borrowers may focus solely on the interest rate on a loan when comparing their options.  Even “sophisticated” and seasoned borrowers do not know how to compare their borrowing options to optimize outcomes. …

For decades, community banks have structured term loans as 5-year fixed-rate facilities.  In the last six months, the percentage of 5-year fixed-rate loans at community banks has increased by approximately 25%, but this same bucket has held steady at larger banks (those over $25B in assets).  We believe that now is the right time for…

We recently interviewed a top commercial loan producer at a regional bank who explained how he uses three common principles to beat out his competition. We want to share his principles, philosophies, and techniques in hopes that it might serve as an aid for some of your new relationship managers and a reminder for some…

Our previous publications discussed current banking industry dynamics for loan pricing, how community banks are responding, and some winning strategies for community bankers.  We contend that excess liquidity and tepid loan demand are the main culprits in driving community bank net interest margin (NIM) to the lowest level in recent history.  With loan-to-deposit ratios dropping…

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:…

Most community banks will find it challenging to meet their loan growth targets in 2021.  Part of the challenge is lack of loan demand, elevated and rising loan payoffs, and stiff competition.  Therefore, most community banks conclude that they do not want to sell participation in a good commercial loan to another lender. However, selling…