Correspondent Blog

It is rare that banking lends itself to a logic test, but we have been trying this loan risk and return riddle on hundreds of bankers across the country for years, and only a few bankers choose the correct answer.  The riddle goes like this: You are presented with two loans. Loan A is priced…

This month, we rolled out “Tate,” our generative AI chatbot driven by ChatGPT that was designed to increase the productivity of our employees and allow us to become familiar with large language models. It’s been two weeks since its introduction, and we have already learned more than we bargained for. As one of the first…

It turns out that confidence is more valuable than capital. While we wrote about the root cause of the failure of Silicon Valley Bank (SVB) HERE, the lessons of the current banking crisis go beyond interest rate risk management. While interest rate risk caused the most significant impact on value, several other factors contributed to…

Last week the Federal Reserve raised the Fed Funds rate by another 75 basis points – that was no surprise to the market.  However, in Powell’s unscripted remarks at the press conference, he stated that interest rates have reached a “neutral level.”  The market reacted to those words with equities and bonds both rallying.  We…

The graph below demonstrates loan repricing changes quarter-over-quarter from June 2020 to June 2021 for banks in three asset bands (under $1B, $1-3B, and over $25B).  The top three stacks of the bars show fixed-rate loans that reprice 3-5 years, 5-15 years, and over 15 years.  The bottom three stacks show floating and adjustable-rate loans. …

When it comes to setting risk for bank strategic planning, contrary to popular belief, risk isn’t something to avoid. Risk is not even an element to minimize. This is counterintuitive as most bankers are taught to avoid and minimize risk. For that matter, most regulators, board members, and investors also reinforce this notion. Take for…