Banker To Banker

Community Bank Commercial Loan Default Rates – Current and Projections

Quantified Lending Risk

We analyzed default rates through 2015 for banks between $300mm and $3B in asset size.  Historical default rates were measured and analyzed for various loan categories for this bank set.  We also reviewed Moody’s Investor Services corporate default and recovery rates through 2015 and considered which industries may present opportunities for community banks from a yield/risk perspective and as a way to diversify from real estate concentrations. 


How To Sell Your Bank’s Most Important Product – Part I

Selling Bank Treasury Services

If you ever wondered about the future of banking, we can tell you it lies directly in the path of treasury management. Loans will continue to be commoditized, other bank services will be cannibalized by non-banks (payments, etc.) but the treasury management platform will serve to differentiate banks. Every business needs some sort of treasury management banking function and with the rise of technology, banks will start to differentiate themselves by creating different platforms.

Pricing Bank Loans For Default Volatility

Controlling Lending Risk

If you got past the title it is likely that you care about the accuracy of your loan pricing more than the average banker. Banks have long ignored the variability around default risk and it is starting to be a problem, as with tighter spreads, there is now less room for error. While bankers solve for credit risk through taking loan loss reserves and through pricing, it is rare that a community banks takes into account default variability. Many large banks do and this article shows how community banks can gain about 80% accuracy through a simple methodology.

8 Steps To Improve Your Commercial Quote Sheet

Closing More Commercial Loans

Either buried deep in a proposal letter, or attached to the back, lenders will present one of the most important aspects of the commercial term loan – the structure and pricing of the loan.  Many lenders will have their preferred format and presentation style, and certain banks will have a uniform template for lenders to use, however, for the most part we see ad hoc and confusing quote sheets without the elements that we feel are important in providing superior customer service or the compelling information to winning the client’s business.  We would like to share our observations on how a

How To Become An Expert At Deposit Pricing

Setting Deposit Rates

You can always tell a good banker by the way they handle their deposits. When it comes to loans, it’s hard to discern expert level skills unless you know the market and know the credit. Deposits, however, are pure. When we analyze a bank, it is normally the first thing we look for as deposit pricing and structure is the one metric that tells you the most about the quality of a bank. A low cost of funds is just part of it. Almost equally important, and lost with most analysts, is the behavior or performance of a bank’s liability base with movement in interest rates.

Understanding Letters of Credit For Commercial Transactions

Using Letter Of Credit For Commercial Loans

In order to serve their customers and perform their duties, commercial lenders should be familiar with the nature and application of letters of credit.  A letter of credit substitutes one credit (for example the borrower) with another credit (typically a financial institution).  The use of letters of credit to reduce risk is very popular in international trade.  However, community bank commercial lenders should understand the nature and application of letters of cred

The Mistaken Cheapening Of The American Bank Account

Setting Deposit Fees

Starting last December, several large banks (Capital One, Discover, etc.) have started to raise rates. As of the first quarter, community banks have not followed suit but interestingly they have done something almost as expensive – they have decreased fees. As can be seen below, after several quarters of increasing fees, the first quarter of this year saw a decrease in service charges generated from deposit accounts. The result has been negligible as balances are increasing more because of behavioral economics than fee elasticity.

How Banks Can Hire For Innovation

Data For Hiring


Before credit, asset-liability positioning, deposit gathering and customer engagement, there is one process that is more important that bankers must get right to be successful - and that is hiring. Get this process wrong and your bank will be an underperformer. Make some good hires and you will likely excel in key parts of your organization. Make hiring a discipline of the bank, and you will dramatically tilt the odds in your favor. There is no single function more important to a bank. None.


Branding A Better Commercial Lending Process

The Lending Customer Experience

Your commercial customer is the highest value customer in your bank, right? Your brand, or what your bank stands for, is why that customer is attracted to you. If both these statements are true, why is your commercial transaction process likely the Death Valley of your brand? The more important question is – how is your loan process any different from your competitors and do you add value? The reality is the few banks have a loan process that supports their brand.


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