About 70% of all men have worried about genetically programmed hair loss since the days of Julius Caesar (who incidentally had a serious comb over). As a man ages, somewhere around his early twenties, hair loss takes place and no amount of Rogain, head massages, Cayenne pepper rub or goose dropping treatment can replace it. Similar to Male Pattern Baldness, some banks are genetically programmed to lose younger customers. They start to lose them around the edges, in the middle and then the most profitable on top.
Banker To Banker
Banking is competitive. Luckily, community banks have a number of competitive advantages over national banks. However, if you ask the average banker, it doesn’t feel that way, particularly when it comes to loan pricing and community banks are forced to compete against 10-year, 3.90% fixed rate loans. Then again, many community bankers state that they cannot compete against the national banks because of higher cost of funding.
Last week the boys and girls at the Joint Regulators (The FFIEC, plus SEC, HUD and others) rolled out the final rule (Final Rule) set (found HERE) that structures risk retention under Section 941 of the Dodd-Frank Act for bank assets destined for securitizations.
Here at CenterState Bank we have some of the grittiest bankers around. Of course, every bank has them and chances are if you are reading this there is a high probability that you are one as well. Why else would you be clicking on this when you have all that work to do? The answer is likely dedication to the journey of banking and the need to learn from our and other’s triumphs and failures.
Sometimes the future isn’t that clear, and this one has us perplexed. We are not sure this is a step forward or backwards in technology, but we find it interesting. Nimbl, a San Francisco start-up now has an app available where you can request cash and a certified runner brings it to you. For those that have converted to Apple Pay this week (along with the other 8 million people), the app solves the problem of how to get cash easily in an increasingly cashless society.
If you look at the sensitivity in a bank’s budget, $1 of investment in new line of business usually doesn’t break even for two to three years. $1 invested in finding a new customer usually returns about 9%, while $1 invested in a new product is usually above 20%. This all compares to about a 40%+ return invested in improving processes (loan, branch, cash management, etc.) and about a 80% plus return spent on reducing customer churn, increasing lifetime value and/or helping cross-sell.
Last week (HERE) we looked at how deposit account tiering is used, some of the objectives that banks might employ and the effectiveness of tiering in total. As discussed last week, many banks tier without objective, without data and without supportive marketing thus rendering the methodology worthless and possibly hurtful.
Statistically, a “hot hand” in basketball doesn’t exist. In a detailed analysis of the 76ers and Celtics plus controlled experiments with Cornell’s varsity teams, researchers found that streaks were just positive random sequences with little evidence of correlation between outcomes and successive shots.
Back in October and November of 2007, yields dropped 20+ basis points and credit spreads increased by more than 10%. It ended up be a signal as the next month the US found itself in a recession. Yesterday we saw similar movements in the markets, as at one point the 10Y Treasury had moved more on a percentage basis than it had when the Lehman Brother’s collapse was made public and when 9/11 occurred. While both equities and bonds underwent some reversion by day’s end, there is a clear signal being sent that bankers can ignore at their own peril.
Because of tradition we tier our deposit accounts according to size. Here at CenterState Bank, in our money market accounts for example, we have six tiers ranging from $2,000 up to $100,000. Currently, only the $100,000 and above tier pays a different rate of interest. The question that always comes up is do we have the right tiers and the right number of tiers? Further, are we paying the right rate on the tiers to elicit the deposit behavior we want? Let’s explore each question as the answers may change how you feel about deposit gathering.