Banker To Banker

Managing Interest Rate Risk In Loans

Interest Rate Risk Management at Banks

The Federal Reserve held off in raising rates at its November meeting, preferring to assess the results of the presidential election and allow time to make further progress on their twin goals of full employment and price stability.  Since that November meeting, the results of the presidential elections have convinced markets of future expected inflationary pressures resulting from fiscal stimulus in the form of tax cuts and increased government spending.  Furthermor

Why Your Bank Should Be Advertising on Mobile

Bank Mobile Advertising

If you are like most banks, you probably don’t have big dollars allocated in your budget for advertising and of those dollars, probably less is focused on digital and probably nothing invested in mobile. That would be a mistake as the performance of bank mobile advertising has dramatically improved over the last several years. “Mobile is eating the world” is a common refrain and many banks are pursuing a mobile first strategy where all other delivery pipes like call centers, branches, ATMs and online applications support mobile banking.

Why Banks Are Relooking At Their 2017 Deposit Strategy (Part I)

Bank Deposit Management

Here at CenterState Bank, we specialize in Florida.  Now, Florida has a lot of things going for it, but it has at least two major things going against it. One is an unspoken rule that if you own a bar or restaurant with an open-air patio, you have to have some guy impersonating Jimmy Buffett on a stool wearing a flowered shirt singing for tips. These guys are everywhere, and if you live here, it gets old. The other major drawback is that hunting for the highest rate on your deposits is a national pastime only eclipsed by baseball and trying to stay out of sinkholes.

Acquisitive Thinking - Why We Did It: Gateway Financial

Gateway Financial Acquisition and why we did it

Yesterday, we announced our second merger of the year with the purchase of Gateway Financial. Gateway is a three bank holding company and totals $8880mm in assets and nine branches located in central Florida. Combined, that makes us $6.5B in assets with 85 branches spread throughout Florida and cements our position as the second largest community bank headquartered in Florida. In this post, we discuss what this transaction looks like and detail why we did this.


The Background

A Bias In Your Loan Approval Process (Part II)

In Part I of this post (HERE), we discussed the Gambler’s Fallacy and how the loan process itself can inject bias into a bank’s decisioning. In particular, we looked at how the order of how loans are reviewed for credit makes a difference. This sequence bias comes from an inherent cognitive belief in humans that want to assume the world is less random than it is. Flip a coin enough times, and every time the result is heads in a row it is natural to assume that tails are due.

Is It Time For Your Bank To Hedge?

Loan Hedging and Bank use of Swaps

Historically community banks have been hesitant to use derivatives, mostly interest rate swaps, to manage credit, interest rate, and sales risk. Derivatives have been historically stigmatized and even more so after the last recession.  Interest rate hedges have predominantly been used by larger and more sophisticated banks. However, approximately 15% of all commercial banks now report some form of a derivative on their balance sheet, and 9% report interest rate swap exposure.

A Bias In Your Loan Approval Process (Part I)

The Gambler's Fallacy In Lending

The goal of credit underwriting is to make prescient decisions. All credit has an outcome – either it pays as agreed or it does not. The role of the underwriter is to best predict that outcome which is why it is critical to limit the amount of bias inherent in any decision. While we have looked at overt bias in credit underwriting in the past (HERE for example), in this article we look at a particular bias inherent in all bank’s processes and why it matters.


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