October 2018

Building Deposit Value Through Data and Marketing

No matter what size bank you are or what your experience level is, there are simple things you can do to improve performance.  Today, we will look at an example of how data, marketing, and deposit building can work together to build shareholder value and improve customer engagement at the same time.  To pull this off, all it takes is about two hours of time, an Excel spreadsheet and some email marketing to create long-term franchise value. In this article, we explore a technique that can be used for almost any product to drive profitability.

 

Before You Waive Prepayment Protection On A Loan, Consider This

Structuring Loan Value

Top performing banks use prepayment protection (PP) on commercial loans to deliver superior value and gain a competitive advantage against their competition. The connection between PP and bank value is not always apparent, but we can measure this relationship and quantify when it makes sense to remove or insist on PP.  Some banks mistakenly avoid including PP in commercial loans as a competitive strategy.  We feel that eliminating PP on commercial loans materially detracts from profitability, degrades credit quality and attracts the wrong commercial customers.

 

Another Problem With Using Net Interest Margin To Manage Your Bank

Metrics For Bank Performance

Net interest margin (NIM) is one of the most over-utilized metrics in banking. As we have pointed out in the past, if you include all the failed banks over the last ten years, the statistic is about 20% predictive of underperformance. Thus, if you manage your bank trying to get the largest NIM possible, you are likely to produce less profit, not more. Of course, all things being equal you want wider NIM loans than not, but all things are rarely equal.

10 Steps To Generate More Banking Leads on LinkedIn

LinkedIn for Bankers

If you want more commercial clients before you buy marketing lists, spend money on advertising, cold call, ask for referrals or sponsor any events, consider training your relationship managers on how to use LinkedIn for prospecting. For us, LinkedIn is responsible for generating more commercial leads than all other social media channels combined and has been a great source of not only leads but also market intelligence and general brand building. Having intermediate or better LinkedIn skills are helpful for any banker and is now mandatory for any new relationship manager.

Playing Defense Against Deposit Competitors

Fighting Deposit Competition

In a recent article we published on Where Your Deposit Balances Are Going, we might have underplayed the looming competition for deposits particularly from money market mutual funds (MMF) and online-only banks. Our article failed to highlight an important signal that has only been present since April of this year. As such, our use of second-quarter data, in retrospect, didn’t adequately capture the risk that many community banks are and will be facing.

A Pitfall of CECL on Bank Performance

Bank Loan Structuring

We believe that CECL will inadvertently force some community banks to make suboptimal lending decisions and accelerate community bank consolidation, while, at the same time, allow others to differentiate their business models.  In this article, we consider some of the secondary effects of CECL on community bank CRE lending decisions and specifically the average life of newly originated loans.

 

CECL Summarized

 

Top Secret Commercial Bank Deposit Prospecting Hack Revealed

Selling More Treasury Management

Seasoned bankers call it “The Distributor Tactic” and it is a little-discussed technique used for ages in banking to speed up the sales cycle to land small business deposit and treasury management accounts faster. The key to this tactic is to know that very few commercial checking customers utilize any medium or high-value treasury management services at banks (see below). These low penetration rates present an ideal situation to market your bank’s services and disrupt the competition.

What Your Bank’s Shareholder Base Isn’t Telling You

Bank Shareholder Management

If one of your bank’s strategic goals is to provide an above average return to your shareholders, then equity price management must occupy a certain amount of executive time. Like loans and bonds, every shareholder has a stated, or at least, an implied “life of holdings.” As interest rates and your bank’s value moves up or down, that life either shortens or increases depending on the goals of the shareholders. In this article, we look at better understanding those goals, the life of holdings and how your shareholder base can predict your destiny.