Tag: Diversification

How Using the Rooney Rule Can Help Bank Performance

Bank Board Governance

As community banks, we aim to fulfill our namesake by being a part of, and representing, our communities. Sometimes, however, it is difficult to see that there may be a gap between our banks and the communities that we serve. The NFL had a similar issue before 2003 when they realized the disparity of the demographic between their players and head coaches. There were only two African-American head coaches at the time, out of the NFL’s 32 teams. “The Rooney Rule” changed that.

Should Your CRE Concentration Concern You?

CRE Concentrations

If you are a large bank, the share of commercial real estate (CRE) as a percentage of your balance sheet is likely slightly less than 5%. However, if you are a community bank, the share is likely over 20%, and growing. Even when viewed as a percentage of Tier-1 capital, larger banks hold about four times for commercial real estate exposure. That is a pretty big difference and CEOs (plus risk managers) should at least be asking the question as to why. 

 

When It Comes To Loan Mix Is Your Bank More Artist Or Scientist?

Managing the Loan Mix

There is a classic debate in banking of whether it is better to diversify your loan portfolio or to “stick to what you know.” The logic of the stick-to-what-you-know camp is that since you understand  X (insert your specialty – real estate, doctors, residential, etc.) your return will offset any gains in diversification.

 

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