Tag: Efficiency

How To Talk To Your Kids About Paper Statements

Bank Efficiency

The now-famous Ally Bank commercial of 2012 that asked two kids if they want a pony goes down as one of the most effective in banking history. Two girls are asked if they want a pony, and while the girl in blue gets a toy pony, the girl in orange gets a real pony. Disappointment ensues to the Blue Kid and the moral, of course, is even kids know it’s wrong to treat others differently. While an effective commercial and a nice lesson for the grade-school set, it is a poor lesson for bankers not to mention both intellectually and emotionally disingenuous.


Why You Should Tidy Up Your Bank Products

Kondo-izing Your Bank

After a bestselling book and new Netflix special, Marie Kondo has tens of millions of people around the world organizing their homes and businesses. The key to the methodology is not minimalism but mindfulness. It is asking yourself - does this procession “spark joy”? If the answer is yes, you neatly put a trifold in it and put it in your drawer or closet in such a way that you can see it. If the answer is no, you thank the object for its years of service and then promptly donate or trash it. Banks should do the same thing.


How Banks Can Get A 45% Efficiency Ratio - Part II

Improving Bank Efficiency

In our previous post (HERE), we discussed the importance of driving bank efficiency to below 45% over the next five years. Many banks have already saved between 5% to 10% of total expenses by cutting waste and renegotiating contracts. Taking another look at your core, online and mobile contracts alone can probably save you that much not to mention taking another look at your purchasing. After that, you need to be strategic.

How Banks Can Get To A 45% Efficiency Ratio - Part I

Bank Efficiency

Our contention is that all banks need to get to a sub-45% efficiency ratio over the next five years. We say this based on the current rate of change of operating efficiencies we see at fintech companies and national banks. As these entities become more efficient, they can offer better rates and fees on banking products and spend more money on both customer engagement and customer acquisition. If you roll this concept forward, the model shows that it will be harder and harder for community banks to compete to grab new customers and harder still to retain them.

6 Easy Things To Reduce Risk In Loan Closing

Reducing loan closing risks

We have written in the past about the importance of community banks closing loans as quickly as possible after the borrower’s acceptance of pricing and terms.  Banks that can close loans with alacrity can earn a higher return on the credit and deliver better customer satisfaction.  In today’s environment the following factors are creating incentives for banks to close loans quickly: a) intense competition, b) Federal Reserve raising interest rates, c) a flat yield curve motivating borrowers to favor fixed-rate loans (with more risk to lenders), and d) political uncertainty translating to ma

Curing Loan Production Peaks and Troughs

More Efficient Loan Production

The production of a typical community bank often resembles the chart below. There are discernable peaks and troughs. We know this as our pipeline functionality in our Loan Command pricing and management model helps banks track production and closing rates for loans. In this article, we explore what a typical closing percentage looks like for a community bank, how it changes month to month and provide some tips as to how to smooth the process out and get more efficient at loan production. 



Here Are the Latest Closing Time Statistics For Commercial Loans

When it comes to commercial loan closings, we have found that speed and bank profitability are correlated. This is to say that the faster you can close a loan, the more likely you are to be booking more than your share of loans. We are not sure which way the cause and effect happens – either you are good at closing loans, and so that drives business, or you are good at driving loan business, so you learn to close loans fast, but it doesn’t matter as speed and loan success go hand and hand.

2Q Data – How Bank Size and Performance Is Correlated

The Latest Data On Size and Banking

As we have written before, the size and performance correlation is overrated in banking. In good times, asset size does have an affect efficiency and hence earnings, but in bad times, size negatively impacts earnings. If you take the business cycle into account, over a 20+ year period, there is little correlation between size and banking. As a rule of thumb when a bank grows risk increases. Few bankers understand how to grow assets at decreasing or steady marginal credit and operational risk.


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