We work on thousands of lending transactions every year with hundreds of community banks across the country. We participate and help structure financing on commercial real estate, C&I and Ag properties ranging in size from a few hundred thousand to over $100mm, and we collaborate with community bank lenders and underwriters that span the whole gamut of experience. We witness the good, the bad, the ugly, and occasionally the very bizarre in bank marketing, under
Tag: Fixed rate loans
In the last few months, more than a dozen bankers have reached out to us about the merits of a fixed-rate loan program. Up until a few months ago, we didn’t know that the industry had started coining the term “fixed-rate loan program.” We always assumed that banks made loans that borrowers needed, whether fixed-rate, adjustable-rate, or some form of hybrid. Now, this seems to be a thing and we, not surprisingly, have an opinion on the matter.
Some community banks are seeing broad challenges in trying to book and maintain quality loans. These challenges include borrower demand for long-term fixed rates, general lack of qualified borrowers, and intense competition from multiple lenders (including banks, credit unions, insurance companies and alternative financial institutions). We would like to share a specific loan origination and portfolio tactic that has worked for banks of various sizes and has been successfully deployed by community banks across th
When it comes to pricing fixed rate loans, we see banks do some crazy stuff. For example, if your bank is pricing off a fixed rate spread using a floating rate index such as Prime, then go directly to jail, don’t pass Go and don’t collect $200, - that is an asset-liability tragedy. It is also equally bad to just pull a fixed rate out of the air or base the fixed rate on the competition without knowing what the interest rate risk is. Given the recent pricing volatility, if your bank does that, you could find out that you are 20 or more basis points in the hole.