To compete effectively, community banks need to understand who their competitors are; the products and services that competitors offer; plus, how the competition is positioning and selling these products. Conducting competitor analysis allows banks to rank themselves in the industry, leverage competitive insights, discover trends and improve their product offering. Unfortunately, many community banks do not have the resources to conduct a thorough competitor analysis. We would like to share one recent pitch from a small regional bank on how they position and sell a novel prepayment provi
One of the easiest ways for community banks to increase profitability is to stem commercial loans from refinancing to a competitor. Competition is intense, and community banks that develop a strategy to retain profitable clients can increase income substantially. While most banks devote resources to marketing, sourcing, and booking new business, much less emphasis is placed on maximizing profitability on the existing loan portfolio by identifying and controlling customer loss (or refinancing risk). We would like to share one specific strateg
The power of three suggests that things that come in threes seem wittier, more understandable, and more memorable than things that come in other numbers. This concept is utilized in comedy, academia, and banking. We identify the three most important concepts that high-performing community bankers are deploying today to drive profitability and decrease risk. We call it the “2018 Trinity” of community banking.
In the attempt to win more business, banks sometimes offer what is commonly referred to as an “extendable,” “flex,” or “structural flex” commercial loan in order to give the borrower more flexibility. The option allows a borrower to move out their maturity date and allows more flexibility. While this structure is a popular way to win business, some banks may be inadvertently increasing their credit risk. In this article, we review the structure and look at the right, and wrong way to structure the extendable loan.
While many banks get involved in tax-exempt loans or bond purchases, many overlook the much smaller but vitally important taxable market. While larger spreads can be achieved in the tax-exempt market, that market comes with the risk that the bank’s tax position could change. This could happen because of either a tax law (i.e., like just happened with tax reform) change or because the bank records a loss for a year, and it cannot take immediate advantage of the tax-exempt income.
As the yield curve flattens, the difference between Prime and ten-year fixed commercial loans rates gets smaller. Community banks face a dilemma in how best to manage interest rate risk – which affects both the bank and the borrower. Banks are further challenged to offer loan structures that maximize their competitive advantage and differentiate their product from multiple competitors. We see one specific strategy that community banks are deploying that utilizes upfront non-interest income in structuring owner-occupied and investor CRE term loans for ten to 20 years, eliminating both the
More bankers rely on emails than phone calls and in-person visits to communicate with, and market to, their customers and prospects. Unfortunately, what may work in person may not translate well to email communication. We see thousands of emails from hundreds of commercial lenders every year, and we want to share some best practices for email subject lines for initial marketing and ongoing emails.
Given smokin’ hot production numbers, record low employment and the Fed meeting, many borrowers are concerned about the prospects of rising interest rates and the resulting higher loan costs. Not just that, tax reform has made many loans easily refinanceable. As a result, many borrowers are facing a dilemma – do they keep their existing loan to maturity or refinance now and extend out maturity? In this article, we take a look at one little-known tactic that will set your bank apart from the competition.
We will miss Anthony Bourdain. As foodies, he captured our imagination not just with his food, his travelogue, and his attitude, but with his insider’s view of running restaurants. His book, Kitchen Confidential not only changed how we looked at restaurants as consumers, but it was the first time we started to apply some of his teachings to restaurant lending.
Of all the subsectors in bank lending, industrial commercial real estate (CRE) has been a favorite for the past year. Warehouses, distribution, logistics and manufacturing properties have performed well and banks that sought to curtail retail lending over the past five years have largely increased lending on industrial properties. Since this is such a popular subsector, we wanted to take a look at the data to see what we can glean to increase bank performance.