Tag: Loan Profitability

Commercial Lender Survey Results

The State of Commercial Lending

We sent out a survey to several thousand community bankers across the country to understand bankers’ concerns, challenges, and opportunities in the current business environment.  We feel that organizing an exchange of ideas and sharing of strategies is beneficial to many bankers. We also offered resources (videos, white papers, policies, marketing material, online proposal generators, and calculators) to help bankers obtain information based on their specific survey responses.  The survey only took five minutes and consisted of five questions.

The Risk of The Main Street Lending Program By The Numbers

Main Street Lending Profitability

What is with all the waving we do at the end of Zoom calls? Should we start waving as we back out of the room for in-person meetings in the future? By the same token, many banks are baffled by what to do with the Main Street Lending Program (MSLP), as this is not something we would do in normal times. Yet, we found ourselves both participating and waiving at the end of those MSLP Zoom calls. No matter if your bank is going to participate in MSLP or not, understanding the risk involved is a master class in loan structuring and credit.

Here Is What Lenders Can Learn From Investment Officers

Capital Market Lessons for Lenders

With a low and flat yield curve, generating profits through investments has become more challenging.  There are some very poignant lessons that CFOs are learning about investment strategies that apply directly to commercial lenders.  In this article, we look at several basic capital market precepts that the average investment officer lives with every day but lenders may not notice. 

 

8 Steps To Profitable Loan Growth Given The Environment

Lending Management

Loan growth is slowing for community banks, and credit spreads are widening. As is typical in economic cycles, recessions present an opportunity for healthy banks to thrive and for weaker banks to be whittled.  Despite the flat and low yield curve, the current banking environment is a perfect recipe for healthy banks to win new, strong credit relationships, and increase loan profitability.  However, healthy banks need to act prudently today in choosing the correct type of credit, appropriate structure, enforceable prepayment provisions, and long-term relationship customers.

 

How To Use NPV for Loans and Get Our Free NPV Calculator

RELATIONSHIP PROFITABILITY
RELATIONSHIP PROFITABILITY

We were recently working to close a commercial loan when the lender officer paused the closing.  He did not want his bank to spend legal fees to clarify some tax-transfer issues (costs which the borrower also refused to cover).  The legal bill would be between $2 and $3k.  We asked the lending officer to calculate the legal costs versus the loan’s net present value (NPV) of income – the lender gave us a puzzled look.  We quickly calculated the lifetime income of the loan versus the legal fees for the lender, and the lender proceeded to close the loan within two days.

A Loan Strategy Given Lower Rates

Increasing Lending Profitability
INCREASING LENDING PROFITABILITY

Many industry analysts are increasingly gloomy on the banking industry, trimming expectations for net interest margin, interest income, and total profits. With long-term interest rates declining within a whisker of the lowest level in history, many analysts are reducing their forecast of banking profits by up to 10% through 2020 or 2021. However, we would like to share a current proven strategy for community banks to make the best of the current interest rate environment, lock-in their best clients, increase cross-sell opportunities, and actually increase margins. 

 

Improving ROA and Data Visualization At Your Bank

The Data on Net Interest Margin
THE DATA ON NIM

Data visualization is the presentation of data in a pictorial or graphical format. It enables decision-makers to see analytics more easily, grasp difficult concepts, identify new patterns, and explain outliers.

Why Commercial Loan Prepayment Provisions Matter

Protecting Commercial Loan Profitability

In an article two weeks ago, we discussed why community banks should desire prepayment provisions in their loans.  We also acknowledged that in this very competitive banking market banks are unable to negotiate a meaningful prepayment provision.  In this blog, we will identify techniques that some banks may use to obtain a meaningful prepayment provision, and we share a video explaining how CenterState Bank lenders use these techniques with commercial borrowers to negotiate a powerful prepayment provision. 

 

The Data on The Term, DSCR and LTV Trade-off in Commercial Loan Pricing

Creating Greater Loan Profitability

At this juncture of the credit cycle, community banks must be judicious in the way they source, structure and book commercial loans.  Competition is stiff, and every banker is trying to outsmart and out-compete multiple lenders vying for the same customer.  Unfortunately, negotiating terms and pricing on a commercial loan feels a little like entering a bazaar wher

Why That 5Y Adjustable Rate Loan is a Bad Idea

Commercial Loan Structuring

One of the most common structures in commercial lending is that ten-year commercial loan that is structured as a five-year fixed rate loan with a rate reset at the end of five years. There are two main problems with this loan structure, one having to do with credit and the other having to do with interest rate risk that makes this one of the worst performing loan structures in a rising rate environment for community banks. In this article, we delve into the data to compare two popular loan structures.

 

Pages

Subscribe to Tag: Loan Profitability