Tag: Loans

Managing CRE Risk - What Will Happen to Office Space?

The Future of Office Commercial Real Estate Loans

Office lending for banks has been one of the better-performing sectors of commercial real estate (CRE) for banks for some time. Even during the pandemic, the credit on office loans is doing surprisingly well. The question arises, what happens in the future? Will it be business as usual post-pandemic? Will companies take more space to provide for social distancing, 25% of the space as they go mainly to remote workers or 50% of the space to handle a hybrid remote work culture?

The Single Secret To Building a Profitable Bank

Designing a more profitable bank

Last week a seven-year-old asked us what banks do.  That question got us to pause.  How do we explain a whole industry to a seven-year-old in less than a minute, keep his interest, and do justice to the answer?  The simplest answer is that banks allow customers to change the timing of their cash flows. It’s really that simple at its core.

Should You Have a Minimum Loan Spread for Pricing?

Based on our observations, we estimate that somewhere between 20% and 25% of community banks have adopted a policy requiring minimum yield or credit spreads for their newly originated commercial loans. The strategy requiring minimum commercial credit spreads may be well-intentioned, but the results for banks may be less than optimal.

What The Election Means For Credit

The Impact of the Election on Credit

It is around this time before a presidential election that bankers start to ponder how the results of the election will affect credit, interest rates, and the general business environment.  The stock and the acceptable answer is that presidents get too much credit when the economy does well and too much blame when it slumps. The complex and intertwined US capitalist economy goes through boom-and-bust cycles independent of any president’s actions.

What Covid-19 Is Doing To Industrial CRE Loans

Industrial CRE Lending Risk Update

While several commercial real estate (CRE) sectors are showing signs of stress, the industrial sector is one of the few bank credit lines that are improving. Companies gained confidence at the end of the second quarter and started to lease more space. As such, weekly leasing activity jumped back to pre-Covid-19 levels after hitting a low in mid-April. In this article, we take a quick look at national CRE industrial sector economics and explain why banks may want to consider reallocating more capital to this area. 

 

The Next Step For Banks In Moving To SOFR

The LIBOR to SOFR Transition

In the next twelve months, the transition from LIBOR to alternative Risk-free Rates (SOFR in the US) will take an important course. Banks with products tied to LIBOR need to understand the implications of ISDA Fallback Protocol and how to manage possible risks with this critical industry transition. Shortly, ISDA (International Swaps and Derivatives Association) will be publishing LIBOR Fallback Protocol. Firms that sign up for the LIBOR Fallback Protocol agree to the spread adjustment and the fallback rates if LIBOR becomes unavailable in the future.

Overcoming Lending Challenges for Community Banks

Commercial Lending

Covid-19 and the responses to the pandemic are exerting various pressures on community banks.  How a community bank underwrites and books commercial credit through the end of 2020 will have a significant impact on the bank’s profits and credit quality through the entire next business cycle. In this article, we focus on four key steps of what banks can do to continue to add earning assets to their balance sheet.

 

10 Resource Saving Tactics While Finalizing PPPFA Workflow

Improving PPP Efficiency

This week is the first week banks could potentially take Paycheck Protection Program Forgiveness applications. However, most banks are holding off as we do not have a final application, due out this week. WHEN you release your process merits some analysis, and in this article, we discuss 10 important considerations to decide on as you finalize your process.

 

When to Start Your Process

 

How PPPFA Will Impact PPP Staffing and Your Bank’s Forgiveness Workflow

PPPFA Staffing

True to form, last Friday, President Trump signed into law a Paycheck Protection Program (PPP) change giving us yet a new acronym and the need to scramble to figure out how to amend our respective Forgiveness program to accommodate. The good news is that the new law, the Paycheck Protection Program Flexibility Act (“PPPFA”), addresses many concerns of our small business customers. Since these changes now radically offer both production workflow and profitability, in these changes, we highlight the impact of PPPFA and discuss some ways to optimize the process.

Should Last Week’s Jobs Report Change Banks’ Outlook For Lending?

The Lending Environment

Last Friday’s economic data indicated that U.S. nonfarm payrolls rose by 2.5 million in May, compared with expectations for a decline of 7.5 million. In April, nonfarm payroll fell by 20.7 million in the largest single-month drop in records dating back to 1939. Throughout last week, interest rates rose (the ten-year yield rising by 25bps) and the yield curve steepened relentlessly - spread between five-year notes and 30-year bonds widened on Friday to 120 basis points, a level last seen in December 2016.

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