Banker To Banker

If you want to get ahead of a trend, consider investing in content for your bank. Content is the new growth accelerator in banking and banks would be wise to start small now, experiment, and learn the ways of the future. Content is the missing piece of growth acceleration and helps not only acquire new customers but slows turn while helping build a brand. In this article, we look at the formula for using content, some examples, and a game plan for blowing past your competition.

 

The Concept

Loan Profitability

Research demonstrates that many companies do not sell their products or services evenly throughout the week, month, quarter, or year. Instead, in many industries, revenue and profit margins can fluctuate substantially throughout periods. It pays for community banks to not pay attention to this phenomenon in order to increase margins, but due to the vaccine, credit spreads are likely to decrease during the back half of the year as banks increase credit supply.

Commercial Lending in the COVID-19 age

Credit is always changing, and CenterState watches a variety of markers such as corporate bond credit spreads, vacancy rates, net effective rents and many others in order to help us understand credit. Three of those important credit metrics are the probability of default (POD) by industry, the rate of change of that POD, and the volatility of credit of each industry.

The Forward Start Strategy in Lending

 As shown in the graph below, we may be witnessing the end of a multi-decade bull run in bonds.  After many decades of decline, interest rates may be on the rise for years to come.  This development is creating an opportunity for community banks to book longer-term fixed-rate loans with higher profit margins.  However, borrower demand is forcing banks to make loans with 5, 10, and even 20-year fixed-rate maturities.  How should banks protect themselves from the rising cost of funding and at the same time improve interest margins?  CenterState Bank uses a strategy that enables the pricing of

Setting Up for PPP2

Of all the lending programs in banking history, the Paycheck Protection Program (PPP) has to be one of the most complicated ever to enthrall bankers. Consider that in the next couple of weeks, banks will be:  originating the second draw of PPP (PPP2) under new guidelines; originating PPP loans under the initial set of guidelines (PPP1) to include some amendments; amending PPP1 to accommodate larger amounts; forgiving PPP1 loans and setting up to forgive PPP2 loans. It is enough to make even the most organized banker’s head spin.

Improving CRE Performance

A credit tenant loan (CTL) is a loan secured by the real estate pledged as collateral and the obligation of a credit-rated tenant of that real estate.  These loans are a cross between a bond (because the tenant's obligation to pay rent is a senior obligation of a creditworthy obligor) and a commercial mortgage (because of the real estate collateral). The CTL is usually less risky than a comparable commercial mortgage and, therefore, priced accordingly. The CTL is also structured for a longer-term and does not rely on personal guarantees.

The Next PPP Round

The new split bipartisan Covid Relief Bill got traction yesterday and stands a good chance of getting approved in the next couple of weeks. Most versions of a new stimulus package contain the approval for the next draw of the Paycheck Protection Program (PPP). The SBA, in turn, is preparing to bring the program live around mid-January.

Workplace Vaccine Policy

With FDA approval and the first shipments of the COVID-19 vaccine start to hit our communities this week, the question comes up over should banks have a policy around if the vaccine should be mandated, recommended, supported, and acknowledged in the workplace?  On the one hand, taking a proactive stance supporting workplace vaccination could be the fastest way to normalcy and safety. On the other hand, requiring a vaccine to return could be rife with liability and employee morale issues.

Improving Relationship Profitability

We recently spoke to a frustrated banker who was amazed that a regional bank was trying to poach his existing customer by quoting the borrower a credit spread of 1.65%.

2020 Gift Guide

Now that Thanksgiving is behind us we can turn our attention to the holidays. That means our annual gift guide for bankers. We do this as we not only have a good time putting this together, but it is one of the pieces of content that we produce that drives heavy traffic.

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