Banker To Banker

Using Sampling in Banking

A tool that every banker should have at their disposal is the ability to figure out what a statistically valid sample size is from a given population (calculator at the bottom). A simple everyday example is in the case where examiners are coming in and you want to be sure all your wires are BSA compliant.

Improving Your Loan Pipeline

If you’re a bank that keeps a loan pipeline report, chances are you have some excellent data that will form the basis of making your bank more efficient. Of the key performance indicators (KPI), tracking length of time to close, approval rates, fall out rates and lost rates are likely on the top of your list to manage to. In this article, we look at some typical rates, what they might mean for your bank and how to improve the ever-important throughput.

Bank Profitability

Why do some banks grind it out and struggle to produce a 9% return on equity ("ROE"), while other banks such as Bank of America and Chase produce 20% plus ROE for the same business segment? One answer is that banks that produce an above-average ROE either have a more profitable customer segment focus, more profitable products, or a more profitable business model.

Bank Performance

January is typically a slow month for loan production at community banks, and the pandemic-hampered economy made the month even more challenging for many banks. The data from the Federal Reserve’s H.8 report showed that all loans were essentially flat in January for banks. For January, for small domestically chartered commercial banks (defined as not the top 25 ranked by assets), total loans outstanding were flat, C&I loans grew by 1.2% despite substantial PPP production, all real estate loans declined 0.4%, and CRE loans declined 0.5%.

Bank Performance

Our first indication of industry performance for 4Q comes to us in the form of earnings disclosures from the top 24 banks. In this article, we break down five lessons learned from analyzing large bank performance for the fourth quarter (4Q) of 2020 compared to 2019 and see how we can turn this data into actionable insights to improve community bank performance.

 

One: Small Is Beautiful

 

Customer Engagement

A frustrated bank leader sat alone in her office amidst stacks of analysis showing the slow erosion of the net interest margin - once the bank’s engine of profitability. The leader had watched the margin ebb like the wick of a burning candle, despite the monthly efforts from skilled advisors and analytical staff. New target marketing with better data analytics had been bringing in new customers and doing it cheaper than the former “shotgun” approach of broad media advertisements, but margin stubbornly refused to grow.

 

Better Bank Marketing

Community banks divide into two groups – those that have shifted their digital marketing to encompass the pandemic and those marketing as if it was business as usual. Do you know which type is by far the least common? That’s right, the first. Do you know which type is by far the most successful? Yep – the first. Why more banks are not adapting their marketing to show more empathy and education is a mystery. This article highlights seven tactics culled from quantitative research that banks can copy to boost their success in a pandemic and post-pandemic environment.

Faster Loan Growth

One of the biggest mistakes that some bankers make is believing that banks are in the business of making loans.  It is true that banks make loans, but originating a loan is unquestionably an unprofitable business.  Banks earn an acceptable return on capital by keeping loans, not by making them.  We recently worked with our lender on a refinancing opportunity that we want to showcase to explain our strategy.

 

Why Making Loans is Unprofitable

 

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.

Pages