September 2014

Get Ready: How To Prepare Your Bank For A Fed Exit

Federal Reserve Exit Tools

While it is debatable when the Fed will raise interest rates, we now know we are getting closer. In all likelihood, October marks the end of the Fed’s Quantitative Easing Program and now the question is just how the Fed will reverse a large portion of the $4.4T of investment that sits on our Nation’s balance sheet. Of greater interest to banks is what mechanisms the Fed will use and what banks need to know to take the best advantage of the unprecedented size of the liquidity reversal. 


More Info About The See & Speak Interface (“SASI”) For Your ATM

Financial Technology FinTech

For those bankers that wanted to know more about the ATM video teller that we reported about last week in our Bank of Edmond article, we have the inside scoop and have conducted further due diligence for your benefit. The SASI provides customers with the same personalized experience from the ATM as they get in the branch. Co-developed between the Bank of Edmond and NueQ , SASI links the customer to the specialist of their choice - teller, loan officer, mortgage banker or other employee.

How This Bank Boosted Their Mobile Effort With Creativity (And Cut Costs)

Mobile Banking Marketing

As we were looking at granular restaurant performance data we noticed that the average time at the table for patrons has increased by about 2 minutes on average over the last three years. Upon further inquiries, it seems customers are spending their table time taking pictures of their food and of course, themselves. The act of taking a selfie has spawned popular songs, websites and articles which is why Independent Bank in Texas has captured this recent sentiment in picture perfect form.


How Citizens Bank of Edmond Amplifies Their Brand And Creates A Strong Culture

Bank Performance, Culture

If you ever doubted the power of a CEO, consider Jill Castilla, CEO of Citizens Bank of Edmond. Taking over at the start oft his year, she has been quick to change the culture. While the Bank is well regarded for its use in social media, the bigger story here is how a CEO can create an environment of innovation, risk taking and fun. More importantly, Jill has given the Bank a personality which has worked to strengthen its brand.


3 Things Banks Should Do About Walmart Offering Checking

Walmart Checking Competition GoBank

Yesterday, Walmart, under the brand “GoBank” announced that they will offer checking accounts to anyone over 18 that can pass an identification check. The giant retailer will leverage its partnership with Green Dot Bank and offer a debit card-linked, mobile checking account starting in late October that will cost $8.95 per month for accounts under $500 with a direct deposit (free if over) and $2.95 to set up. The move strikes right at the heart of bank’s most profitable products taking away future needed balances. So what shall we do about it?

Does Your Bank Have The Right Geographic Loan Diversification? Here Is A Framework

Loan Diversification and Risk Management

Is there an advantage to banks in diversifying loan portfolios by geography and category? As we learned in the downturn, geography can have a huge negative impact on banks. In fact, geography is the largest single factor driving profitability (largely due to credit performance) composing about 16% of a bank’s return.

Four Ways Crowdfunding Will Be Incorporated Into Community Banks

Bank Crowdfunding

Given the Alibaba-hysteria you might get the impression that in this market, everyone is an investor. Crowdfunding trends would only reinforce that notion. Crowdfunding is the concept that individuals, companies and investment organizations (funds, clubs, etc.) can invest or donate their funds in exchange for products, experiences, royalty streams, equity, debt or a combination of all of the above.

How the Internet of Things is Changing Banking

Internet of Things Risk Management

The “Internet of Things” is well on its way of changing how we move around the physical world, and 2014 marks the first time banks are starting to capitalize off this trend. Manufacturers are embedding sensors, tracking devices and actuators in various devices and linking them via the Internet. These devices form a network that not only churn out a steady stream of raw and analyzed data, but are able to be communicated with. The result is a “dynamic information layer” that adds value to any activity touching this network, including bank financing.

The Most Important Commercial Loan Underwriting Ratio That There Is

Leverage Ratio, Commercial Real Estate, Credit Risk

We are often asked what is the single best measure of lending risk?  Is it loan-to-value ratio?  Is it interest-coverage ratio?  Is it debt-service-coverage ratio?  Is it liquidity ratio?  While there is no single measure that can be used and each of these measures are important in various underwriting circumstances, if we were stranded on a deserted island and could only bring one tool to measure our underwriting risk, it would be debt-to-cash flow ratio (this is typically called the “leverage ratio”).  The leverage ratio is the measure of the borrower’s debt divided by t

Know Your Premium Before You Underwrite Your Next SBA Loan

SBA Lending

There is an argument to be made that a bank should underwrite every 7(a) SBA loan that comes its way. With a 75% guarantee and an average 10% premium net of cost and operational risk, that imputes a 30% cumulative probability of default. That is, as long as the bank thinks that there is a 70% chance of repayment, the bank should make that loan. This leaves a whole lot of room for error. Even if you underwrote nothing but one of the riskiest of major sectors, restaurant franchises, you would still be OK as their historic cumulative default rate is approximately 28%.