July 2015

Should Your Bank Offer Customized Checking?

Custom Checking Account Options Graphic

Several banks offer a retail or business checking account that you can customize to your liking. In fact, BBVA Compass just rolled out their customized checking offering this quarter called “Clear Choice Checking.” The advantage is clear in that you give the customer the option to pick and choose what account attributes would give them the most value. The downside is that management loses some control over cost and account performance, plus it is harder operationally.

When Bad Product Lines Happen To Good Banks

Bank Management

Now that we have officially kicked off strategic planning season, it is time for all banks to review their lines of businesses to see where they want to add or subtract capital over the next several years. Running a profitable bank is a simple equation of more profitable products to more profitable customers in a profitable way. Unfortunately, there are many banks with this equation exactly backwards – they try to sell unprofitable products to unprofitable customers through an inefficient process.

Bank of America Trends In Consumer Mobility

Mobile Banking

Bank of America just released their second annual “Bank of America Trends in Consumer Mobility Report” and it shows consumer’s growing reliance on smartphones. The report finds that 38% of respondents are never away from their phones and only 7% entirely shut down on vacation. In addition, 36% of smartphone users check their phone constantly while 89% of adults check their smartphones at least several times per day. If that is not a connection enough, 71% sleep with their smartphones and 35% say they check it first thing in the morning.

Reflections On Our Culture Here At CenterState Bank

Bank Culture

Recently, Toshiba Corporation made the news for inflating earnings by at least $1.2B over the last seven years.  Executives had to resign in disgrace.  We are not interested in casting aspersions at Toshiba, but we do believe that at least one reason for this corporate governance failure is a lack of appropriate corporate values.  The company’s public core statement is “Committed to people and to the future.”  It further states that its activities are “attuned to the regions and communities where we work help maint

Understanding A Bank Loan’s Debt Service And Probability Of Default (2015)

Commercial Loan Probability of Default

Few banking school classes teach the finer points of loan structuring these days. This is a mistake as loan production is so competitive and spreads so thin that inexperienced lenders are at a distinct disadvantage. Last week, for example, we were discussing a loan here at CenterState and we determined the downside (stressed) case in a particular commercial real estate loan’s cash flows was a 0.8x debt service coverage ratio (DSCR). The question came up how much risk is that compared to a loan that cash flows at 1.25x stressed case?

Uber, But For ATMs

FinTech Disruption

It is a cliché in Silicon Valley that every start-up seems to call itself the next Uber of something. If not, Uber, then it is “AirBnB, but for __________ “.  However, a Philippine startup Coins.ph might be on to something that is a combination of both of those disrupters. “Teller,” Coin.ph ‘s new smartphone app allows users to get cash from other users in a secure and convenient manner. Now we are not sure it will catch on, but the concept of a distributed banking experience is intriguing.


It Is Not Rates, But The Shape Of Rates That Could Hurt Banks

Asset Liability Management

The countdown to higher rates continues despite the drama in Greece and the retracement of China.  There is little ambiguity that rates will increase shortly and the question we would like to address is how banks should position their balance sheets for the expected shape of the yield curve. Put another way, what will be the shape of the yield curve in the future and what are the implications for loans, securities and deposit structures?

Banking Is Not A Commodity. How To Set Your Bank Apart

Bank Branding

Banks stumble on how to create an enduring brand. It’s hard given that one checking account looks much like another. However, if they can brand water, bananas and vodka, we can certainly brand a bank. Just be glad your bank has a product that customers can see and touch, because Intel had a tough job branding its hardware that was never seen. Despite that, Intel was wildly success with its “Intel Inside” branding effort and serves as a case study of why you want to invest in a brand. The payoff to a branding effort is a clear distinction in a crowded market.

When Should You Sell Commercial Bank Owned Property?

Commercial Real Estate Loans

When a bank forecloses on commercial property (or has the option to foreclose) there is always a question of do you spend energy working out the property in hopes that the value comes back or do you sell the property and take the capital charge? To answer the question, we looked at analysis on 150 loans whose underlying financed properties had payment problem and analyzed appraised values over a period of time to determine when a bank should either push the borrower to liquidate the property or foreclose and liquidate the property themselves.

Why Most Analysts And Bankers Are Wrong About How Rising Rates Will Impact Banks

Asset Liability Management

There is a common perception that community banks’ performance improves when short-term rates rise.  The analysis of this thinking is especially germane now that Federal Reserve Chair Yellen has clearly signaled that the Fed is ready to make a move by year-end.  Since we have debated with so many analysts and bankers over the years, we pulled the community bank data for the last 20 years and present balance sheet composition for the industry.