Earlier this week we highlighted the lessons that machine learning taught us about the Unified Deposit Formula (HERE). Embodied in the Unified Deposit Formula is a marketing and amplification equation. In this article, we expand on the lessons we learned from artificial intelligence when it comes to deposit gathering and explore how we can better use the Formula to optimize deposit gathering.
The power of three suggests that things that come in threes seem wittier, more understandable, and more memorable than things that come in other numbers. This concept is utilized in comedy, academia, and banking. We identify the three most important concepts that high-performing community bankers are deploying today to drive profitability and decrease risk. We call it the “2018 Trinity” of community banking.
In the attempt to win more business, banks sometimes offer what is commonly referred to as an “extendable,” “flex,” or “structural flex” commercial loan in order to give the borrower more flexibility. The option allows a borrower to move out their maturity date and allows more flexibility. While this structure is a popular way to win business, some banks may be inadvertently increasing their credit risk. In this article, we review the structure and look at the right, and wrong way to structure the extendable loan.
If you are looking for insight on how artificial intelligence can help banking, we give you the Unified Deposit Formula. Prior to using machine learning, we, like most bankers, thought about deposit pricing along a single dimension – price and sensitivity. However, it turns out, that price is not only just part of the equation but often a small part. There are thousands of other factors that play a part.
While many banks get involved in tax-exempt loans or bond purchases, many overlook the much smaller but vitally important taxable market. While larger spreads can be achieved in the tax-exempt market, that market comes with the risk that the bank’s tax position could change. This could happen because of either a tax law (i.e., like just happened with tax reform) change or because the bank records a loss for a year, and it cannot take immediate advantage of the tax-exempt income.
We are big proponents of developing a sales process for bank calling officers. We believe that without a well-defined and implemented sales process, a community bank cannot succeed as a sales organization. One very effective tool that more bankers should be deploying for their sales process and training is role-playing. However, few community bankers are doing so, and at a recent bank meeting where we discussed role-playing as a sales tool, we had two bankers (a CEO and a CLO) roll their eyes at us and state that they would not subject their
Recently, we sat down with Jack Hubbard of St. Meyer and Hubbard to compare sales call note-taking approaches. We were both amazed at how few bankers take notes during meetings and sales calls. While there are lots of reason not to take notes, there is one scientific study out there that shows you can have 70% or better recollection of an event past three months. Since the customer is one of the most important assets to your bank, and you likely pride yourself on being relationship-driven, then it only makes sense that every banker should take notes.
Recently, at the Graduate School of Banking at LSU, we had the team from Afterburner, Inc. in to discuss their Flawless Execution and Stealth Debrief Model. Since it was such a hit, we wanted to provide a 30-minute excerpt from the class. In this article, you can also find Afterburner's “6 Steps To Mission Planning” checklist and a debrief scorecard to gauge your effectiveness.
Is there an advantage to banks in diversifying loan portfolios by geography? As we learned during the last downturn, geography can have a significant negative impact on banks.
As the yield curve flattens, the difference between Prime and ten-year fixed commercial loans rates gets smaller. Community banks face a dilemma in how best to manage interest rate risk – which affects both the bank and the borrower. Banks are further challenged to offer loan structures that maximize their competitive advantage and differentiate their product from multiple competitors. We see one specific strategy that community banks are deploying that utilizes upfront non-interest income in structuring owner-occupied and investor CRE term loans for ten to 20 years, eliminating both the
