January 2021

The Content Acquisition Strategy

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

Is There Seasonality in Loan Credit Spreads?

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.

Getting More Granular on Credit Risk in the Midst of the Pandemic

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.

How Community Banks Can Take Advantage of Rising Interest Rates

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

Here Is a Process for PPP2 That Could Help You

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.

Should Community Banks Consider Credit Tenant Loans

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.