South State Correspondent

MARCH 5, 2024

Several measurable factors drive loan (and, by extension, bank) profitability, including loan size, credit quality, term, cross-sell, and upsell. In this article, we will consider how and why loan size is one of the most significant drivers of profitability for community banks and what community banks can do to improve performance.

Community Bank 195

Community Bank Community National Lending 195

South State Correspondent

MARCH 5, 2024

Several measurable factors drive loan (and, by extension, bank) profitability, including loan size, credit quality, term, cross-sell, and upsell. In this article, we will consider how and why loan size is one of the most significant drivers of profitability for community banks and what community banks can do to improve performance.

Community Bank 195

Community Bank Community National Lending 195

Abrigo

JUNE 30, 2022

What Are the Loan Betas in Your Plan for Rising Interest Rates? Loan betas, or how rates for new and repriced loans will act as interest rates rise, are critical ALM inputs for NIM forecasts. . Takeaway 3 Loan pricing philosophy and methodology influences projections of beta value assumptions for commercial loan categories. .

Lending 195

Lending Marketing Analysis Data 195

Abrigo

DECEMBER 23, 2022

Expert advice for shoring up your institution's ALM model. Navigating a rising-rate environment, leveraging core deposit strategies, and pricing loans effectively were top of mind for asset/liability management (ALM) staff in 2022. Complimentary ALM guidance.

Resources 195

Resources Risk Management Study Strategy 195

Abrigo

MARCH 21, 2023

Strategies for earning more in rising rates Financial institutions need to be intentional with funding strategies and loan pricing models. WATCH Takeaway 1 Earning more income and mitigating interest rate risk isn’t as simple as charging higher rates on loans and earning higher rates on the investment portfolio.

Risk Management 195

Risk Management Management Strategy Lending 195

Abrigo

JANUARY 24, 2024

Takeaway 2 Successful acquisition of failed banks requires rapid comprehension of targeted loan portfolio data, core deposit value, potential deposit runoff, and more. Successful acquisition of failed banks requires organization and rapid comprehension of vast amounts of data, particularly concerning the targeted loan portfolio.

FDIC 195

FDIC Regulation Strategy Data 195

South State Correspondent

JANUARY 3, 2023

While many bankers focus on developing strategies to increase loan yield to widen NIM, we believe this approach is not sound. Loans are not fabricated by banks but are negotiated by borrowers and lenders in a broad, relatively efficient market. What Drives Profitability if Not NIM? If NIM is not a predictor of ROA, what is?

Community Bank 221

Community Bank Community Data Marketing 221

South State Correspondent

APRIL 9, 2024

We estimate that the average contractual loan commitment for term credit at community banks has decreased from just under five years in 2022 to just under three years currently. Borrowers that locked short-term financing in 2022 and 2023 will be faced with higher payments for loans repricing today (term rates have adjusted upwards).

How To 195

How To Community Community Bank Marketing 195

South State Correspondent

JANUARY 30, 2024

A typical current strategy for community banks when originating commercial real estate loans is to offer floating-rate loans or shorter-term adjustable structures. Borrowers are waiting for the Fed to lower short-term interest rates, hopefully translating into a refinancing opportunity for the borrower at a lower loan rate.

Community Bank 195

Community Bank Case Study Community Strategy 195

South State Correspondent

JUNE 30, 2023

The reason bankers should want to provide an above-average level of service is to increase profitability, which translates to charging customers more in the form of higher loan rates, lower deposit rates, and more charged fees. This is where understanding relationship pricing and profitability help allocate resources.

Resources 195

Resources Community Bank Capital Community 195

South State Correspondent

MARCH 19, 2023

In this article, we’ll consider the risk-return tradeoff for bank credit risk, and in a future article, we will compare different community bank business models. Each loan would earn the bank the market clearing ROA. The reality of risk-return for private credit (loans) is quite different. The markets (i.e., The markets (i.e.,

Analysis 195

Analysis Community Bank Operations Community 195

South State Correspondent

SEPTEMBER 18, 2023

Community banks are dealing with smaller relationships (both loans and deposits) that are not being charged appropriately to cover overhead costs. The relationship between loan size and ROA and ROE is shown in the graph below. Yet the average community bank’s commercial loan size is about $250k.

Management 195

Management How To Community Bank Community 195

South State Correspondent

AUGUST 16, 2023

Unsecured personal loan usage is up 21%. Refinanced loans will finish at 6% of volume and scream adverse selection (if you exclude life events). Q2 was likely the top of home prices for this cycle. Unfortunately, the last downturn taught many consumers to use debt consolidation mortgage loans to increase their debt load.

Trends 195

Trends Cards Capital Data 195

South State Correspondent

JUNE 13, 2023

On our loan hedging desk, we work with hundreds of banks ranging in size from just over $100mm in assets to some national banks with over $1T in assets. Combined with our relationship profitability model, Loan Command, we see the pricing of thousands of commercial loans per month as small as $30k and as large as multi-billion dollars.

Marketing 195

Marketing Examples Capital Management 195

South State Correspondent

OCTOBER 10, 2022

Funds transfer pricing (FTP) has been an essential tool for financial institutions for several decades. FTP gained further focus after the 2007 financial crisis when financial firms failed partly because of the lack of funds transfer pricing application and rigor. Simple Funds Transfer Pricing Example.

Community Bank 195

Community Bank Community Examples Management 195

Abrigo

APRIL 25, 2024

The average size of loans examined here was $637,000. The data below outlines SMB loan origination trends, delinquencies on SMB loans (90+ Days Past Due, or DPD), and changes in the average loan sizes for various industries. Our data below shows SMB loan originations have followed a similar trend.

Lending 195

Lending Trends Capital Strategy 195

Abrigo

JANUARY 19, 2022

How to Price Loans Effectively Effective loan pricing is more imperative than ever for financial institutions, given the outlook on interest rates and other factors. . A number of loan pricing factors explain variations in yield among institutions. . Loan Pricing Essential.

Lending 195

Lending Strategy Groups Examples 195

South State Correspondent

MARCH 10, 2021

We estimate that approximately 80% of all banks in the country do not have a commercial loan pricing model that adjusts for credit risk, the shape of the yield curve, acquisition costs, maintenance costs, or relationship revenue.

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South State Correspondent

FEBRUARY 20, 2023

Understanding the competitive banking landscape helps community banks set proper pricing, respond to rival marketing, and compete more effectively. Analyzing the competition can also help a bank be realistic about which products it can sell and at what price. The same picture emerges for domestic deposits.

National 195

National Lending How To Community Bank 195

South State Correspondent

OCTOBER 12, 2023

This applies to candy or marketing for commercial loans in your market. The Problem Explained To better understand the problem, let’s say there are four loans, each with a different profitability. Four banks are going after these loans, each with a different preference. In response, Bank B goes after the Retail loan.

Resources 195

Resources Strategy Capital Industry 195

South State Correspondent

AUGUST 31, 2022

Then there are vendor contracts, employment agreements, statements of work, loan documents, financial statements, tax returns, deposit account documents, policies, and an array of similar applications. Pulling data off a tax return has a low error rate while pulling data off an attorney-prepared loan document is more challenging.

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Training Data Examples Taxes 448

Abrigo

DECEMBER 22, 2023

The most-read lending & credit blogs in 2023 Probability of default, CECL model validation, and stress testing were among Abrigo's top blogs on ALM, CECL, and portfolio risk this year. You might also like this resource, Abrigo's "2022 Loan Review Benchmark Survey Results." Community lending software can help get you there.

Lending 221

Lending Risk Management Community Management 221

South State Correspondent

SEPTEMBER 7, 2022

A common strategy for community banks, when faced with a borrower that wants a 10-year fixed rate loan, is to offer a five-year fixed rate that adjusts in five years. However, adjustable-term loans have several drawbacks for banks and borrowers, especially in a rising interest rate environment. The Issue with Adjustable Rate Loans.

Community Bank 195

Community Bank Community Lending Maine 195

South State Correspondent

MAY 23, 2023

This data is critical for pricing, capital allocation, and marketing. With the average loan loss and lease allowance (ALLL) at 1.25%, including retail, the majority of banks are currently underserved. We have priced this cheaply so any bank, no matter its size, can afford this valuable tool. last year to 12.7%

Trends 195

Trends Minnesota North Dakota Arizona 195

South State Correspondent

MARCH 5, 2022

In this current market, swap spreads are negative, and banks that can utilize swap spreads in pricing loans gain a substantial pricing advantage. Banks that correctly price their commercial loans on the curve using swap rates may be able to achieve nine to 58 basis points (bps) net interest margin (NIM) gain.

Community Bank 195

Community Bank Lending Community Regional 195

Abrigo

MARCH 21, 2024

Firms specializing in fair value bring specialized expertise in financial modeling and valuation techniques. As mutually owned entities, credit unions do not exchange financial consideration in a merger transaction; hence, there is no “purchase price.”

Lending 221

Lending Analysis Exercises Risk Management 221

South State Correspondent

JULY 10, 2023

With an inverted yield curve, borrowers have a pricing advantage to lock in long-term fixed-rate loans, while lenders strongly desire to limit loan duration. One possible solution to this dichotomy is for banks to offer interest rate swaps to hedge individual loans. Of the largest 250 banks, 90% use interest rate hedges.

Community Bank 195

Community Bank Community Tools Management 195

South State Correspondent

AUGUST 15, 2022

Better products, faster service, or insightful advice can translate into additional loans, better credit spreads, or extra fee income. Sometimes just a graphics tool can help a banker win more loan business. Why The Loan Proposal Generator Works. Touchpoints are critical in sales, including loan sales.

Tools 195

Tools Lending Online Training 195

South State Correspondent

AUGUST 15, 2022

Better products, faster service, or insightful advice can translate into additional loans, better credit spreads, or extra fee income. Sometimes just a graphics tool can help a banker win more loan business. Why The Loan Proposal Generator Works. Touchpoints are critical in sales, including loan sales.

Tools 195

Tools Lending Online Training 195

Abrigo

AUGUST 24, 2023

The integration improves visibility into prospective and existing loans, fostering more swap opportunities. CS: The dramatic surge in rates over the past 15 months has created several challenges for lenders , including higher deposit costs, losses on their investment portfolios, and reduced loan demand from their borrowers.

Strategy 195

Strategy Risk Management Lending Management 195

Abrigo

DECEMBER 2, 2021

Takeaway 2 Excess budget funds can also be used to help mitigate risk in areas such as the BSA department or loan review. They also don’t know what to expect in terms of pricing impact for next year because it’s unclear how rate-sensitive their depositors are. Beef up your loan pricing strategy. Options for Excess Funds.

Conference 195

Conference San Antonio Lending Fraud 195

South State Correspondent

MARCH 30, 2022

In banking, this disconnect is hurting institutional performance as relationship pricing is not optimized. How should management go about measuring relationship pricing? Seeing The Big Customer Picture of Relationship Pricing . However, banks can develop their own tools or purchase pricing models from third-party vendors.

Community Bank 195

Community Bank Resources Community Regional 195

South State Correspondent

OCTOBER 4, 2023

Stable short-term rates for the next year or longer will increase cost of funds (COF), hold yields on loans steady, decrease net interest margin (NIM), and pressure return on equity (ROE) for new credit assets. Community banks’ loan-to-core deposit ratio is currently 91.87% – approaching the pre-pandemic level.

Community Bank 195

Community Bank Community Capital Comparison 195

Abrigo

FEBRUARY 14, 2024

Find commercial real estate risks in the loan portfolio Sound risk management practices in commercial real estate lending help lenders manage CRE credit losses and protect the portfolio's profitability. LISTEN Takeaway 1 Effective CRE risk management involves adapting to changing market fundamentals to avoid excessive loan losses.

Risk Management 195

Risk Management Management Lending Capital 195

South State Correspondent

APRIL 3, 2023

The second article compared and contrasted community banks’ pay-for-risk and relationship business models. We define relationship banking as a model focused on a consultative banking approach. Still, the model is not easy to deliver effectively, and its implementation is not as intuitive as some bankers may believe.

Community Bank 195

Community Bank Community Lending Marketing 195

Abrigo

AUGUST 30, 2022

Expanding the commercial loan portfolio in today's market With the right strategies, banks and credit unions can expand their commercial loan portfolios successfully. Takeaway 1 Commercial loans have remained strong through the pandemic despite high inflation rates and unstable conditions. Market conditions. Knowing the why.

Strategy 195

Strategy Lending Risk Management Analysis 195

South State Correspondent

SEPTEMBER 16, 2022

To do so would require at least a rudimentary funds transfer pricing methodology, and many banks have not invested the time to derive a workable framework. Understanding a product’s cost structure is the first step towards accurate pricing and, more importantly, process improvement. Cost of Loan Calculations.

Analytics 195

Analytics Lending Data Groups 195