Delivering Real Value to Your Retail Banking Customers

Delivering Real Value to Retail Banking CustomersWhat do retail banking customers want? The obvious answer… high yields on their deposits and low rates on their loans. As a customer, that’s what I’d ask for. But is it really what I want? When I hire a roofer or a plumber, I never choose the lowest bidder. I carefully consider who I’m about to do business with, and ask myself: Do I trust them to do the job right? What happens if something goes wrong? Will they stand by their work?

Why is banking any different? As bankers, we’re not just clearing houses for cash, we provide a service to our clients and to our communities. We provide our clients a safe place to keep their money, help them plan for retirement, and lend them money to start and build businesses that they’ll pass on to their kids. Continue reading

Interest Rate Derivatives in the New Year: How to “Break Ground” on a Hedging Program

Time to Break Ground on a Hedging Program?We have now passed the five-year anniversary of the Federal Reserve moving short-term interest rates to near zero percent, and the question that immediately arose in the wake of that monumental decision continues to weigh heavily on community banks five years later: “When and at what pace will the Fed begin to raise the Fed Funds target?” With the removal of quantitative easing at the top of the Fed’s agenda, market expectations in the form of the yield curve have become quite volatile as participants attempt to predict how aggressively the Fed will “taper” bond purchases. While the timing of policy changes remains uncertain, the ultimate direction of interest rates is clear-as in “nowhere to go but up.” Continue reading

Big Changes for Small Creditors

Are you a small creditor?

Big Changes for Small Creditors

The answer to this question could limit your margins on first-lien mortgages by as much as 250 basis points.

Earlier this year, the Consumer Financial Protection Bureau (CFPB) announced a change in Regulation Z that creates an elevated threshold on higher priced mortgage loans for smaller creditors. But before we discuss the change, let’s talk about how we got here.

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Beyond the Static Rate Sheet

I was fortunate enough to publish an article on The Increasing Value of Deposits in BAI Banking Strategies today.

“…The banking industry has run off $1 trillion, or one-third, of its time deposits since 2008, according to the Federal Deposit Insurance Corp. That was good for banks as long as interest rates were going south. However, since April 2013, we’ve seen a doubling of the five-year Federal Home Loan Bank (FHLB) advance rates, which represent an alternative funding source for financial institutions. Five-year rates at the FHLB of Des Moines, for example, have been over 2% for several months at a time when the average five-year bank certificate of deposit rate as reported by FDIC has been around 0.75%…”

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Best Practices for Purchasing Software-as-a-Service and Cloud-based Solutions

Cloud computing is here... are you ready for it?Gartner Research estimates that annual spending on cloud-based solutions will grow nearly 66% from just over $23B today to just under $40B by the end of 2015. Much of this growth will occur in the banking & financial services industry as businesses migrate from older, less flexible, on-premise systems to more agile and always up-to-date services in the cloud. For many community banks, this is an entirely new endeavor – one that requires a brand-new skill set that must be mastered to reduce cost and maintain overall competitiveness. So how do you get started? What sort of applications are ideal first candidates for the cloud? What should a bank look for in a cloud solution provider? Continue reading

Community banking and baseball… lessons from a small market team

Billy Beane found a way for a small market baseball team to WINAnybody recognize this guy?

That’s Billy Beane… well, Brad Pitt actually.

For nearly 100 years, there wasn’t a lot of money in baseball. That’s not to say that money didn’t play a part… just that the players, coaches, and fans were there primarily for the love of the game. Kids on playgrounds across the country idolized their favorite sluggers, and dreamed of someday getting a chance to step up to the plate. On game day, raving fans came out in droves to support their local teams, and players ran onto the field determined to win. Continue reading

Are you growing your retail deposit base enough?

I have the good fortune of speaking with bankers every day, from all across the country, in large markets and small. What am I hearing? Again, and again…

The wholesale markets are shrinking, and I’m going to need a lot more deposits to make up for it.

I was thrilled to be invited to speak on this very subject at the upcoming Retail Deposit Optimization and Strategic Management Symposium in NY on December 5th and 6th. GFMI marcus evans is bringing together heads of retail deposits, retail banking, and deposit operations from the retail banking industry to discuss strategies for deposit growth. Speakers will also examine the effects of the new Basel III liquidity regulations on acquisition and retention strategies. Continue reading

Want to know what’s really happening at community banks… just ask a community banker

Want to know what's really happening at community banks... just ask a community bankerThe value of a banking conference is mostly in the people, in the candid conversations over lunch, dinner, or even on the golf course. That’s where you hear the real story of what’s happening every day in the trenches. The sessions and presentations provide the backdrop, the trends, the landscape, but the people provide the perspective.

Such was the case a couple of weeks ago in Buffalo, NY at the IBANYS Annual Convention. I had the pleasure of speaking with a number of community bankers and each one welcomed me with a friendly smile, a firm handshake, and some very engaging conversation. Everyone I talked to was happy to share what was really happening in their world. Continue reading

Should you proactively re-price highly profitable loans?

Let’s say you’re looking at a really profitable loan that you booked at a much higher rate a few years back. Maybe the customer has a couple of loans like that with the bank and you’ve even earned their deposit business. You’ve built a solid relationship and have become their go-to banker.

But rates have fallen quite a bit since you booked those loans. The borrower could easily re-price and save themselves a lot of money. And it wouldn’t take much to discover where today’s rates are… information like that is coming at us from practically every direction. Even a casual conversation at Rotary Club can let the cat out of the bag in no time. At that point, you’ve become the banker they didn’t hear it from.

So, do you go out and proactively re-price, hoping to trade a bit of today’s profit for an even stronger relationship, or do you ride it out? Continue reading

Find out what your borrower really cares about… and give it to them

Win-Win solutions are out there... you just need to pay attentionFrom a recent American Banker article…

The real struggle is on the commercial side… Everyone is fighting for the A-paper clients.

Not surprisingly, I heard the same thing at an RMA conference in April. During my talk, I contended that everyone seems to be chasing the exact same deals, and they’re chasing them in exactly the same way – in essence, by offering lower and lower rates. This really hit home with the crowd, and a number of bankers tracked me down to vent about how frustrated they are. Continue reading