Articles

Jeff Morris gives his profitability perspective in latest FMS Update

Jeff Morris was featured as a panelist in the recent FMS Update article titled, “Perspectives on Profitability – Getting the most out of profitability analysis in community institutions”. Jeff was asked wide-ranging questions on how community banks tackle profitability analysis. To read the full article, please click below. FMS Update

Read More

A Storm of Sorts is Brewing for Community Bankers

A storm of sorts is brewing for community bankers, perhaps not the epic “perfect storm” but one that nevertheless will present some significant challenges in maintaining profitability and margins over the coming months and well into the 2016 – 2017 planning horizon. While we don’t know when the Federal Reserve will actually begin to raise rates, whether they start this October, in December, or in early 2016, it appears that they intend to raise the benchmark overnight rate gradually over the next 24 months, by as much as 300 basis points.

Read More

Pricing Small Loans – Essential Concepts in Loan Pricing

The most significant complaint we hear from bankers regarding in-house and third party pricing models is that they don’t work well on small loans. Bankers get frustrated because no matter what rate assumption they put into their model, the loan never meets the bank’s ROE target levels. In this article, we’ll explain how loan profitability is calculated within a pricing model and how a properly calibrated system allows lenders to be competitive regardless of loan size.

Read More

Funds Transfer Pricing – Essential Concepts in Loan Pricing

The single largest impact on profitability calculations in your loan pricing model is the Funds Transfer Pricing (FTP) rate. Many community bank commercial lenders and credit analysts generally are unfamiliar with the importance of FTP concepts and methodologies and how it figures in to the lending process. Members of the finance team are often tasked with maintaining in-house FTP systems for their institutions, sometimes at the exclusion of lenders and credit personnel.

Read More

New Basel III Standards Lead to Higher Rates or Lower ROE’s

Whether you are a Community Bank mirroring the new Basel III standards voluntarily, or a larger bank required to comply with the new capital guidelines, the effects of these increased standards will cause you to either charge your commercial loan customers (perhaps significantly) higher rates, or accept a significantly lower risk adjusted return on capital (RAROC) for your bank. Prepare now by planning your institution’s most effective response to the implementation of these new guidelines.

Please see the full length article, provided by Austin Associates and LoanPricingPRO™, which covers each of the commonly originated loan types affected by the new standards.

Read More