Continue reading »]]> Amid record increases in deposits, and low demand for business and consumer loans, the FHLB is suffering portfolio declines and low demand along with the rest of the industry.  FHLB advances had an overall decrease of 13.2% for the year so far, the lowest level since 2000.  FHLB Dallas and Chicago led the pack with 26.7% and 24.4% declines respectively. Only two FHLB banks had increases in the 3d Qtr. with Cincinnati at .5% and Indianapolis at 1.6% increase. They are suffering the same problems that banks are currently experiencing, i.e. shrinking net margins, lower loan balances, higher yield investments being replaced with lower yields.  Investments are also declining at FHLB banks, but in some cases are overtaking their advance balances. Their regulator, the FHFA has warned that  since their primary role is to provide liquidity to banks, they cannot continue to operate this way.  Are the issues in our industry temporary in nature, or structural like other economic problems in the U.S.?

Article source: http://cbankfunding.com/new/2012/03/23/october-31-2011/

Continue reading »]]> The focus is now on loan growth for most banks. Regional banks Q3 results are reporting modest loan growth, improving credit quality, and continued shrinkage in loan loss reserves.  All of this is good news except that low interest rates, lower fee income, and higher compliance costs are obstacles to higher revenue. Huntington Bancshares was the leader of the 10 largest regional banks with loans and leases up 4% for the quarter, net charge offs down .92% and loan loss reserves decreasing by 63% from one year ago.  The key to loan growth will always be adding new core customers. Studies have shown that two thirds  of those new DDA customers add revenue through additional products and services. It may be wise to consider innovative new deposit products, even though the industry is awash in short term liquidity. The brokered market still offers the best option for extending liabilities.

Article source: http://cbankfunding.com/new/2012/03/23/monday-october-24-2011/

Continue reading »]]> Good Morning,

One of the biggest challenges for community banks with assets less than $1 Billion is raising capital. Current need is estimated at $90 Billion, according to Joshua Siegel, CEO of Stonecastle Partners, a private equity firm in New York that invests in community banks. The biggest obstacle is the Bank Holding Company Act of 1956 that requires any outside investor who owns more than 24.9% of a bank must be a holding company, subjecting them to all of the regulatory requirements. If a bank has $100mm in equity, that's only a $25mm investment. For most private equity firms, the number is too small. Currently, 92% of the 7,437 banks in the U.S. have assets less than $1 Billion, and are effectively shut out of the private equity market. A group of investment bankers, private equity firms, and others are now looking at solutions to this issue, with the intent to garner support from a congressman to advance a bill with changes to existing laws. It is time we update this antiquated law and help community banks to fund growth.

Have a good week.

Christa Gerlach

VP, Business Development

Community Bank Funding Company

MBCD Rates

eCD Rates

Continue reading »]]> The focus is now on loan growth for most banks. Regional banks Q3 results are reporting modest loan growth, improving credit quality, and continued shrinkage in loan loss reserves.  All of this is good news except that low interest rates, lower fee income, and higher compliance costs are obstacles to higher revenue. Huntington Bancshares was the leader of the 10 largest regional banks with loans and leases up 4% for the quarter, net charge offs down .92% and loan loss reserves decreasing by 63% from one year ago.  The key to loan growth will always be adding new core customers. Studies have shown that two thirds  of those new DDA customers add revenue through additional products and services. It may be wise to consider innovative new deposit products, even though the industry is awash in short term liquidity. The brokered market still offers the best option for extending liabilities.