Community Banker Guy
@commbankerguy
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Community Banker sharing insights and dropping jokes. Surviving this Fintech universe.
Joined April 2022
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What if rates get cut 50bps second half to go up 150bps from there. I imagine most banks aren’t ready for that event to happen.
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Young people can be so disappointing. We had a lender in his 30’s that we transitioned from analyst to loan officer. Gave him raises along the way. Has booked minimal deals for 18 months so on Friday we wanted him to go back to splitting analyst/lender duties and take back raise
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My goodness the realtors are crying. Heard another one today. Do they really think we feel sorry for them for taking 6% of the entire housing market for filling out a form??
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The Fed is beginning to call banks with CRE concentrations INCLUDING Owner Occupied portions. The game is changing.
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@TicTocTick
Now try $5,000-$10,000 fixed fee at most. % of the sale should be rejected by everyone.
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How do you evaluate if your bank is high risk for a bank run??
1) Look at on balance sheet cash as a % of assets or deposits. below 3%,🚩
2) Look at unrealized loss in bond portfolio as a % of tangible capital. If tangible cap is under 4% after mark, 🚩
3) Look to see if
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@chrisderose
We were. However getting demoted and still making six figures and you quit, that’s just ridiculous. No fight in young people when it doesn’t go their way
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We are now in part of the cycle where Bank of the Ozarks is actually turning down construction projects. 😂
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To all the people thinking of switching to a big 4 bank, community banks fund 60-70% of all small biz in this country. They make loans that large banks wouldn’t do. You are just a number to them and if you don’t fit in their box, you don’t get that loan. There are ways to protect
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Two best charts I’ve seen from JP Morgan to explain what happened and shows you how unique Silicon Valley Bank was that led to blowup.
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Talked to a realtor friend of mine for first time in a few months who runs a flat fee based residential brokerage. He had to lay off more people and he was getting worried. Said he lowered a price of place in a nice area of town 15% and had zero showings. He’s been in biz since
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@DrewLukacs
@chrisderose
20 out of 24 months without a loan originated. He should have been fired.
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@_ColeMurray
I’m not a boomer actually, Gen X.
So you give someone an opportunity to rise in organization, they fail. You encourage, you check in, you give them loans, you set up calls. They fail.
Maybe it’s not managements fault and not everyone earns to stay in that position making that
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I’m hearing of larger banks engaging in any tactic as possible to get out of low interest loans. A recasting of a loan after a significant pay down, a change in business ownership 2 years ago, any maneuver to call the loan.
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Everyone has a job but no one can afford anything.
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Small community banks are willing to stick by you and give you time to work through problem situations as long as you don’t go dark on them.
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Liquidity in most community banks is drying up very fast. Funding we thought we had for next 12 months is gone. We’ve seen a recent desperate bank advertise a CD rate at least 50bps higher than everyone as of this week in our area.
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A majority of realtor commission is a tax, nothing more. They take none of the risk and make more than the bank. And banks finance their fee. 😂 cry me a river
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Bank CEO round table discussion points yesterday:
1) Check fraud out of control
2) No one interested in Fed Now, don’t want to be first mover
3) Deposits Deposits Deposits
4) Chief Innovation Officer needs
5) Young generation is weak and not one person works past 5pm.
6)
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Need 10y above 5% for any meaningful slowdown IMO. I have the largest pipeline of construction requests we’ve ever had right now. Frightening
The most likely macro scenario by the end of '24 looks like little to no Fed cuts, elevated rates on the long-end, and the economy slipping into recession.
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It’s exciting to fight for a loan and get it approved knowing the project will change a persons life, continue their legacy, and make a huge impression on the community. Makes you proud to be a community banker. 💪🏼 now let’s get the project finished 😅
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As I’ve been saying since July, LT rates are finally reacting the way the Fed needs them to. We will see asset prices going down and real pain begin. It’s happening as planned now that Treasury is out of the way. Next phase of the game is here.
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Just had a realtor friend and owner of a very successful brokerage call me, said he’s simply telling his buyers to send low ball offers in. It’s a process for sellers to understand when the “market has rejected their price.” Fun conversation.
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Spoke with our Fed case manager today. CRE reviews really ramping up. They are trying to get banks to hold concentrations down in anticipation of recession. The owner occupied vs non owner occ issue is frustrating. We have a lot of work to do.
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2024 is really going to be a mess. As a borrower, you need to be prepared to put equity in a renewal deal or move it to someone else if you can (most likely not). Get as much cash as you can, liquidate things, don’t try to wait til last minute. Take action now.
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My notes from senior lending forum yesterday:
1) Banks slowly turning spigot back on
2) No credit issues, like zero
3) Word is getting out about the Fed counting owner occupied in CRE bucket, everyone concerned.
4) Deposits required to do most loans 10-20% of loan is typical
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Our HELOC request for increases really starting to come. We’ve been waiting for it and utilization starting to pickup. Consumer debt is insane right now.
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I know it would be surprising to most but to get a loan done as a small business, you need an advocate. Someone that will fight for you at a committee or board meeting. That part of the banking biz no one sees. Appreciate the loan officer that is willing to put their butt on the
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How are banks looking at new loans today:
Pricing- there is very little room for negotiation. We must get our yield to make it worthwhile for our NIM
Given cost of funds. If it’s in the 6’s, take it and run. 7’s is a great deal, 8’s is becoming more standard.
Equity- need
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@leadlagreport
I will never understand how you keep doing it. You’ve been wrong for years. Cost people money with your advice. Maybe one day soon, it will be your day to celebrate the crash you have predicted for 5 years.
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If you are a community bank and aren’t adapting as fast as you can, you are already dead. The sense of urgency is lacking in so many. Move as if you got a decade to be viable at most. Stop waiting and start acting.
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I keep hearing loan pipelines are falling off a cliff. Another struggle for banks in ‘24 will be can they deploy enough new money and reprice renewal loans to make up some margin as the cost of funds keep squeezing higher.
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I believe depositor relationships have changed for community banks. Getting someone’s primary deposit requires good service, good tech, and high yield. It’s too easy to move money to higher yielding accounts with better tech and people are no longer willing to get nothing if they
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Pretty confident RobinHood going to lose a ton of money.
How can Robinhood afford to give 3% cash back?
@vladtenev
answers
2 customers:
Transactors pay balance in full. RH is using this as upsell to other Robinhood products via Gold
Revolvers use debt. RH makes money lending to them.
They are ultimately competing with JP Morgan.
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I really don’t know if we can keep our mortgage department open at this point. Losses for 8 straight months with no end in sight.
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FWIW, I recommended to the Board in early 2022 to swap fix to floating on 10’s of millions to hedge our loan book and they said No. Said we had “missed the move”. That No has cost us $1m per year in income.
Should I tell them?? 😂
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We get regulated so heavily. I will never understand how regulators didn’t pressure SIVB in the fall to raise money given their risk profile. Their EVE exposure on their IRR model had to be huge and no one did a thing?? Baffles me.
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Past dues and non performing loans are starting to show. Frauds are being revealed. Not saying end of the world but cracks are there.
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Observations from my Chief Credit/Lender Forum this week:
1) No surprise consumer credit problems bubbling
2) A lot of banks still on hold and not lending on CRE and construction
3) Assisted Living loans are a disaster with long COVID 😷
4) Renewal of residential specs will
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It’s overlooked but being a Credit Officer is very tough and somewhat lonely. You need to be right 99% of the time. Factors outside your control affect credits. Recession fears always persistent balancing with pressure to make deals happen with asset values high. Tough job right
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Had an investor friend get a house 25% off list yesterday. Third one I’ve seen being a liquidation sale and that seems to be the market clearing price. Just take off 25-30% and that’s your number.
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Serious question, is every small private realtor and mortgage company going bankrupt before this cycle is over??
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I’m a former regulator and either agency could have stepped in last year, evaluated their interest rate risk, and pressured them to raise money and de-risk the balance sheet. This is a failure on them as well. What were they looking at?
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To banker friends, most loans to your realtors are going to be problem loans soon.
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Was at a dinner with a few bank CEOs hosted by investment bankers. Everyone saying Fed not going to cut.
I tend to agree but when you have consensus one way, it’s time to place bets the other way.
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Ran across a 80 yr old community bank in middle of nowhere, has $100m in equity and the bank is $300m in total assets! They have locked up the $100m in bonds with a $15m unrealized loss. Why would you not sell it all and reprice the balance sheet?? Annual ROE of 2-3% over last
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I’m not trying to whine when I say that in general, the only thing community banks have left to lend on is CRE, rental property, and some C&I. The consumer part of the biz has been regulated out and competed out by online lending and Credit Unions who aren’t on a level playing
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My journey in one post:
1) Finance Major in college
2) Bank Regulator for 10 years
4) Consultant for problem banks in GFC
3) Joined startup/recap of local bank as a analyst/risk officer
4) Became president of bank in pandemic
5) Bought stock along the way and now own 1% of bank
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We have been assessing mergers with other banks in our state in order to get some scale to help on efficiency. Every situation we hear about are old CEOs wanting lengthy payouts or extended stays when their time is obviously passed. Frustrating.
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Let me just say, if you are a bitcoin person, stop following me. It’s a complete waste. The use case doesn’t exist and you are buying into a ponzi. If it isn’t obvious to you, then you are truly lost.
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A known bank in the southeast is trying to sell pools of loans. One pool I reviewed was 70% unsecured small business loans over 90 days past due (I.e.charge off). Packaged with some real estate loans that were marginal. 🤮
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@benjaminsweet_
Fascinating for a person that didn’t book a loan for 20 out of 24 months. Only ones he did, we gave to him. We coached, we encouraged, we did everything to help a guy succeed. His performance was awful.
I feel like I’m living in the upside down. 😂
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Another issue the FDIC and other examiners on the ground have is that compliance has distracted bankers and safety & soundness exams. No bank has ever failed from compliance risk but regulators weigh them the same or compliance more. It’s very stupid and why I believe we’ve had
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If you don’t think tech has changed the banking landscape for community banks, I submit to you this.
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Amazing. Barney Frank was on the Board of Signature. 😂
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Bottom line, Realtors are the biggest rake in a transaction and I hope this changes things. Take no risk and get most of the transaction, just stupid. With so much data out there, their knowledge of an area means nothing now. Their value now would be about repairs and ROI on
#Realtors
- there is debate stirring in the mortgage world about the many possible outcomes of the commission lawsuits with NAR. I’m curious if individual brokerages are discussing this and how it may impact future roles, responsibilities and compensation?
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Checked in with some banker friends. All we are getting are construction requests. No amortizing deals out there. As a borrower that’s needing construction financing, a deposit relationship needs to be established. Otherwise, it will cost you P+1.
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The more I study on the issue, the more I realize the game between Treasury and Fed is in total control of economy and how it moves markets. If you don’t understand how treasury issuance, repo facilities, TGA, QT affects the economy directly, you are flying totally blind.
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Never go dark on your bank. Take the call and communicate. Going dark simply leads to you losing your property or equity when we force you to sell it. It’s called default interest.
Default interest in the loan agreement allows the bank to eat up any equity you have with
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The hidden value in banks today are the rural ones. Although technology will continue to take share, they will last the longest of the remaining banks.
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No major deposit movement for us today. Good to see Main Street being calm for now. Had 3 customers get payroll hung up in SVB.
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I feel like no one is talking about this. Would be a huge deal.
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If you are slow with getting your bank financials (you know who you are), you are playing with 🔥 if you have an under market rate. Banks will use any reason possible to get out of the low fixed rates. Don’t risk it.
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We told a high profile borrower No today on a multiple spec construction deal. He acted like a jerk and hung up immediately instead of hearing our feedback of concern. Texted us it was awkward and we missed out on a great deal. 😂 Made me feel so good to know we avoided that
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Just hit 5,000 followers. Thank you to everyone that engages and follows me. It’s a grind and my wife always rolls her eyes at me tweeting 😂. I’ve learned from so many here and Here’s to the next 5k.
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Talked to a banker CEO/competitor yesterday and they are liquidating most underwater bonds in Q4. I assume many will do this to set up for next year and will prob be the top in rates. 😂
Full disclosure: we are thinking about the same thing for our 2025s
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I just looked back at a swap presentation that we didn’t execute in late 2021. We were looking to hedge some of our fixed rate loans.
The quote was:
Pay fixed rate on a 5 year maturity at 1.13%!
Receive floating LIBOR at 2%.
Worth over $1m per year to us now.
I want to cry.
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Most older boards and management are out of touch and not understanding what has changed about banking in last 10 years and how the service/product is offered and the speed. They still think banking works the same old way and it doesn’t. It’s been ripped apart into pieces by
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A credit union in my area is doing a 5.65% CD for 10 months.
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Year End Round Up for My Bank:
Earnings down 40% 🫠- double whammy of margin and mortgage loss. Expect to rebound half that lost income with most of our bonds maturing in Spring.
Net Loans Up 7% - Gross origination down 50% 😬but steady net growth all year with less payoffs.
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As you guys know, my concern going into second half is the treasury bond issuance taking longer rates higher, causing another liquidity squeeze on banks as depositors/investors move money there to take down the supply. Regulators somewhat see this coming w the new guidance on
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Underwriting deals continues to get harder. Everything barely cash flows even with more equity in. Credit officers are in a tough spot these days and have to find mitigating factors as best they can.
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So much fraud happening within Cash App/Sutton Bank. All the ACH kiting we see ends up at Sutton, every time.
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Quarter end is here. What do I expect on most community banks:
1) NIM margin compression intensifies. Some management will say it’s over but I disagree.
2) Reduced profitability overall due to compression to pay up for deposits.
3) OCI and pressure on capital worsens. Bond
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A lot more customers are sensitive on the $250k insurance limit. That’s all they ask about.
In other news, commercial loan pipeline is dwindling.
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These people kill me. What else do you think small banks have to lend on?? Consumer loans are now all credit unions and fintech. Larger banks take what they want. You are only left with higher risk assets and you have to be smart enough to underwrite the risk.
The most concerning thing I found in an overall mild report was the overall exposure of small banks to the most vulnerable segment of CRE - office and downtown retail. It appears notably higher than the big banks and regional banks.
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Treasury management people are now more valuable than ever. Most banks should have been developing this talent during the era of cheap deposits. Most ignored it including us.
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I will never understand the parents that put their kids in travel ball all year/tons of cash on practice in sports to hopefully get a scholarship don’t just put that money in an index fund and you will have college paid for. Sports important for life lessons but it’s so overdone
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Larger banks over $50b should pay for the losses on uninsured deposits going forward. The reason it’s even an option bc these banks were too big to be acquired given TBTF max limits. This would incentivize banks to remain smaller and protect overall system.
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My predictions for Q4 earnings:
NIM declines across the board and worse than people expect. Earnings going to be down big vs Q4 2022. Most will say it’s the bottom but I think it’s Q1.
The zombies will begin to reveal themselves. Those that have no chance of recovery in ‘24
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I’m going to DC to listen/discuss bank regulation, DIF insurance, etc. I can’t stand politicians today and their inability to do nothing but their party line. Doubt anything comes from it, but if you don’t defend the community bank now, when will you??
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Heard about one of our spec home builders running out of money and can’t pay their floor guy. We are complete at 60% LTV on our deal but it begins.
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The most frustrating part of running a small bank is the amount of time and energy on compliance. Section 1071 is a new challenge that we will have to devote more time, more resources.
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In case you are wondering, deposits are still running out of our bank. A slow bleed.
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I’ve said it before and I’ll say it again. If you don’t understand how the mechanics of the Fed balance sheet works, you are flying blind. The rate is meaningless to the overall puzzle.
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All these people saying Apple will be one of the biggest banks with just a savings account, I just don’t buy it. Goldman Sachs is buying market share using Apple as a platform.
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I find myself more interested in doing everything I can to promote employees, encourage/invest in their development, pay them more money than anything else about the bank. Customers & shareholders won’t care as much about what you did for them as the employee that you helped get
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Has anyone noticed that Credit Unions who don’t pay taxes had their hands out for the $570m from the CDFI fund/treasury.
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I am not as smart as the Chair Powell but I’m having a hard time understanding why they would cut when the economy hasn’t really slowed with Fed funds over 5% for a year.
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We have a borrower that hasn’t been able to sell their home on a bridge deal. Her loan has matured and We are pushing to foreclose bc we are well secured. She’s dropped her price from $1.1M to $750k as of today. It’s a great neighborhood but goes to show you how everyone’s price
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Guys, I’m in a small restaurant off beaten path in my city w entrees at $40 per on a Thursday night and it’s packed. Drinks flowing everywhere. Consumer is doing just fine.
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President Biden just talked about one thing I applauded. Eliminating
non-competes. They are ridiculous and take advantage of your youth. Should never be allowed.
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The BTFP arbitrage is over. Congrats to those who locked in their rates. We did 4% of our assets and wished we had done 10%!
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To the housing crash skeptics, this has to fix itself somehow. My best guess is rates and prices lower over time. However, if there is a credit crunch, we are down 20-30% quick.
Is it better to own or rent a home?
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My best guess on RE downturn given what we did as a bank. Feels like calm before storm.
So many refinances in ‘late 20, ‘21,early ‘22 gives you a typical 3-5 year time span. As most have said, Maturities will be issue as things reprice, making your payment 50%+ more, but prob a
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Only going to get worse. Banks will have to manage through a structural change of a deleveraging system. Cost of deposits will be higher and NIMs lower.
Jeez, U.S. banks have lost deposits for 5 quarters in a row
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I hate large banks. Always want to screw over the customer for a bad deal they made.
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