White Clay Insights - Flipbook - Page 3
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The Following Types of Commercial Customers Drive Profitability, or Hurt It,
at Community Banks
Averages for Relationships With Open Product
Source: White Clay. Communit y bank sample database, Q1 2025
% of RiskRelation- Adjusted
ships % Revenue
Segment
% of
Dep
Bal
% of
Avg
Annual RiskLoan Annual
Adjusted
Bal
Trans
Revenue
Average
Deposit
Balance
Average Loan
Exposure % of
(000s)
CLV
Commercial
100%
100%
100% 100%
850
$32,500
$525,000
$1,000
100%
High Transactor
11%
48%
59%
45%
6,200
$125,000
$3,000,000
$4,000
56.0%
Transactor
27%
37%
25%
27%
800
$37,500
$500,000
$1,250
35.0%
Loan Only
21%
11%
0%
21%
50
$15,000
$7,500
$750
5.0%
Large Investor
7%
3%
13%
4%
90
$10,000
$1,000,000
$1,000
3.0%
Small Investor
12%
1%
2%
4%
80
$2,000
$100,000
$575
1.0%
Unengaged
22%
0%
0%
0%
30
$600
$5,000
-
0.2%
Encore Bank sells a full suite of Treasury services to commercial customers to
help make their business more profitable.
One of those products is real-time payments so they can get paid more quickly,
and Encore helps escrow companies
reconcile accounts faster. It has begun
integrating popular accounting software
into the bank’s systems, so customers
don’t have to download bank data, skipping cumbersome steps.
At Encore, the bank’s priorities extend
to the employee incentive program. Relationship managers can use a dashboard to
see if they’re meeting their goals, which
tion to optimize pricing and relationships.
For example, commercial clients of
the most profitable retail customers might
have been big spenders, but their profit-
community banks with the highest level
ability has fallen somewhat as fee income,
of transactions tend to be more profit-
such as from overdrafts, has declined.
able than commercial clients with few
of risk-adjusted revenue and 53% of
Taking the Next Step
Once financial institutions understand
customer lifetime value, according to a
who is profitable and who is not, the hard
White Clay analysis of bank data. That
work begins of making the unprofitable
11% of commercial clients have an average
customers profitable.
of $3 million in deposits in the bank and
“It’s a lot easier to cross-sell a customer,
6,200 annual transactions, compared to
most times cheaper than it is to go get
850 transactions annually for the average
new ones,” Earwood says. “A big part of
commercial customer. You need to know
that goes back into ‘Can we be relation-
who your best customers are to take care
ship bankers that sell the value of having
of them, Thompson says, adding that the
your relationship at our community
customers who call the bank regularly are
bank?’” Earwood says. “You have a per-
not necessarily the bank’s most profitable.
sonal interaction with your banker.”
On the retail side, the most profitable
est-bearing deposit accounts to the bank.
“[T]he first question I ask is, ‘Do your
people, even when they go talk to a
commercial customer about a loan, do
transactions. Only 11% of commercial
clients at community banks drive 48%
are weighted toward bringing noninter-
Banks can encourage primacy by offer-
customers tend to be the big savers and
ing services the customer wants and needs.
big borrowers who bring low-cost deposits
For example, savers are driven by higher
to the bank. Large investors aren’t that
rates on deposits and loathe fees. Commer-
profitable, because they tend to chase the
cial clients become more profitable when
highest rate, Earwood says. In years past,
they use Treasury services, Thompson says.
they even talk about the deposits and the
relationship?’” asks Earwood.
Lenders should price deals based on the
risk-adjusted rewards for the bank. If a
customer wants a loan, many banks have
begun requiring a deposit relationship.
Another tactic is to turn someone away
who just wants a loan or offer that person
a higher rate.
Perhaps the biggest issue banks
struggle with is changing their approach.
Switching from an institution that doesn’t
act on its data to one that does is a big cultural shift and can take up to three years,
Thompson says. “If the numbers say one
thing, are you going to actually change
your behaviors to improve those numbers
or are you going to keep doing business as
usual?” Earwood says. “Otherwise, don’t
invest the time.”
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