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May be off topic or wrong forum. Operating loan interest ?
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behog
Posted 11/25/2012 00:30 (#2715323 - in reply to #2714692)
Subject: Re: May be off topic or wrong forum. Operating loan interest ?


frederick, MD

golfnut - 11/24/2012 18:49 As a former banker I'll will say that most banks should be making good money in this environment but do be aware that CD rates are only a portion of a banks funding. If a bank does not have enough deposits to meet loan demand they too have to go to the market and borrow money. Sources of funds include but are not limited to the Federal Reserve, other banks (often called Fed Funds), FHLB (Federal Home Loan Bank, but the name doesn't mean much). Also, banks are encouraged by regulators, and good banking practice, to tier their rates and terms for risk management. The last I knew Fed Funds daily borrowings were the cheapest source of funds but just like customers, banks have access to a limited amount of daily operating funds and are forced to term out their borrowing and therefore increase their cost of funds. That being said, I would not anticipate rates to make any drastic changes under the Obama administration. The economy is still stagnant and big banks appear to be afraid to lend at any rate. Bernanke does not seem to be in a big hurry to make any drastic changes. Also consider what you want in a bank. Some are fee driven and some are rate driven. I was never a fan of fees but we were known for being full service. The rates we charged were very competitive but not the lowest. Nearly all my customers knew they could call me any time (and often did) and it did not bother me. One good customer called me on a Thursday evening wanting approval to spend nearly a million bucks the next afternoon on ground. He generally gave me more time but his landlord was getting wishy washy. He got the approval and bought the ground. Farm Credit would have needed two weeks, and charged closing fees, documentation fees, etc. I charged him only the filing fees. When a good customer of mine was killed in an ATV accident the home town bank I worked for pretty much took care of the farm operation with her son in law until the end of the season. She didn't have time or desire to worry about it. Full service banks generally have slightly higher rates.  Don't forget to look at the strength of your balance sheet either!
                                                                                       Will you please come here and help us start a bank.  This area needs bankers like you

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