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Bank Fee Income

Financial Impact Analysis

  • Net interest margin equivalent of approximately 13.3%
  • For every $1,000,000 in volume, the bank will earn approximately $133,000 in net fee income
  • Every $1,000,000 in portfolio will yield approximately $700,000 in compensating core deposits (bank manages 100% of deposits with 50% of loan)

bank Fee Income Loan Size

Bank Portfolio Analysis

Total Portfolio          $2,000,000
BRS Participation    ($1,000,000)
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Bank Portfolio           $1,000,000

Total Income (14%)    $140,000
BRS Fee (5%)           ($7,000)
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Net Income                 $133,000

Equivalent Net Interest Margin of Approximately 12%

Core Deposit Analysis

Bank manages 100% of deposits

Reserve Account                          $500,000
(approx. 25% of $2mil portfolio)
Borrower Operating Account          $200,000
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Total Average Deposits                 $700,000

Compensating Core Deposits of $700,000 are
generated on bank’s $1,000,000 portfolio

Bank Survey Results

During the first quarter 2014, BRS conducted a survey of community and regional banks with established accounts receivable financing programs. Only banks with accounts receivable financing portfolios greater than $2 million outstanding were included.

The survey found that while accounts receivable financing was only about 4% of the banks’ portfolios (ranges were 2.75% to 5.25%), A/R financing generated about 45% of the total portfolio revenue (ranges were 39.5% to 52%). The asset allocation and revenue production are illustrated in the following pie charts:

accounts receivable bank survey results

This disproportionate revenue to assets ratio demonstrates the significant impact that A/R lending can contribute to bank profitability. In addition, A/R credit product represents net new loans that the banks would not otherwise be able to accommodate on a conventional line of credit.

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