Scott Earwood
Director of Community Solutions

Banking has changed. In the last two years, liquidity and capital have become increasingly more valuable as deposits have shrunk, deposit rates have increased and credit quality weakens. To fight the margin crunch and to better manage their liquidity and capital, banks are looking inward; however, most lack the ability to see dangerous pitfall relationships.

We have observed costly pitfall relationships in institutions ranging from $600 million to $200 billion in assets — but with the right information and strategy, they don’t have to. There are five types that you can start looking for and combating today.

1. White Whales: Big, but Not Profitable
Every bank has customers that the bank assumes are profitable based solely on the size of one or more of their accounts. However, to win relationships, the bank and/or banker abandoned pricing fundamentals and created a situation where the bank loses money each month. Banks need to identify these ahead of the next pricing opportunity to have a shot at getting each relationship back to profitability.

2. Vampires: Discounted to Death
The bank has a great client that the bank encourages everyone on the team to take care of. Everyone pitches in, giving upgrades in the form of deposit bumps, discounted treasury management services and improved loan rates. This seems harmless at first, but the special considerations add up and eliminate the profitability. In trying to take better care of a customer, the team has removed all benefit to the bank. Banks must identify these customers and incrementally reduce their drain on the bank.

3. Tourists: Just Passing Through
Banks make money on the money that stays with the bank. Customers who have accounts that immediately sweep money into other institutions may not be worth keeping. Your bank does all the work taking the deposits but gets none of the value if fees aren’t charged. However, banks with the ability to track how each customer transacts can take steps to avoid these situations, and banks with a complete picture of customer relationships can see exactly which relationships are worth keeping and which to exit.

4. Black Holes: Unused Lines of Credit
Every bank has large, unused lines of credit. These ego lines or security blanket lines consume your bank’s capital and drive expenses with no return. Lines of credit are an important, valuable product for businesses. You are putting up capital and need to get value for it. Once you know the profitability, you can lower the limit, charge a fee, get rid of the line or leave it as is, knowing what you’re giving up and what you’re getting.

5. Secret Santas: Unknown Best Clients
There are clients in your bank that are bigger than you think, but they are currently separate entities in that should be considered as a single client relationship. You’re not actively losing money here, but not being able to identify these unknown best relationships means you may not be taking care of them the way you should be. Your bank needs to retain these customers, and your bankers need to know which clients they should be spending their time on. Furthermore, your bankers need to know what a truly great client looks like so they can focus on elevating other clients to that state and pursuing prospects with similar potential.

  • How to Avoid the Pitfalls
    Aggregate Full Relationships: Banks with the ability to combine and organize customer data can enable their bankers to better target which relationships could be deepened and optimized.
  • Determine the Profitability of Each Account and Relationship: Understanding the drivers of profitability in a relationship allows bankers to take action to improve it.
  • Price Based on Complete Relationships and Data: When pricing a deal, consider the entire relationship, not just the instrument in question.
  • Deliver Actionable Information to Frontline Bankers: If bankers can’t see these relationships, they can’t help. Enlist them in the fight by showing them what their clients are worth.

Scott Earwood

Director of Community Solutions

Scott Earwood is the director of community solutions for White Clay, and he is responsible for the community bank and credit union division.  Mr. Earwood spent the last 11 years at White Clay providing bankers with software tools and data intelligence to ensure return on liquidity and capital in each customer relationship.


Mr. Earwood spent the first 10 years of his career working for both national and community financial institutions in the retail, business banking and mortgage lines of business.  After banking, he started several businesses including a venture capital-backed start-up.