Net Present Value Function: = NPV(rate,value1,

[value2],...)
 
This function is great to calculate the lifetime value of a
loan or other banking products.  We were amazed when
we started using this function to compare the amount of
money our bank earns on short-term loan products (like
bridge financing, mini-perms or construction loans) versus
long-term stable loans (like permanent finance and real
estate term facilities).  Given that commercial underwriting
expensive and origination costs are high, this function
gives bankers the ability to compare profit streams for
various relationship timelines.  We find that longer-term
relationships are much more profitable for commercial
banking.

 
Weighted Average Life Function: = Sum (value1,[value2],...)
 
Excel does not have a loan-weighted average life function, but with a very simple
sum function, and a two-step formula we create a formula that calculates loan
average life.  This allows us to compare various amortization and loan
commitment terms to try to find sweet spots in the market.  For example, the
average life of a 15-year fully amortizing deal is actually shorter than the average
life of a 25-year amortizing 10-year loan.  Because most borrowers only pay
attention to contractual loan term, a 15-year fully amortizing loan can be more
appealing to a borrower but is actually a shorter credit commitment than a slower
amortizing 10-year loan.  This is a great example of using simple math to provide
safer or more profitable loans.
 
Correlation Function: = CORREL(array1, array2)
 
This function allows us to determine the statistical relationship between two
properties. For example, we track our cost of funding to various indices and
market developments.  We have found that our cost of funding is more closely
correlated to LIBOR than to the Prime rate even though we price very few
deposits directly to LIBOR.  This phenomenon is true for almost all banks in the
country.