Academic journal article ABA Banking Journal

The Headache: Revenue Improvement

Academic journal article ABA Banking Journal

The Headache: Revenue Improvement

Article excerpt

Banks face financial pressures, and we asked prescribers how they have been addressing them through repricing, diversification, and staff reorganization. Here is what bankers told us regarding the first. You'll find more ideas in future issues on these topics and online at www.ababj.com/blog/277.html, where you can add your own ideas. Plus, there's still time to enter our $50-prize drawing by submitting a motto or inspirational quote that you keep by your desk.

Deadline: November 15. Read more about it in last month's special "Aspirin" in the digital magazine at www.ababj.com

Remedy 1: Review business services

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Stacey Bentley, Cedar Valley market president, Community National Bank, $228.4 million-assets, Waterloo, Iowa

We've made two major repricing moves. First, we began to charge for online business-banking services. There's no question the service saves customers time and money by managing their accounts online. We have found most have no issue paying the fee once they realize the benefits. Another area we found to improve pricing was in merchant-card processing. Once we began to research vendors, we found a more viable cost-saving option and made a change. We then reviewed each merchant account and determined the fees needed to cover costs and, more important, offer a profitable and beneficial tool.

Remedy 2: Rethink deposit rates

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George Marx, chairman, president, and CEO, Copiah Bank NA, $158.7 million-assets, Hazlehurst, Miss.

We realized at the onset of the downturn and recession that maintaining margins would be a challenge. So we made the conscious decision that we would concentrate on deposit repricing, as we knew that we would have pressure on loan rates, even those that were locked in for a remaining three to five years. This meant that our growth would slow down, and that deposits would actually decrease a little bit. We aggressively repriced our time deposits, as well as short-term, interest-bearing deposits, slightly below our market competition. We did this on both consumer and commercial deposits. The net result has been that we did have a small growth; but, more important, we were able to maintain our net interest margin, net of loan fees, which since 2007 has ranged from a low of 4.42% to a high of 4.70%, and is currently at 4.63%. This taught, first hand, what we had heard for years: "Bigger is not necessarily better. …

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