ABA Banking Journal - October 2012 - (Page 20)

Pass the asPirin The BAnker-TO-BAnker exchAnge The Headache: Revenue improvement 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 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 costsaving 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 George Marx, chairman, president, and CEO, Copiah Bank NA, $158.7 millionassets, 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.” Remedy 3: Revisit risks and costs David Rom, president and CEO, Platinum Bank, $151.1 million-assets, Saint Paul, Minn. We have refined our pricing approach to differentiate both risk and service. On the risk side, we have recognized that loans with greater risk carry significantly more monitoring and maintenance. Particularly with operating lines secured by receivables and inventory, higher-risk credits contain higher volatility. Our appetite remains strong for operating credit financing, but we recognize the need to price for such volatility. On the service side, we have reviewed all fee and service pricing schedules. We performed a market analysis to determine a cost-basis approach. We found, in many cases, we were charging much less than it cost us to deliver. Accordingly, we raised our earnings credit rate to encourage customers to retain higher deposit balances. We have seen that our average deposit customer carries much higher balances, resulting in stronger efficiencies per customer. Remedy 4: Incentivize checking Sharon Burran, president and COO,Woodhaven National Bank, $399.5 million-assets, Fort Worth, Tex. We replaced free checking with a new checking product called Select 4, which has a monthly service charge that may be lowered in increments or to zero if a customer uses four other services: internet banking ($2 credit); electronic statements ($2); direct deposit ($2); debit card, 10 transactions per statement cycle ($1). Also, we set an interest-rate floor on commercial loans due to the low prime. Remedy 5: Farewell free checks! Daniel C.Yates, president and CEO, Brattleboro Savings & Loan, $179.2 million-assets, Brattleboro,Vt. On the business side, we established minimum borrowing rates and line fees, and eliminated free checking. On the consumer side, we eliminated several free accounts and ended a years-long tradition of buying customer checks. Remedy 6: Reduce waivers Frank Campbell, president and CEO, Pilgrim Bank, $171.4 millionassets, Cohasset, Mass. Last year, we did an overhaul of our fees and charges. We raised some, but, more important, we initiated an effort to charge for services that we had neglected in the past. And we also reduced fee waivers. 20 | ABA BANKING JOURNAL | october 2012 http://www.ababj.com/blog/277.html http://www.ababj.com

Table of Contents for the Digital Edition of ABA Banking Journal - October 2012

ABA Banking Journal - October 2012
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
Picture This
Ag bank rebrands—literally
Pass the Aspirin
Tech Topics
Ready for the leadership ride
Community Bank Survival: Matter of attitude?
Card biz: Playing the hand you’re dealt
ABA At Your Service
100 years of service to farmers
Compliance Inbox
Legal Issues
First Person

ABA Banking Journal - October 2012

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