Western Independent Banker - September/October 2008 - (Page 27)

By Chris Bledsoe Margin Management: Get in the Driver’s Seat LET’S FACE IT. Not many banks predicted and budgeted for a 225 basis point rate cut within the first half of 2008. As a result, the net interest margin at most community banks is taking a huge hit. You may be thinking “there’s nothing we can do,” but with the right information and the right routine, you can take control of your bank’s margin performance. Be Proactive The net interest margin is the single, greatest source behind 90 percent of a community bank’s earnings stream. That’s why it is so important to get into the driver’s seat and proactively manage the margin. It’s no longer good enough to wait until month end to calculate and report results. There are online technologies available that can arm you and your team to more effectively measure and manage the margin and its components on a more frequent basis, even daily. Some of the margin components you should be tracking daily include: • Loan yields – down to the branch and loan officer level • Loan pricing – develop a baseline for consistency • Production – by month, branch, loan officer and product type • Deposits – CDs and Mix • CD maturity distribution You must be able to quickly and easily take apart the earning asset yield and evaluate performance by product, branch and loan officer. What loans hit the books yesterday? What and who is helping and hurting the bank? For cost of funds, look at new and renewed CD production by branch, by customer service representative, by term, etc. Equipped with this level of data and analysis at your fingertips, you can make the proactive decisions that will impact your 2008 performance and beyond. Automate to Support Analysis All of this is made easy through automation – technology can help you streamline processes and eliminate errors and inaccuracies. Do you and/or your team still report margin information in spreadsheets and spend hour after hour rekeying data, performing manual calculations and writing reports? Why, if you don’t have to? You could be getting quick access to daily General Ledger account and branch data and obtaining a consolidated view of your bank’s performance. With automation, you will spend your valuable time analyzing and driving decisions that impact your bank’s bottom line, rather than performing manual, unproductive tasks. Don’t confuse activity with productivity. Disseminate and Expect Results Invest in technology that enables you to quickly and clearly disseminate performance information to your team – the operative word here is team. To get the results you are looking for, it can’t just be the CEO and CFO focusing on the margin. Everyone who makes key decisions at the bank should know the margin trend and what one basis point is worth at all times. Share margin information on a daily basis in a simple format that is intuitive and easy to use. The reality is that most community banks are still sharing margin and production information with a limited group of people monthly, when it’s too late to adapt and adjust to better manage the balance sheet. High performing banks make it a habit to consistently educate their employee base about the margin, its trend and its impact. Each morning, senior management, branch managers, loan officers and other team members review real-time production information to understand what’s working and what’s not. Comparisons are made to budget and prior periods and adjustments are made accordingly. When you empower your team with this type of access and knowledge, you are able to hold them accountable for driving results. Accountability is an area that is typically not a strong one for community banks, but one that can promote a significant improvement in the margin. Know the Trend In order to manage the margin and guide the performance of your institution, you must have the ability to easily track the trend and how it has developed over time. Many banks are good at calculating the margin, but very few use trends and comparisons to gain this invaluable insight. With the right tools, this can be accomplished – it should be as easy as going to ESPN.com and checking the scoreboard. Technology is a key enabler to managing the margin and its drivers more effectively. The real value lies in automating the accumulation and consolidation of daily production information and getting it quickly to those in the position to make the decisions that impact your bank’s bottomline performance. Chris Bledsoe is CEO and co-founder o f B a n k e r ’ s D a s h b o a r d (w w w . bankersdashboard.com) in Stockbridge, Ga. He can be reached at 770-507-9894 ext. 101 or Chris.Bledsoe@BankersDashboard.com. Western Independent Banker September/October 2008 27 http://ESPN.com http://www.bankersdashboard.com http://www.bankersdashboard.com

Table of Contents Feed for the Digital Edition of Western Independent Banker - September/October 2008

Western Independent Banker - September/October 2008 Contents A Message from the President & CEO What To Do When Good Employees Go Bad! Remote Deposit Capture: What’s Your Target Market? Remote Deposit Capture: Lessons Learned Debit Decoupling: Part of Larger Merchant Funding Trend Debit at the Speed of Life: A Look at Debit Technologies on the Rise ID Theft Rule: Automating the Compliance Process Lose Paper and Gain Audit Trails Data Loss Prevention: A New Package on an Old Idea Securing Data in Transit Margin Management: Get in the Driver’s Seat Shopping for Cyber Insurance WIB Service Corporation Report WIB Calendar Welcome New Members Index to Advertisers advertiser.com

Western Independent Banker - September/October 2008

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