ABA Banking Journal - July 2009 - (Page 16)
Community Banking Pass the Aspirin Headache 1: How is your bank dealing with shrinking net interest margins? Remedy 1 Burt Blacksher, executive vicepresident, Bank of the West, $758.3 million-assets, El Paso, Texas We have been successful in maintaining our net interest margin with floors on floating-rate loans, which we began implementing about 18 months ago. We saw the likelihood of a significant drop in interest rates and didn’t want to repeat the same mistake that we made during 2001-2002, when the prime rate plummeted to a 40plus-year low. We have also been able to gradually lower our interest expense, thereby maintaining a 4.44% (average) net interest margin over the past six months. In contrast, our net interest margin averaged 4.20% during the previous six months. low-cost deposits, more NSF income, and higher FTP credit on deposits. Remedy 3 Albert H. Garrett, president and CEO, Robertson Banking Co., $240.5 million-assets, Demopolis, Al. We meet regularly with our loan officers to emphasize to them the importance of keeping the loan rates in line with risk. Loans are reviewed after they are booked to monitor variances from the rate sheet we issue as guidance. Also we are encouraging officers to keep maturities short. One measure of their incentive plan is interest income growth. Additionally we watch CD rates and conduct a rate survey of competitors in our market. Whenever possible we make sure we are at market rate or below. We watch closely so that we can react quickly to the changing market. Our customer service representatives are charged with maintaining relationships with our customers and they do a good job in a difficult situation. I make a point to tell them that we know they are faced with disappointed customers many times a day. It is much easier to raise a customer’s CD rate, but it is a different matter when they are required to deliver bad news in the form of much lower rates to our customers. Remedy 2 Amy J. Rohdenburg, senior vicepresident/retail market executive, Carolina First Bank, $13.3 billion-assets, Greenville, S.C., part of The South Financial Group. Here’s how The South Financial Group is dealing with shrinking margins: 1. We let high-interest, single-service, CD-only households walk. 2. We place a high focus on relationship HH customers. [HH = Households by customer] Cross-selling is key. 3. We stress consistent focus and coaching with retail employees in the sales process. We find out the needs of our customers first, before we try to sell them something. 4. We scheduled training for commercial lenders (fall 2009) in selling skills training (including “needs-based sales” training). 5. We place an intense focus on income statements, such that retail employees focus on P&L, specifically “interest income” and funds transfer pricing credit on branch deposits. This helps build more Remedy 4 Mike Murphy, executive vicepresident and CFO, First American Bank, $295 millionassets, Norman, Okla. Our net interest margin is not as healthy as it once was, but we are still fortunate that it is well-above peer average. To combat the loss of NIM that came about due to the drastic reduction in interest rates, we have focused on moderating our expenses. We have and still are undertaking a review of all large contracts, looking for leverage with our vendors and for better ways to get the service we need. That has been a very productive way to 16 JULY 2009/ABA BANKING JOURNAL Subscribe at www.ababj.com
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