You know that scene in Tom Hanks’ Castaway where he finds Wilson for the first time? Tom’s character, Chuck Noland, had no idea that that volleyball would turn into his only “friend” for the next four years while he fought to survive on that lonely island.
Now, hopefully you’re not talking to a bloodied volleyball at work every day - no judgement if you are - but the modern community bank faces a challenging market that could easily blow your bank off course too. Just like Noland had to adapt to survive, banks must rethink their loan pricing to survive and thrive, here are some tips from our team of former bank CEOs and banking survivalists.
Creating the Strategy
Developing a robust strategy to drive low-cost deposits is vital. By focusing on & seeking out business deposits and other accounts, banks can lower their cost of funds and improve their competitive edge. This proactive approach ensures that deposits are not just a passive element but a key driver of financial success.
FED/FIS Update
Deposit costs are beginning to decline, but many banks haven't recognized this shift yet. It's important to push through rate reductions on deposit accounts to stay ahead. Low-Cost Deposits are a critical foundation, and proactive banks with thoughtful strategies will secure them first. Last bank with a deposit strategy to market loses… Recognizing and adapting to these changes can provide a significant advantage in the market.
Loan Pricing Models and Beyond
While loan pricing models are valuable, they are just one part of the strategy. Low-cost deposits allow banks to offer competitive loan rates to the lowest risk clients while maintaining healthy margins. The old rule of making money is “Buying Low and Selling High” – right? This approach not only enhances profitability but also strengthens customer relationships by offering better rates to lower risk clients.
We encourage bank leaders to arm themselves—and their teams—with tools that can help drive performance to the promised land of profitability. While it might seem like incremental subtleties on loan and deposit pricing doesn’t matter much at the transaction level, that mindset spread across your bank will cost you significantly in NIM. Our solution, Banker’s Dashboard, has the right tools to keep everyone on your team on-track and at peak performance to maximize your NIM.
If your bank is waiting for a rescue rather than gathering the resources needed for your raft to freedom, it’s time to move from surviving to thriving, and let Banker’s Dashboard be your Wilson on the journey off Castaway Island.
