Approximately 85% of a typical community bank’s net revenue is derived from Net Interest Income. It only follows that the most important initiative your bank can pursue is one that will have an immediate and long-term impact on this significant component of income.
Diversifying your lending portfolio, decreasing risk, and beating out your competition are just a few of the ways your financial institution can increase NIM and NII. As the CEO of First Horizon Bank recently stated in an American Banker article:
"We are looking to put money to work, but the number of strong borrowers is more limited in this part of the cycle and the competition does seem to be very strong for those."
So how can you outperform your competition and make more money? First of all, you might want to ask yourself these questions:
- Do you have a risky concentration of commercial real estate loans?
- Is asset quality one of your overriding concerns?
- Do your lenders know the profitability of each loan or loan type?
- Do your lenders know how low a rate they can offer an "A" credit and achieve profitability target?
- Does your bank have a method for determining how much to vary the rate based on loan size?
- Do you have a practical approach to pricing for credit risk?
If you're not sure how to answer all of these questions, it may be time for a new approach. Community banks must shift the way they currently think about creating new accounts and accept that new lending does not necessarily mean only finding new borrowers. It's about lending and pricing in new ways. These pages are intended to help you further explore those new ways of thinking and generating income for your bank.
Learn about the different types of solutions available to meet the needs of your business clients. From Asset based financing solutions to alternative types of financing for unique borrowing situations, we have a solution for you.
Both LendingNetwork and BusinessManager are part of the Independent Community Bankers of America (ICBA) Preferred Service Provider Program
Learn about the different types of loan and deposit net interest margin solutions that help banks increase net interest margin and grow at the same time. Our clients outperform the industry by 15 basis points per year.