Bankers: It’s Time to look at a Loan Pricing Solution

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Pricing commercial loans for community banks can be daunting especially in areas where they compete for loans with larger institutions. With a yield curve that has changed dramatically over the past 18 months, isn’t it time your senior commercial lender looked at a loan pricing solution?

Commercial lending comes all shapes and sizes and borrowers are more sophisticated now more than ever. What should the interest rate be? For what term? Is there a fee involved? Is the rate floating or fixed? And lastly, will the borrower keep deposits with the bank?

Loan pricing solutions have been used by larger institutions for years and community banks sometimes just “throw a dart” to see what a borrower will pay. Generally, costs associated with underwriting and servicing the loan is not considered since it is hard to determine what they are. With interest rates at historically high numbers (last 15 years) maybe community bankers should look for an affordable loan pricing program.

Strunk’s loan and relationship pricing solution is designed to model all types of commercial loans factoring in costs associated with the loan, pricing for risk, and providing a return that is satisfactory to the bank. The program takes into account deposits the borrower may have with the bank as well as other loans.

The loan pricing model is easy to use and training the lending staff is paramount to getting buy-in for the solution. The goal is to increase net interest margin while also giving bankers a tool to understand why you may have lost a deal.

Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn more about loan pricing solutions offered by Strunk. You will be glad you did.

High Performing Banks Look Outside the Box

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As interest rates rise and the cost of doing business increases, bankers are challenged to figure out where we go from here. Many community banks face a huge loss in their bond portfolio due to the substantial increase in rates on US Treasury securities. Liquidity can be a problem as we have seen in some mid-sized banks. Community banks haven’t seen a run on deposits although there is pressure to compete for deposits from non-bank competitors.

Service charge and fee income has increased some since the 2020 pandemic but still are near historical lows. As banking regulators continue to scrutinize “junk” fees including overdraft fees, what alternatives does a bank have? Large banks have a multitude of ways to create service charge or fee income but smaller community banks aren’t so lucky. Banks with assets over $10B have to report NSF/OD income on their quarterly call report. Any bank with a concentration of income from this source is being criticized by the CFPB. Now community banks in some states are being asked the same question. More, not less regulation is coming.

What can you do? Strunk was the pioneer for the Overdraft Privilege program beginning in 1993 and it was the best fee income idea in the history of our industry. We have several other fee income programs that many financial institutions have implemented. High performing bankers are always thinking outside the box.

Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn more about fee income programs offered by Strunk. You will be glad you did.

 

Strunk introduces Pricing Manager, a commercial loan, deposit pricing, and relationship profitability tool for CFIs

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Strunk is proud to announce its newest solution, Pricing Manager. Pricing Manager is a fully hosted, web-based solution that allows community financial institutions (CFIs) to deploy a tool to all lenders to ensure they are armed to price loans profitably and consistently based on target profitability objectives.  It also provides the ability to understand the details of relationship profitability so better pricing decisions can be made.

Pricing Manager offers lenders the ability to vary rate, fee, risk premium and term structure among other variables, to understand the drivers of profitability and develop pricing options for borrowers that all achieve the target ROE for all types of loans. Deposit relationships can be included to see how much ‘pricing power’ each brings to the loan or total relationship. The solution contains built in assumptions for loan origination, loan servicing and cost of funds which can all be customized.

According to Strunk’s Chief Executive Officer, Dan Roderick “Until about a year and a half ago, pricing was fairly straight forward for most community FIs, given historically low interest rates and record high liquidity. However, that has changed dramatically, as should an FI’s approach to pricing. Liquidity, which only several months back was far from a consideration, is now becoming a concern for many community FIs. Economists are beginning to predict tightening commercial credit largely due to a downturn in commercial real estate values – particularly for office space and retail properties. At no point in history has proper loan pricing been more important.”

With Pricing Manager, Strunk offers a full featured loan and deposit pricing tool that will:

  • Arm lenders with the tools needed in an increasingly competitive environment.
  • Include a relationship profitability module.
  • Allow instant adjustments to a shifting rate environment and ensure pricing consistency.
  • Increase profitability.
  • Produce rate sheets for consumer loans.
  • Provide clients with pricing offers that will win more deals.

Strunk is providing free demonstrations of the Pricing Manager solution for interested CFIs. Please visit https://strunkaccess.com/pricing-manager/ or contact Strunk at info@strunkaccess.com to learn more.

Does Your Bank Need More Fee Income?

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Community bankers across the country are holding their breath hoping they won’t have to pay increased FDIC insurance premiums to pay for the recent $23B drain on the fund by the two large failed banks. A FDIC special assessment is coming but whether all banks will have to pay their proportionate share is still up in the air. Certainly it is not fair for community banks who are not “too big to fail” to share the responsibility of maintaining the FDIC Insurance fund at regulatory levels. Regardless, expenses at community banks are not going down.

Another concern that should be on community bankers’ minds is the percentage of service charge income they derive from non sufficient fund and overdraft fees. Since 2015, the CFPB has required banks with over $10B in assets to report their income from NSF/OD fees on their quarterly call report. Now, several states are asking smaller community banks for the same data. Banks that obtain over 50% of their fee income from NSF/OD fees are being criticized by the regulators. Some bankers are keenly aware of what is going on…others have not caught on to what they can do to mitigate this from happening. Bottom line is all bankers need to diversify their sources of fee income.

Strunk’s value added checking program will generate significant amounts of fee income while keeping free checking for those customers who want it. Since 2011, over 1,200 banks have offered the benefits added checking account to their offerings. You can expect fee income to go up by at least $40 per checking account per year. The program is easy to implement and easy to manage.

Contact us at 800.728.3116 or email at info@strunkaccess.com to learn more about fee income programs offered by Strunk. You will be glad you did.

Strunk at the ICBA’s Live 2023

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The Independent Community Bankers Association held this year’s ICBA LIVE event all the way out in Honolulu, Hawaii from March 12-16 at the Hilton Hawaiian Village. In addition to the beautiful location, attendees enjoyed visiting with vendors in the Marketplace, various Learning Labs and sessions with ThinkTECH presentations.

Strunk was pleased to meet with so many bankers, discussing necessary solutions for community banks. Strunk was thrilled to debut their newest solution, Pricing Manager. Pricing Manager is a full-featured loan and deposit pricing solution that will provide banks with the ability to set loan and deposit pricing consistently and profitably. Commercial loans can be priced consistently by every lender – creating options for customers that all achieve the bank’s profitability targets. Additionally, rate sheets for consumer loans, residential mortgage loans, and deposits can easily be created that are also based on established profit objectives. Not only will Pricing Manager drive consistent achievement of profitability targets – it will also help you win more quality deals!

Strunk’s goal is to continually provide value-added SaaS solutions that help community banks increase profitability, while controlling operating expense. In addition to their latest offering, Strunk highlighted their overdraft service and best-in-class governance, risk and compliance solution, Risk Manager.

For more information on Pricing Manager or Strunk’s other solutions, visit https://strunkaccess.com/ or contact Strunk at info@strunkaccess.com.

Banks see a Significant Drop in Fee Income

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Banks across the country saw a steep decline in fee income derived from overdrafts in 2020 likely due to pandemic related stimulus checks that pushed up consumer’s checking account balances. It bounced back somewhat in 2021 but there was another sharp decline in 2022.

Service charges that banks derive from overdrafts hit an all time high in the late 2000’s when the industry collected over $30B annually. In 2022 that number is less than $8B according to a recent report from the Consumer Financial Protection Bureau, a 75% drop in fee income. What happened and what can our industry do?

Consumer spending habits have changed and they are less likely to overdraw their account. Also, debit card regulations changed in 2010 which made banks get confirmation that a consumer wants their debit card paid at point of sale, even though they may not have enough money in their account. This was a great regulation and it gives the consumer a choice on how they want their account handled in the case of an overdraft. It also alleviated the problem for banks when they have to decide what to do in that situation. A win-win situation for consumers and banks.

Bankers for decades have been afraid to charge fees for services received by their customers. An example would be charging a fee for a checking account. Strunk’s Value Checking program has been around since 2011 and over 1,300 financial institutions have implemented it. Very simply, add benefits to all checking accounts and charge a small monthly fee on the account. ID theft protection, roadside assistance, and cell phone coverage are some examples of valuable benefits consumers are paying for elsewhere.

Contact Strunk at info@strunkaccess.com to learn more about Strunk’s Value Checking strategy. It is very simple to implement and consumers will like the service.

Strunk at the ABA’s Conference for Community Bankers 2023

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The American Bankers Association hosted this year’s Conference for Community Bankers in sunny Orlando, Florida from February 12-14 at the stunning JW Marriott Grande Lakes property. Attendees enjoyed a golf outing, Super Bowl tailgate party, Seussville reception and many engaging educational sessions.

This year’s keynote addressed employee retention, the “Great Resignation” and the “War for Talent”. Education sessions covered topics such as technology, payments, profitability, and lending.

Strunk was thrilled to debut their newest solution, Pricing Manager. Pricing Manager is a full-featured loan and deposit pricing solution that will provide banks with the ability to set loan and deposit pricing consistently and profitably. Commercial loans can be priced consistently by every lender – creating options for customers that all achieve the bank’s profitability targets. Additionally, rate sheets for consumer loans, residential mortgage loans, and deposits can easily be created that are also based on established profit objectives. Not only will Pricing Manager drive consistent achievement of profitability targets – it will also help you win more quality deals!

Strunk’s goal is to continually provide value-added SaaS solutions that help community banks increase profitability, while controlling operating expense. In addition to their latest offering, Strunk highlighted their overdraft service and best-in-class governance, risk and compliance solution, Risk Manager.

For more information on Pricing Manager or Strunk’s other solutions, visit https://strunkaccess.com/ or contact Strunk at info@strunkaccess.com.

 

Is your bank prepared to offer Digital Lending to your customers?

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Digital banking has been around for years on the deposit side of the house but most banks don’t have a solution to make installment loans quickly and profitably. Fintech’s and other financial services providers have eaten our lunch when it comes to consumer lending since credit cards became a prevalent method for paying for purchases in the late 1970’s.

Quilo has developed an easy to use yet sophisticated digital lending solution that enables banks to make profitable consumer loans in seconds…rather than days. The solution allows each bank to use their underwriting criteria and set a limit on how much credit they want to extend and for how long.

Most Quilo banks are setting maximum limits at $35K and only for those who have an excellent credit history. Minimum credit criteria is usually set for no lower than a 670 credit score and loan amounts can be tiered based on credit score and the banks appetite for risk. For instance: those with a credit score of 670-720 can get a loan for no more than $5K; credit scores of 721-770 will max out at a $15K loan; and consumers with a 671 credit score or higher can get a $35K loan. Maximum term might be 24 months on the low end and 60 months on the high end. This is just one example of how a bank can set up their Quilo portfolio.

Take 45 minutes to see the demo of Quilo by contacting Strunk at info@strunkaccess.com.

Strunk at the Western Bankers Lenders & Chief Credit Officers Conference 2022

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This week the Western Bankers Association hosted its annual Lenders & Chief Credit Officers Conference. Strunk was excited to attend and to present Quilo, a digital installment loan solution directed at consumers.

The three day event was hosted at The Ritz-Carlton, Laguna Niguel and was packed full of content for bankers. The agenda included sessions on “Growing Your Small Business Lending Program”, “Innovating through Digital Transformation”, “Loan Growth Through Technology and Automation” and a Legislative Update from Ken Gould, EVP with the California Bankers Association.

Strunk’s CEO, Dan Roderick, was pleased to present and demo Quilo during the Digital Consumer Lending session. Quilo is a fully turn-key FinTech consumer installment loan program that will allow your bank to compete in the world of digital lending. Quilo includes the ability to direct deposit funds to your account holders’ checking accounts for quick and easy access to funds.

Technology has changed the market for installment loans and Quilo can put community banks on the path to high loan growth and increased profitability. Quilo is a game changer. Utilizing the latest in technology, Quilo creates the opportunity to insert community banks in the middle of this quickly growing segment.

Bankers were enthusiastic about the solution and we look forward to continued conversations with many of the conference attendees. If your bank is interested in growing your loan portfolio and improving your margin, let us show you how Quilo can make that happen.

When is a good time to Review your Overdraft Privilege Program

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Delaying annual reviews of overdraft programs until the next rule modification or updated guidance can lead to serious and expensive issues. Preventing a problem is almost always simpler and less expensive than trying to fix it. Despite the fact that the most current guidance was issued in 2010, a lot has changed in the overdraft industry since then. The media and lawmakers have been focusing more on overdraft fees, which has brought increased attention to this financial service. Just recently Regions Bank has been fined $191 million by financial authorities for charging ‘surprise’ overdraft fees on debit card transactions and ATM withdrawals. The CFPB announced that Regions Bank “committed unfair and abusive acts and practices when it charged overdraft fees on transactions that had a sufficient balance at the time the Bank authorized the transaction but then later settled with an insufficient balance”. In August, the FDIC issued new supervisory guidance on multiple non-sufficient funds (NSF) fees arising from the re-presentment of the same unpaid transaction, charging a consumer more than one NSF fee for the same declined transaction, without providing proper disclosures.

Financial Institutions should be evaluating these areas on a regular basis. Strunk can help your financial institution reduce risk while offering this important service by using consumer-friendly policies, compliant disclosures with simple, understandable language, and constant, continuing account holder communication. We will provide a thorough analysis of your overdraft program and its disclosures and make recommendations on how to update it to meet current regulatory requirements. Your financial institution will gain greater understanding of program usage as well as practical best practices. Strunk will also provide staff training, consistent communication around the program, correct disclosures and compliance with all regulatory rules. In order to assure the success of your overdraft program, it may be time to rely on an outside expert if limited resources and other projects now demand all of your team’s focus and attention. Don’t put program assessments off and run the risk of being let down.

An independent certified public accountant has examined Strunk’s operations and found them to be in compliance with the AICPA’s Trust Service Principles. It was determined that Strunk meets the Security, Availability, Processing Integrity, Confidentiality, and Privacy criteria for SOC 2 established by the AICPA.