Increase Net Interest Income With A Loan Pricing Tool

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Many community banks net interest income is well below the 50th percentile compared to peers when looking at year-end UBPR numbers. It doesn’t have to be that way. The key is to price loans competitively but also consider the risk of the borrower, the term of the loan and the SIZE of the loan. Yes, size does matter when pricing commercial loans.

When analyzing the commercial loan portfolio of community banks we almost always see very little difference in the yield of loans under $100K compared to loans over $500K or $1M. Why is that? Doesn’t it cost a lot more to underwrite and service a larger loan than let’s say a farm equipment loan?

When making commercial loans the three most important factors of loan profitability are 1) size of loan; 2) credit risk of the borrower; and 3) term of the loan. It is hard to make money on a small loan that pays off in a short period of time. Likewise it is hard to make money on a small line of credit that rarely gets used.

Strunk’s loan pricing tool will ensure your lenders price new loan opportunities that meet both the customer’s needs and the bank’s profitability target. It factors in deposits and other loans as well.

To increase net interest income contact Strunk at 800.728.3116 or info@strunkaccess.com to learn more about Strunk’s affordable loan pricing solution.

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