03/19/2019

Which accounts are helping your NIM, and which are hurting?

Trevor Rasmussen March 19th, 2019

Net Interest Margin (NIM) makes the world go ’round in banking. Most everyone in finance knows it measures the difference between the interest banks pay and the interest they receive. Last year, the average NIM for U.S. banks was 3.2 percent, which was up from a record low of 2.95 percent in 2014, but down from a peak of 3.84 percent in 2010. So, given that data, if your bank is hovering somewhere between 3 and 4 percent, you’re golden. But, it’s not always easy to ensure you’ll hit those numbers.

Recently, some pros from Deluxe, Dan Reichert and Devon Brown, held an online webinar, Do you know which accounts are helping/hurting your net interest margin? The idea was to talk about ways to improve NIM performance by identifying which accounts are helping or hurting your margin. This all-important topic is key to delivering superior results and maximizing branch efficiency no matter what the operating environment.

NIM couldn’t be more important — it accounts for 90 percent of a bank’s earnings. The margin is critical, we know that. Here’s how to make the most of it within your branch.

NIM-boosting strategies

  • Watch interest rates. Rates have stabilized for now, and the Feds are still indicating we might see an increase or two. But there might be a decrease in rates. In that case, banks are considering adding floors for protection if rates drop.
  • Consider all funding sources, including FHLB.
  • Don’t forget about marginal costs, especially when running specials.
  • Pay attention to deposit mix, particularly non-interest-bearing deposits. It’s hugely important to NIM. If this isn’t a focus yet, now’s the time to think about it. Look at niche outreach, like attracting escrow accounts.

How Dashboard can help

Banker’s Dashboard is an invaluable tool when analyzing which accounts are helping and which are hurting your net interest margin. Banker’s Dashboard is a web- and mobile-enabled software solution that provides actionable insights into your bank’s financial performance. Easy to integrate, Banker’s Dashboard allows your team to access and assess margin components, branch performance, forecasts and more, accurately, quickly and around the clock with user-friendly, point-and-click simplicity. Here’s how to use Dashboard to analyze your NIM:

NIM analyzer

All users should be viewing it regularly, not just at month-end. You can see increases and decreases, and drill down to see loan data to identify which are helping or hurting your NIM. With the Margin Component Quick Graph, you can click on report properties and see just your branch or others. You can see what loan yields look like, or trends for the past 12 months.

Start page widgets

Customize your page with widgets that are specific to your position at the bank. Every user can create a customized start page. With these widgets, you can get trends and graphics that give you a clear picture of what’s happening, and what’s changing day over day, month over month.

Alerts

These show variances, balance sheets, income statements. You can customize your alerts to only show you increases or decreases or both. Day-over-day changes will show in your alerts.

Loans tab

With this tab, you can view your branch, region or lender loan portfolio, taking the weighted average from all lenders. If you’re viewing the performance in branches, this can foster friendly competition. Who is pricing above or below the weighted average? It also shows you weighted average yield and sorts the data.

CD tab

Your officers can see what’s coming due from any point in time to the end of the month. Can they get costs down a few basis points when they reprice that CD? You can see the buckets of future periods and work the CDs that are maturing in any given month. You should be working the maturity rate change report. It shows the different terms of your CDs maturing. Let’s say we want to reprice this CD bucket at 215 and the actual rate is 196. You can see the drill-down level, current rate, projected rate and what it’s going to cost you. You can price your CDs and see the impact of your expenses.

Banker’s Dashboard stats

Here are some quick stats about the Dashboard:

  • Average client outperforms the market by 23 bps
  • More than 300 clients ranging from $50 million to $15 billion in assets
  • Ease of use unlike any other
  • Industry service leader with free and unlimited training support
  • Free user group meetings two to three times per year

For more information about how Banker’s Dashboard can help your bank increase profitability, contact us at 800.245.6040 or visit us here.

This content is accurate at the time of publication and may not be updated.