50 MAY / JUNE 2021 Last year challenged our industry in ways previously unknown. We began 2020 expecting our biggest challenge to be continued growth of deposits at reasonable rates. Today we are faced with: a prolonged low-rate environment with continued margin compression; keeping branches open and serving our communities; and an increasing number of customer transactions moving to the digital arena. Much has been written regarding the validity of the branch in the current environment. Has community banking been changed forever based on consumers’ digital behaviors? Possibly. Is some of this for the best? Definitely. Does the branch still have value? Absolutely! Community banking is about community support. It’s about being present and accessible. Unless your strategic plan is to shutter your branches and vacate your communities, keep reading. Margin compression is real, so what can you do? You can offset a portion of it by shifting your deposit mix toward low- or noninterest-bearing deposits. Adding long-term, low-rate deposit relationships should be the foundation of any strategy, and community bank data shows your branches are the key to shifting your deposit mix. While new core relationships are strategic in managing and maintaining your margins, they are also key drivers of additional noninterest-income (NII) – a critical component in the shorter term. Financial institutions must increase their NII to offset some of the challenges on the interest income/margin side. The Loyalty Factor Translating relationships into noninterest income To accomplish growing those new relationships you must: 1. Bring more new customer relationships into your organization; 2. Serve all of your customers better than any other financial institution has previously; 3. Create customer loyalty by increasing relational intensity over time. The Loyalty Factor Bringing in more relationships should be data-driven, and the data shows the checking account and branches are key. Looking at data from more than 100 community-based financial institutions and over 2.5 million households/businesses illustrates this point. The vast majority, 72%, of consumer and business relaAchim Griesel President Haberfeld achim@haberfeld.com Sean Payant, Ph.D. Chief Strategy Officer Haberfeld sean@haberfeld.com Haberfeld is an associate member of the Indiana Bankers Association. DIRECTORS / SENIOR MANAGEMENT
RkJQdWJsaXNoZXIy MTg3NDExNQ==