those who contribute the least to the bottom line and, at the same time, run the risk of losing our most profitable relationships. To accomplish this, we must have a way to set profitability targets that are then applied consistently to every pricing decision. The key is consistency and discipline. We want to be consistent from lender to lender, customer to customer, and most importantly, from one point in time to another as the interest rate environment changes. How Does a Pricing Tool Help My Bank? An empirically based pricing solution 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 bank’s target profitability objectives. It is critical to apply consistent assumptions for loan origination, loan servicing and cost of funds so that all pricing decisions are considered based on a level playing field. An effective pricing solution should provide: • Lenders with the tools needed in an increasingly competitive environment. • A relationship profitability module so relationship value can be factored into the decision. • Instant adjustments in a changing rate environment to ensure pricing consistency. • Rate sheets for consumer loans and interestbearing deposit products. • Pricing options that will win more deals. Over the past 30 years, Strunk has helped over 1,800 community financial institutions increase income with a variety of innovative products and services. A more disciplined and consistent pricing methodology will increase your bank’s net interest income by at least 25-50 basis points. With increasing margin pressure in 2024, now is the time to consider making adjustments to your pricing practices! 35
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