1. Offer multiple stages in the sales process. Considering the fact that not all depositors will respond in the same way to various offers, it makes sense to harvest some accounts that are less price-sensitive with your standard pricing at lower interest rates. However, if all you have to offer is this lower standard pricing, you will lose the business that you would have previously retained. Therefore, we use a series of offers. (This is more like what you find in most bank's commercial lending activity today where they don't lead with pricing)
We use a four-stage process that involves standard rates; promotional specials; customized maturities; and finally Limited Edition Savings accounts.
These offers are made sequentially. The goal is to price the often silent majority who do not display as much rate-sensitivity at standard fair rates; attract new deposits and depositors; and price the vocal minority who display rate-sensitive behaviors at managed, consistently exceptional "relationship" rates.
2. Display dollars. Every CD customer wants two things: a high yield and a short commitment. To bring relevance to the decision-making process of each depositor, community bankers should be equipped to talk to their depositors in terms of dollars.
3. Compare to competition. In addition to building an environment of transparency and trust, this sales method can quickly and easily identify to consumers the benefit of depositing in a particular bank compared to others they may be considering.
4. Customize deposit maturities along with rate enhancement. Using this approach, banks structure time deposits to mature when depositors would like greater access to their money without a penalty. This accommodation also comes with enhanced pricing. Producing a de-commoditized offering with advantageous pricing for the assertive rate-sensitive depositor often creates a mutually satisfying negotiation and overall customer experience for these depositors.
5. Offer an invitation-only Limited Edition Savings account. This sales method involves offering a special-purpose savings account as a last resort to retain maturing time deposit accounts when depositors appear committed to leaving unless another offer is matched. The unique account structure prohibits deposits and therefore eliminates the disintermediation of checking and savings funds. This is a familiar restriction to CD depositors who don't expect the opportunity to deposit additional funds to their CDs and so don't care.
6. Offer Companion Deposit Accounts. @Robert Nystuen Before you launch a "special" premier MMDA, please consider using a debit-only approach. Give higher yield without commitment, but avoid the cannibalization that comes with conventional high-yield MMDAs. Here is a blog post from our bank for offering this debit-only account. You can see an example of this at Get the best in savings, high yield and no commitments
| Tsbank | |||||||
|
|||||||
Using a combination of these and other tools including Promontory products we estimate that we gain 10-40 basis points of cost reduction on the deposit volumes we get rather than relying on conventional pricing and sales methods. Gaining 10-40 basis points on 10-40% of the balance sheet has made these adjustments quite advantageous.
------------------------------
Neil Stanley
President of Community Banking
TS Banking Group
Treynor, Iowa
------------------------------
-------------------------------------------
Original Message:
Sent: 04-13-2018 12:06
From: Brady Nachtrieb
Subject: What are current bank strategies to maintain a low cost of funds?
Obviously, rates are on the rise, and I would like to hear any strategies other community banks are using to offset the rising interest costs to try to maintain a low funding cost, as well as strategies that have been employed with Promontory to achieve this goal?
------------------------------
Brady Nachtrieb
CFO
Stockmens Bank
------------------------------