The Federal Reserve continues to gradually tighten monetary policy and increase the Fed Funds Rate. At the same time, the long end of the curve, while flattening over the last 12 months, has increased substantially as well. This has helped increase loan yields, but not nearly to the same magnitude as market yield curves.

With the recent passage of the Tax Cuts and Jobs Act of 2017, now is the appropriate time to review the tax rate assumption in your loan pricing model. It is easy to update this key assumption, but you should also carefully consider the impact of a tax rate change on the other configuration areas within your model.

Commercial lending executives often identify two perceived barriers to implementing
state‐of‐the‐art commercial loan pricing systems. Cost ranks as the primary objection followed
closely by a lack of familiarity with the software’s benefits. Like many other challenges and
barriers that may be encountered, there are effective solutions to overcome your concerns
with attaining an appropriate Return on Investment (ROI) on your loan pricing system
implementation.

At ProBank Austin, we are always curious at this time of year to find out what’s on the minds of our community bank clients, and in particular, to better understand their plans and goals for the coming year.

As consultants serving clients from around the country, we have a unique window into the thinking of community bankers, as each year we assist our ALCO clients with the preparation of their annual budgets. By confidentially analyzing and comparing these annual financial plans, we are able to provide all community bankers with insight into how their expectations for 2017 compare with that of their peers.

In its simplest form, loan pricing discipline exists when a financial institution implements a system that ensures that loan rates and fees move in concert with movements in related market rates. This system must assure that a variety of objectives are being attained, including that margins are maintained or expanding, desired behaviors are incentivized, and critical performance information is generated. This system must possess at least each of the following functional capabilities