first_img 3SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr Clearly and consistently navigating the route to optimized future balance sheets and income statements is the responsibility of a credit union’s asset/liability committee. ALCO meetings can be some of the most dynamic and participatory events in the credit union when a practical, efficient, and effective process is used to create harmony and execution in optimizing ALCO loan and deposit pricing decisions.Pricing managers recognize that pricing impacts revenue in two ways. Higher sales price—such as a loan rate—increases the revenue on realized business, while making the sale more difficult. Lower sales price tends to increase the likelihood of the sale, while reducing the profitability of any sale achieved. This conundrum often causes discouragement for those without an effective framework to anticipate and properly deal with it. High-performance pricing managers recognize the environment and have learned how and where to make optimizing pricing adjustments. We share their process here.Recognizing that price is a major factor in both volume and interest spreads and that the combination of volume and interest spread produces profits, it’s easy to conclude that price is ultimately a primary determining factor of profit.  The harder part to understand and apply is that some price increases cause a related increase in performance, while other price increases actually decrease performance.For example, a credit union’s ALCO could decide to raise loan rates. It’s always profitable to increase the price of a loan if nothing else changes as a result. But member behavior in response to an increase in loan rates—such as deciding to go elsewhere for the loan or deciding not to take a loan—could reduce the credit union’s revenue and overall profitability. continue reading »last_img

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