Here's How an MCIF Can Pay for Itself.

• Author: Coffey, John J.
• Position: Brief Article

For many banks, the dramatic lowering of interest rates this year has placed a great deal of compression on their spread, which could cause them to become less profitable. This is particularly true for banks whose prime-based loans are repricing faster than their CDs. Because of this, banks are looking for more ways to increase their profitability. As such, generating additional fee income is becoming a higher priority.

Fortunately, you can use your MCIF to help you understand how to increase your bank's fee income.

How to use your MCIF to increase your fee income

The first step in determining which fees you can increase is to analyze your competition's fees and minimum balance structures. For comparison purposes, you could even develop a product grid that displays the product features on each row and competitors on each column. You would then need to determine your bank's pricing strategy in your market area. For instance, if you are a community bank, you might want your fees to be higher than some of the other financial services providers in your market, but less than the large regional banks. By using this product grid and your bank's pricing strategy, you could determine which fees and minimum balances would be likely candidates to increase.

Your MCIF can now be used as a razor-sharp tool to determine the impact of these fees on your customers. For instance, your minimum balance fee for a checking account may be only $15 if customers have $1,000 or less in their account, while the regional banks in your market area have a minimum balance fee of $18 if a checking account has less than $1,500. With the MCIF, you can analyze the impact of increasing your minimum balance and monthly maintenance fee for a variety of scenarios. In addition, you can also identify which accounts would be impacted.

To find the number of accounts that will be affected by this charge, you will need to perform the following research: Find the "product name" and "minimum balance" more than ([greater than]) current minimum balance required and less than ([less than])the proposed minimum balance. The additional annual income as a result of this change will be the number of accounts multiplied by the difference in fees!

This research needs to be done for all of your products that may be...