I’ve heard it a thousand times—a CEO will say to me, “I am so tired of lenders walking into my office and saying, ‘Boss, I’m going to lose this deal unless we match the pricing.‘” Yes, this is true, but only because they didn’t handle it correctly from the beginning.

That lender put themselves in the position of having to match the rate. So, yes, they are in this mess, and maybe they can sweet-talk their way into getting something like, “Well, you get me, and we have good people.” They might get 25 basis points more, but you can’t become a Top Five Percenter™ with just 25 basis points more on a loan deal, especially when desperate competitors are pricing these things at crazy rates, and deposit rate competitors are offering sky-high rates. 

Margins are shrinking for those who don’t get it. Don’t be that person. You need to understand that having a four or even five net interest margin is essential, and it’s doable. I can prove it, and you’ll meet these people when you attend the Best Banks in America Super Conference. Many banks command well over a four net interest margin while other bank CEOs claim it can’t be done. 

They have a mountain of evidence. Everyone comes to them saying they must match the pricing or lose the deal, and it’s true. But there’s another mountain of evidence about how to engage in those relationships correctly from the start, so it doesn’t become about rate. All you need to do is watch the hard trendlines. Dan Burr, a dear friend and futurist, says that being a futurist isn’t that difficult. He says to watch the hard trendlines, and they’ll tell you where things are going. When I started this business, there were 18,000 banks. Now there are 4,500. Where is this going? We’re heading toward 2,000. Many banks are not nearly paranoid enough about losing the name on their door. They look at the fact that they had a good year last year, which means nothing for this year because every year brings new challenges. Unless you become a top 5% performer, you are always in a state of vulnerability. 

There will always be 2,000 great boutique banks that can command premium pricing and compete against all the desperate non-bank competitors. If you’re not on the path to becoming a Top Five Percenter, one who can command four and five NIMs, you’ll face challenges keeping your name on the door. The hard trendlines show where this is going and denying it won’t stop it from happening. So please wake up to this possibility. Your team members will love you when you start commanding premium pricing because they’ll no longer feel like vendors. They’ll feel like partners and will love coming to work every day because guess what? It is fun to win. 

To your continued success, 

Roxanne Emmerich 

Please watch the video above and share it with your exec team and board.