For years rate-setting at Building and Loan has been a Tuesday ritual in which managers spend hours poring through stacks of competitors' data and the prices of Federal Home Loan bank funds to gauge where the Nebraska thrift's own prices should be.
"It's a time-consuming process," said Kim Marco, vice president and treasurer of the $125 million-asset thrift. "We have to manually compare all of those numbers to our own rates."
That process, however, may soon go the way of the adding machine.
Equitable, based in Grand Island, has been testing a new Internet-based system called I-Price that is designed to help community banks determine the optimum rates for their deposits and loans. The thrift plans to replace its manual method with the software within two months, after tests and updates.
I-Price, released six weeks ago by a Wisconsin consulting and technology firm, seems to be the first system of its kind. It pulls data on competitors' deposit and loan rates from the Internet and provides real-time data on funding alternatives, such as the Federal Home Loan banks, and investment alternatives, such as mortgage securities.
Banks can input hypothetical rates and analyze where they might earn their best profits, said Thomas Farin, president of Farin & Associates in Madison, Wis. He added that I-Price could help community banks cope with the continuing squeeze on interest margins as banks bid up deposits to keep pace with loan demand.
"Banks are under a lot of pressure now," he said. "But they still set their rates by coming into the office Monday morning and looking up and down the street at what their competitors are charging.
"It only takes one idiot that doesn't know how to price to make everyone else an idiot."
The I-Price software also allows banks to store data that can be used to determine the effectiveness of past CD and loan promotions. Banks can then forecast results for similar future specials.
"That's going to be a useful tool," Mr. Marco said. "Funding is a big problem. Our demand for loans is strong, but the stock market is taking deposits away from us. We need to find the best sources of funding."
Farin & Associates tested prototypes of the software in classes at the University of Wisconsin Graduate School of Banking for two years before releasing I-Price. The company already has signed up 25 banks for the $5,000-per-year system.