Tool increases bank's profitability measurement abilities

Nashville's $10 billion First American National bank has purchased Treasury Services Corp.'s Evaluation and Reporting System as part of a plan to increase its net interest margin from 4.07 percent to 4.2 percent and generally improve bank profitability.

First American uses the system, recently acquired by Oracle Corp., to squeeze some extra juice out of its treasury management functions and for cross-marketing, according to Jay Phillips, First American's svp for profitability measurement. "We use the product to do match funds transfer pricing, so that if we have a CD with a six-month maturity, we match it with an implied funds transfer credit, and we know what the CD is worth at that spread level. But it also does strip funding for mortgage loans-that includes options, risk calls, (and) breakage costs," generally allowing more active account management than before. "It's a more sophisticated view of funds transfer pricing at the specific account level," Phillips says.

The system is also used for overall profitability measurement, including line-of-business profitability, Phillips says. "It allows us to take risk-adjusted, account-level profitability and roll it into various other segments," across the customer's bank profile, "as well as comparing discrete customer profitability," he says.

The overall plan is to widen spreads and tighten operations firmwide.


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