Chris Nichols: I'm Chris Nichols from the SouthState Bank, thanks for tuning in on this series, we're going to talk about loan pricing, give you some immediate tips on how to improve your bottom line. Now at SouthState, one of my jobs is to handle loan pricing support, we have built a model, other banks use it and so we're going to gather that data as well as the data and the experience from SouthState as we rolled out, we have some 5,200 employees handle loan pricing and the training and teaching of loan pricing. And so, we're going to start off with a couple of things, one is the precept that NIM can get you in trouble, Net interest margin is probably not the metric you think it is. Check out this graph here, what you see is the data on that, all the banks in the US 10 years all amalgamated on this little blob here, and if you do a correlation analysis or draw a line between those things, what you see is it's just barely correlated, it's more of a roll of a dice, if anything else. And if you add on this next slide, defunct banks, those banks that went out of business are acquired. What you see is a negative 11% correlation. In other words, not only is an interest margin, not helpful, it's actually hurtful and is more likely to drive your bank into the ground or be acquired than anything else. And there are a couple of reasons for that, one is that it doesn't take into account credit risk. So, here's credit risk, the biggest component that makes up loan pricing, relationship, profitability pricing and you're not taking that into account and that's going get you in trouble. Everyone's a great banker when the economy's good and there's no more credit loss, but where we are in the cycle now, as rates increase, as liquidity drives up and the business cycle comes to an end, you're going to make sure you're not targeting net interest margin.
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