Much has been said about the challenge in making branches profitable. But what has been measured? The below graphic, taken from my employer's database of hundreds of branches, highlights how challenging it is to generate spread in our historically low interest rate environment. The stability of the trend signifies how long the Federal Reserve has kept interest rates low. As a point of reference, during the second quarter of 2006, Bank Peers had a Net Liability Spread of 2.33% and Fee Income of 0.60% for a total of 2.93%, and Thrift Peers had 2.07% and 0.27%, respectively, for a total of 2.34%.
Multiply the below percentages by your branch size to estimate how much spread plus deposit fee income your branches generate.
Net Liability Spread is calculated using co-terminous funds transfer pricing. Meaning that deposits receive a "credit" for a market instrument, such as a Federal Home Loan Bank borrowing, of similar duration to the deposit base. Fee income is actual income stated as a percent of average deposits.