In the previous two blogs related to the resurgence of profitability analysis in the banking industry (Defining the Challenge & Understanding the Process), we covered financial performance challenges facing financial institutions, the resurgence of profitability as a tool to help combat these challenges, and some considerations for implementing and/or improving profitability analysis processes. In this final blog, we will propose several best practices to consider as you work through the process.

A prolonged environment of low interest rates, combined with a flat yield curve, have put significant pressure on banking margins. While these and many other factors contributing to margin compression are outside of your institution’s control, there are measures you can take to understand which products, business lines, branches, and customers best drive profitability to inform your business decisions.

DENVER—Westerra Credit Union was not happy about the way it was managing its financial reporting. Spreadsheets for its monthly reports along with a separate budgeting tool just were not cutting it for the $1.3 billion institution.

The process was time consuming and required manual integration with its core system, said Chief Financial Officer Jennifer Meyers. The finance team needed a customizable tool that could be expanded to meets the CU’s needs over time.