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Budget Surplus? 5 Ways to Invest in Your Financial Institution with This Year’s Excess Budget

Mary Ellen Biery
December 3, 2021
Read Time: 0 min

Spend Leftover Budget Wisely for Growth

Financial institutions with surplus budget funds can invest in growth for next year by spending wisely now.

Learn how a core deposit analysis helped improve this institution's forecasts.

Read more

Options for Excess Funds

Spend budget surplus to grow

If your financial institution is fortunate enough to have a budget surplus at this point in the year, a common phrase you might hear among staff with helpful spending ideas could be, “Well, we have the budget for it.”

But impulse buying – whether at home or in business – can result in waste, so think carefully about areas of your bank or credit union that could benefit next year from a small investment as 2021 draws to a close. Based on some industry trends and regulatory priorities, here are a few ideas for spending surplus budget funds to help grow your financial institution next year or mitigate risk.

Learn more about your depositors.

The influx of money from government relief programs like the Paycheck Protection Program (PPP) in 2020 and 2021 left financial institutions flush with cash. Indeed, deposit levels to transaction accounts among community banks exploded 74% to $896.5 billion from $515.3 billion between Dec. 31, 2019, and June 3, 2021, according to the Community Banking in the 21st Century report. Two years ago, more bankers surveyed for that report named core deposit growth as their greatest challenge than any other issue. But this year, only 15% described core deposit growth as a “very important” risk.

The challenge with the influx of capital is that most financial institutions don’t know how much of the money at their institutions will hang around – or for how long. They also don’t know what to expect in terms of pricing impact for next year because it’s unclear how rate-sensitive their depositors are.

One way to find out is by allocating surplus budget money to a core deposit analysis. This strategic tool evaluates changes in deposit accounts, broken down by the institution’s sectors or sub-sectors. Using information from the core deposit study, bank or credit union management better understands depositor behavior and has critical information to develop pricing strategies and manage funding costs. You can also incorporate the results into the asset/liability management model and develop stress testing scenarios down the road.

Beef up your loan pricing strategy.

In a competitive lending environment, many banks and credit unions are concerned about losing good-quality loans if they over-price them. On the other hand, underpricing loans can hurt loan yield. A smart use of excess budget funds from 2021 is to seek insight into the loan pricing behavior tied to your current offerings. This insight will allow your institution to explore opportunities to boost its competitive and strategic advantages with a relationship loan pricing strategy based on its risk and profitability guidelines.


Aid Staff

Spend Budget Surplus to Mitigate Risk

Get caught up on suspicious activity monitoring alerts or relieve stressed-out staff.

During the pandemic, fraud activity has increased, and fraudsters have found new ways to scam bank customers and credit union members. And regulators have not provided relief for suspicious activity monitoring and reporting deadlines, even though Bank Secrecy Act (BSA) departments have seen increased responsibilities (such as business continuity) and are dealing with staff working from home.

It's "business as usual" as far as expectations for compliance staff to remain alert for illicit financial activity. Retaining and recruiting compliance staff has also been an issue for a few years, leaving professionals overworked and stressed.

A short- or long-term staffing solution that incorporates experienced anti-money laundering and fraud investigators can get the financial institution off to a positive start in 2022. Here are a few of the ways the assigned investigator(s) can assist:

  • Working alerts
  • Investigating cases
  • Writing Suspicious Activity Reports (SARs)
  • Conducting customer due diligence (CDD) reviews or high-risk reviews
  • Serving as an independent quality control arm for the institution.

Streamline and systematize loan review for 2022.

Manually selecting loans for review, pulling data, re-spreading the loans, and tracking the review through the workflow can consume many hours of staff time. But this function supports the institution’s safety and soundness and its estimates for credit losses, so it is a regulatory requirement. However, financial institutions in 2022 are focused on keeping a tight rein on noninterest expenses while growing loan yields, so anything the institution can do now to make loan review more efficient and effective will pay dividends next year.

One potential use of surplus budget funds is to get your bank or credit union’s loan review process automated for 2022. A loan review solution that pulls the sample, the loan data, and the supporting loan documents, then re-spreads the financials in the same system as origination:

  • Removes data entry
  • Simplifies documentation
  • Eliminates redundant customer or member contact
  • Adds consistency to loan review.

Conference Registrations

Spend budget surplus on next year’s training

Lock in discount-pricing for 2022 professional development.

The pandemic has made it difficult for many banking professionals to access continuing education courses or attend conferences so they can network with peers and learn best practices for their areas of the bank or credit union. Nevertheless, the dramatic changes in banking forced by the health crisis have made it clear that everyone in the financial institution must prepare for the next phase of banking. Assuming new variants of the virus don’t cause widespread travel bans again, the new year could finally provide chances to gather and prepare for tackling the opportunities and challenges ahead.

Some conferences are offering early-bird pricing for 2022 events, and excess 2021 budget funds spent on these will pay off in the year ahead. Abrigo’s ThinkBIG conference at the La Cantera Resort & Spa in San Antonio, Texas, will feature speakers of interest to financial institution C-suite executives, lending and credit staff, as well as BSA officers and analysts. Early-bird Registration for the May 24-26, 2021, conference begins Dec. 6.

Streamline loan review
Learn how to satisfy regulators and yield more useful information in this whitepaper, "Effective Loan Review"

About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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