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How Information Technology Helps Create Credit ACE’s Within Your Institution

Posted by Patrick True

Jul 20, 2016 10:54:08 AM

Years ago, I introduced the Credit ACE acronym to describe a credit officer’s skill in managing a commercial lending portfolio. To be an ACE means to Anticipate potential future events and actions, to Communicate effectively with your clients and to Enforce legal agreements appropriately. Since the acronym was first used, advances in information technology have widely enhanced those capabilities. By working with financial technology vendors, financial institutions across the US are beginning to aggregate their financial data in order to see more clearly into each business relationship. From on-line applications and underwriting through documentation, collateral management and compliance, these institutions are beginning to benefit from seamless delivery of data from one system to the next. This will pay further dividends in the near future as institutions develop their strategies to comply with new regulatory standards associated with FASB guidance regarding current expected credit losses (CECL).

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Topics: Loan Pricing, Lending

Five Common (and Costly) Loan and Deposit Pricing Errors

Posted by Jon Kozlowski

Aug 25, 2015 4:33:05 PM


At most community financial institutions, deal pricing is typically set by loan officers, and approved by loan committees, in a process that essentially lets the institution’s competitors price their deals; experienced lenders generally have a good sense for what rate/fee proposals will work on different types of deal structures in their markets, and look to meet or beat what competitors are likely to bid on the same deal.  One of the biggest revelations institutions implementing a pricing model for the first time have is how frequently competitors misprice deals.  This could mean either “giving it away” and not being adequately compensated, or realizing there were quality credit opportunities the institution could have bid more competitively on and still enjoyed strong profitability.

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Topics: Profitability Management, Loan Pricing

Pricing Strategy Segmentation and its Impact on Portfolio Profitability

Posted by Jon Kozlowski

Jul 27, 2015 10:16:34 AM

 

The existence of an “80/20 rule” is an accepted notion in most industries; banking is no exception. Conceptually it is easy to grasp that some customers may be more profitable than others, mainly due to their higher volume. And this is indeed true. What is not well-understood is just how true this is.

At community financial institutions, the “80/20 Rule” is actually a “200/20 Rule.” ProfitStars provides customer and product profitability solutions to hundreds of financial institutions. What we’ve learned from talking to these institutions is that typically more than 200 percent of their total net income is generated by the top 20 percent of the customer base. At the opposite end of the spectrum, over 60 percent of community bank customers lose money for their institutions.

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Topics: Loan Pricing

A Better Way to Price Loans and Establish Deposit Rates

Posted by Strategically Speaking

Jul 27, 2015 10:12:46 AM


As a Lending Solutions Product Specialist, I devote much of each day discussing business challenges with credit union and community bank clients.

Margin compression comes up time and again. Is that any wonder? FDIC and NCUA call reports consistently show that net interest margin is a significant profitability indicator. Is there a Lending, Financial, or Credit Officer who’s not feeling the squeeze between what a financial product costs, and its marketable value?

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Topics: Loan Pricing

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