Chinese Zodiac - One of my favorite memories growing up as a child was going to a Chinese restaurant and reading about my Chinese Zodiac animal sign. My sign is the Rabbit, the fourth of all Zodiac animals. Simply based on what year I was born, I am able to tell whom I will be able to get along with and whom I should avoid. The Zodiac is only one of China’s fortune prediction methods.
What is easy to understand about the Zodiac is that it groups all peoples into twelve basic groups. The Zodiac has been around for many centuries and repeats itself every twelve years. Simply based on what year you and I were born, we should be able to know a lot about you before we even meet.
Vintage/Static Pool Approach to CECL – CECL is an approach to calculating the Current Expected Credit Loss of a loan based on certain characteristics. One of the most common characteristics used for the analysis is the year that the loan was originated. Does that sound like the Zodiac? The basic premise is that the total loss experience over the life of the loan pool with the specific characteristic (in Vintage/Static Pool it is year of origination) will be the expected loss for each and every loan that is remaining in the pool.
Chromosomes - A chromosome is a DNA molecule with part or all of the genetic material of an organism. In humans, each cell normally contains 23 pairs of chromosomes. Since we get 23 chromosomes from parent 1 and the 23 corresponding chromosomes from parent 2, the combinations and outcomes are limitless. However, when we do see certain groupings of these chromosomes in DNA, we can predict with deadly accuracy certain types of diseases and cancers.
Regression Analysis Approach to CECL - Regression Analysis is a set of statistical processes for estimating the relationships among variables. The main purpose of regression analysis is to return a single value based a number factors. In CECL’s case, we are calculate a loan loss value for a loan based on a number of factors associated with the loan such as Collateral Value, FICO Score, Interest Rate, etc.
Download the PDF for the full article.
“Bankers need to be able to manage costs more effectively as their FinTech rivals are operating without the infrastructure of all the bricks and mortar. Now more than ever, banks and credit unions need to be better at Corporate Performance Management. If they are going to continue to succeed, they must invest in and reward what is working and fix or delete what is not working.”1
There are so many demands on your team right now that it is almost impossible to implement any long-term strategy on how to make dollars and sense of your data.
With Corporate Performance Management, you need to automate the mundane such as:
• Call Reporting
• CECL Implementation
• Customer Profitability
With the “must haves” behind you, you can then focus on:
• Better Customer Segmentation for Marketing Purposes
• Aligning Corporate Objectives with Balanced Scorecards
• Incenting Your Employees to Improve Corporate Performance
Please join my complimentary webinar as I discuss Making Dollars and Sense of Your Data on February 15 at 2 PM EST (11 AM PST). Click here to register.
*1 – Enabling World-Class Decisions for Banks and Credit Unions (page 25), Contributors: Mike Applegate, Corey Barak, Daniel Havey, Hadrian Knotz, and Nils Rasmussen
Many companies are struggling to come up with good CECL models because the number of their charge offs is not predictive enough.
CECL Clearinghouse will compare your data with many other institutions’ data to calculate the appropriate reserve at the individual loan and send the results back to you.
All you have to do is simply upload a CSV file that contains a dozen loan related fields into BI360 Data Warehouse on a monthly basis.
Contact me if you would like to learn more about the service.
SFAS 91 is designed to spread the net cost of originating a loan over the life of the loan while CECL is designed to maintain a loan loss reserve over the life of the same loan.
At the point of origination, you will typically have a net credit (SFAS 91 deferral) and an offsetting debit (CECL reserve) to income.
The net effect is that SFAS 91 reduces CECL’s impact.
In this instructional webinar (click here), you will learn:
- How to Calculate Loan Origination Costs
- How to Defer Net Origination Costs – Straight Line vs Effective Interest Method
- How to Break Out Loan Losses into Just a Couple of Factors
- How to Convert Actual Losses into a CECL Model at the Instrument Level
- How to Account for SFAS 91 and CECL over Time
The attendance was overwhelming as dozens of Banks and Credit Unions attended.
Many of them have requested a link to the recording (click here) of the webinar to share with their coworkers.
Before you spend too much money on implementing CECL, you should watch this 17-minute Simplifying CECL video.
In this instructional video, you will learn:
• The difference between Experienced Losses versus Predicted Losses
• The Value of Predictive Analytics versus Linear Regression
• How to get the biggest bang for your buck with just two factors
• Why Loan to Value (Loan Based) and FICO (Borrower Based) are the best predictors
• To apply CECL results to Customer Profitability and Product Profitability
Attached is a SFAS 91 Loan Deferral schedule that I built for a bank.
It takes the reserve approach using straight line amortization at the instrument level.
The main premise is that each loan category has a standard origination cost.
At the note level, you will use the standard origination cost and actual origination fee.
Each month you will post a credit for the entire origination cost of new loans for that month to personnel expense.
You will also post a debit for the entire origination fees for the month as well.
The offsets will be to an asset account called Net Deferred SFAS 91 Fees and Costs (typically a debit balance).
At the end of each month, you will print out you loan trial and determine how much net deferral should remain on the books (see attachment for example).
The adjustment will then be recognized (typically it will be a debit to personnel expense).
In times of rapid loan production, you will end up with a net deferral to personnel expense.
In times of soft demand, you will end up with a net recognition of personnel expense.
Statistics show that customers fall into three distinct groups:
A Customers - Top 15% most profitable account for 100% of profits
B Customers - Next 35% are only marginally profitable
C Customers - Last 50% are unprofitable
Find out who is who with Customer Profitability on Oct 26 at 1:00 PM EST
Register here https://lnkd.in/eXhHnCR
Tired of preparing your Securities Reports by hand? Please join Solver and TPG Software for a brief webinar today, Oct 16, at 4:00 PM EST on how Federal Deposit Insurance Corporation (FDIC) and NCUA members can automate their Securities and Investment Reports.
Having trouble getting all your employees on the same page? What you need is a way to translate the company's vision and goals into balanced scorecards that holds everyone accountable. Check out the YouTube Video https://youtu.be/x03uh4jlQvg?list=PLgcE4HzrkAL-YKqpTjKYQFbTgpMfuNZxF
Translate Your Company Vision into Balanced Scorecards Webinar - Oct 11 at 2:00 PM EST (11:00 AM PST)
Is your organization currently translating its Company Vision into operational goals?
At best, most organizations have an annual meeting to discuss their vision but never link it back to individual performance.
BI360 is a solution that can help simplify the whole process.
Solver is presenting on October 11 at 2:00 PM EST (11:00 AM PST) how BI360 is being used to translate a company’s vision into operational goals via Balanced Scorecards.
Click (https://register.gotowebinar.com/register/1545034125129515777) to register for the webinar. Even if you are unable to attend, we will send you the link to the recording of the event.
It seems that the Call Report just keeps getting more and more complicated with each quarter.
Solver is teaming up with Plot Analytics for an informational webinar on September 21 at 1:00 PM EST (10:00 AM PST) to demonstrate how BI360 is being used to automate the Call Report.
Plot Analytics will show you how they have completely automated the entire Call Reporting process by showing:
- the pre-built data model that imports basic GL, Loan, and Deposit data from any Core Provider
- the automated generation of Form 5300 Statement of Financial Condition and Statement of Income and Expense
- the creation of the XML file the will be sent to the NCUA
REGISTER (https://register.gotowebinar.com/register/6474881424789552898) for the free webinar.
What does CECL mean? - The Financial Accounting Standards Board (FASB) issued the final Current Expected Credit Loss (CECL) standard on June 16, 2016. After the financial crisis in 2007-2008, the FASB decided to revisit how banks estimate losses in the Allowance for Loan and Lease Losses (ALLL) calculation.
Read attached if you are interested in simplifying CECL.
Get your whole organization on the same page today so that everyone will be tracking towards your strategic goals and objectives by utilizing balanced scorecards for Banks and Credit Unions.
The classic mistake that Banks and Credit Unions make is assuming that their financial reports are all they need for Corporate Performance Management (CPM).
This chart is a view of a bank’s cumulative customer profit.
20% of the customers typically provide 100% of the bank’s total profit.
30% provide incremental profits and the bottom 50% are losses.
In addition to financial reporting, budgeting, and forecasting, CPM enables you to monitor and manage business performance down to the instrument and customer level.
FinTech companies have figured this stuff out and are chasing the top 20%.
If you are interested in what Banks and Credit Unions are doing to figure out who their most profitable customers are, please sign up for the webinar entitled, "Making Dollars and Sense of Your Data" sponsored by CBANC.
Definition: According to Wikipedia, Dashboards often provide at-a-glance views of KPIs (key performance indicators) relevant to a particular objective or business process (e.g. sales, marketing, human resources, or production). In real-world terms, "dashboard" is another name for "progress report" or "report."
Often, the "dashboard" is displayed on a web page that is linked to a database which allows the report to be constantly updated. For example, a manufacturing dashboard may show numbers related to productivity such as number of parts manufactured, or number of failed quality inspections per hour. Similarly, a human resources dashboard may show numbers related to staff recruitment, retention and composition, for example number of open positions, or average days or cost per recruitment.
(download document for full article)
Daniel, can you send some information on what Solver does? We are looking to move into ERM and have a new CRO (out of my realm). Unfamiliar with any solutions for cross silo measurements, so we'd be starting from scratch. Thank you!
New to ERM,
Attached is a article by Wipro Council for Industry Research entitled, "Enterprise Risk Management for Banks."
As you are finding out, ERM requires the gathering of data from many places and needs to be analyzed.
BI360 provides a complete Excel and web-based suite, comprised of Reporting and Budgeting, Dashboards and a pre-configured Data Warehouse.
In short, BI360 can easily house all the data you need to gather for ERM and will allow your CRO to quickly build Excel-based reports to analyze the data.
Thank you reviewing and checking out the site - will pass on for discussion to the CRO - appreciated!!
One of the coolest things about the online dating site eHarmony is that it collects 29 different data points about each participant. Based on sophisticated algorithms, it will then match your scores with that of other participants that have similar scores. The odds of success of finding your match, according to eHarmony, are greatly increased.
Likewise, a CRM being loaded with instrument level profitability and activities is a treasure trove of information for data hackers and identity thieves. Even if the profile does not have all 29 facets of your financial profile, these crooks can do great damage with just some of the information.
The Cloud is coming! Are you prepared? I read a story once about a land that was going through a drought, famine, and warfare. After a momentous battle, a leader told one of his lieutenants, “Go up now, look toward the sea.” So the lieutenant went up and looked and said, “There is nothing.” And the leader said, “Go back” seven times.
It came about at the seventh time, that the lieutenant said, “Behold, a cloud as small as a man’s hand is coming up from the sea.” And the leader said, “Go up, say to our adversary, ‘You had better flee this mountain, so that the heavy shower does not stop you.’” In a little while the sky grew black with clouds and wind, and there was a heavy shower.
Did you ever get the sense that Banks and Credit Unions are looking out over the vast competitive landscape and saying to themselves that they don’t need Cloud? They say to themselves, “It is too risky. We want to do and own everything ourselves. This Cloud stuff is just a fad!” Try telling that to Sears as they are facing the end due to competitors like Amazon, the leading Cloud retailer.
(download document to read more)
What is Performance Management? According to the Harvard Business School, performance measurement focusses on four main areas:
- Communicating with external investors to ensure that a firms' securities are fairly priced and that they are able to access capital
- Measure and evaluate a firms' economic performance
- Improve resource allocation and strategy implementation within a firm
- Build accountability for performance through effective external and internal governance
(download document to learn more)
Origins: I met Harold as my new boss in 1989 when I became Controller for a small subsidiary of a bank. At the time, I was a Lotus 1-2-3 disciple. I was great at writing macros and spitting out reports. The one thing I hated about Lotus, however, was its poor printing capabilities.
Harold introduced me to Microsoft Excel and its ability to set and preview the print area made me convert overnight. Harold said he loved the ability to type numbers into Excel every month, so he could get a good feel for the financials.
Benefits: Some of the many other benefits of using Excel are being able to enter data from multiple sources (General Ledger, Loans, Deposits, etc.), putting report development into the hands of bankers, being able to share the reports with others, and Excel’s ease of use.
(Download document to read more about How Excel Reporting for Banks has Evolved.)