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Customer Profitability and Pricing Administrator User Guide

ProfitStars® Financial Performance Suite 2017

Customer Profitability and Pricing Administrator User Guide ProfitStars® Financial Performance Suite

i © 1999-2017 Jack Henry & Associates, Inc.® ProfitStars

2017

Customer Profitability and Pricing: Administrator User Guide ..................................................... 1

Navigating within the Application .................................................................................... 1 Dashboard .......................................................................................................... 1 Notifications ........................................................................................................ 2 Help Menu .......................................................................................................... 2

Setup Menu .................................................................................................................... 3 Assumptions ....................................................................................................... 3 Key Rates ........................................................................................................... 9 Assign Ranks .....................................................................................................10 Manage Users ...................................................................................................11 Organization Setup ............................................................................................12 Display Settings .................................................................................................13 Objectives Input .................................................................................................14 Monthly Update Process ....................................................................................15

Reporting .......................................................................................................................20 View Reports .....................................................................................................20 Create Reports ..................................................................................................21


1 © 1999-2017 Jack Henry & Associates, Inc.® ProfitStars

2017

Customer Profitability and Pricing: Administrator User Guide Customer Profitability and Pricing are each domains within the ProfitStars Financial Performance Suite. Customer Profitability provides a historic measure of the profitability of each customer and customer account while Pricing measures how changing the pricing on an existing relationship or adding a new relationship will impact profitability. This guide focuses on the responsibilities of Admin Users within the application and includes information on performing the monthly update process, managing users, and making changes to settings and assumptions.

Navigating within the Application Upon opening the application, the user will be taken to a Dashboard screen. At the top right, the user name and institution name appear along with a Notifications and Help Menu icon. The ribbon just below shows each domain an institution is licensed for as well as a Reporting and Setup Menu. To return to the dashboard screen at any time, simply click the Profitstars Financial Performance Suite logo.

Dashboard The main landing page is an interactive dashboard which displays key information from the customer profitability and pricing domains and includes the following:

Most/Least Profitable Relationships – Displays the five most profitable or least profitable relationships at the institution along with loan balances, deposit balances, total profit, and ROE for each relationship.

Loan Pipeline – Shows the total dollar amount and number of loans that are in one of five statuses: Pricing/Approval, Ready to Close, Closed – Won, Closed – Lost, or Booked Active.

Pricing Loan Volume – Displays the institution’s top five or bottom five loan products by loan amount that have a current status of Pricing.

Rank Change – Displays up to five relationships that have experienced the biggest change in rank between the prior month and the current month. The positive rank changes are listed before negative rank changes.

My Recent Reports – Displays up to five of your most recently generated reports, starting with the most recent.

Relationship Percentile – Displays the sum of all profit values of a relationship and groups each relationship into one of five percentiles. The performance criteria to calculate the percentiles is set in Display Settings under the Setup menu.

New Loans by Officer – Displays up to five officers who have the highest aggregated profit from new loans in the current month.



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Notifications When a significant event occurs, a message will appear on the notifications page. This can be accessed by clicking the envelope icon which is always visible at the top of the screen. If there are new notifications, the icon displays the number of unread entries.

The most recent notifications are shown at the top of the list. Use the delete button on the right to delete notifications.

Common events that generate notifications include:

Data files have been received

Exceptions have been encountered during the monthly update process

The monthly update has been completed successfully

Reports have been generated

Help Menu Access the online help menu by clicking the question mark icon at the top of the screen.



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The left-hand side displays a table of contents, index, or glossary. Click the desired topic for information to display on the right side of the screen. The search can also be used to find a specific topic.

Setup Menu The Setup menu contains several areas where a user can change settings or assumptions.

Assumptions Within the Assumptions menu, there are six key areas:

Applications – Loans

Applications – Deposits

Applications – Services

Sub Instruments

Funds Transfer Pricing

General

These assumptions play an important role in the Customer Profitability and Pricing results. They are institution-specific and can be updated any time by a user with the proper permissions. Here is more detailed information on the six key areas:

Applications - Loans

This section contains the institution’s loan assumptions by product. These assumptions make it possible for a user to accurately model a loan pricing scenario or view the profitability of a customer based on the loans they hold at the institution.



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The Products page is displayed first. This page shows a listing of each product along with unique characteristics such as capital allocations, expense assumptions, and accrual basis.

The Expenses page contains expense sets that are used to allocate expenses based on the type and the amount of the loan. An expenses set is then applied to each loan product on the Products page.



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The Loan Losses page contains different risk categories in which different risk ratings are assigned an annual loss, max loan, ROE target change, and capital change. These risk categories can then be applied to each loan product on the Products page.

Applications – Deposits

To switch to this section, click the Applications drop-down menu.

This section contains the institution’s deposit assumptions by product. These assumptions make it possible for a user to accurately model a deposit pricing scenario or view the profitability of a customer based on the deposits they hold at the institution. There is only one page for the applications deposits, and it contains assumptions such as capital allocations, expense per account, float, and rate type.



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Applications – Services

To switch to this section, click the Applications drop-down menu.

This section contains a list of any services that the institution provides and allows for several assumptions to be defined for each service, including capital allocations and expense per product. These assumptions make it possible for a user to accurately model a pricing scenario for a service or view the profitability of a customer based on any services they hold at the institution. Loan servicing, brokerage/investments, and a trust are examples of services.

Sub Instruments

This section contains a list of sub instruments which represent different income or expense activities associated with loans, deposits, or services. Associated with each sub instrument are assumptions such as rate type, calculation type, rate format, and rate. These assumptions determine how the income/expense associated with these activities is calculated and is then used in Customer Profitability.



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Here are the three most common types of sub instruments along with examples:

Type Sub Instrument Examples

Loan Transaction Fee Late Fee

Deposit Fee NSF Fee Safe Deposit Rental Fee Deposit Card Interchange Fee

Direct Expenses In-Person Deposit ATM Withdrawal Internet Bill Pay

Funds Transfer Pricing

This section contains the criteria for the funds transfer pricing calculations by product type. The assumptions for each product include the FTP method, funding curve/index, and expected life.



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General

This section contains general assumptions grouped into one of three categories: Common, Simulations Sets, and Loan Status. The Common page includes assumptions for Relationship Target ROE, Tax Rate, and Cost of Capital.

The Simulation Sets page allows for five different rate assumptions so users can examine the impact of changing rates on a pricing scenario.

The Loan Status page displays a list of loan statuses that are used to track the progress of a loan through the loan pipeline and are also for field mapping purposes. There are five standard types:

Booked/Active

Booked/Incactive

Pricing

Requires Review

Requires Approval

Lost



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To increase the granularity of the loan statuses, additional statuses can be created for use throughout the application but will still be tied back to the standard statuses.

Key Rates The Key Rates setup page displays the institution’s current individual indices and yield curve. These indices may be custom or subscribed. If the institution subscribes to rate service, the indices will be imported daily, and they will display at the top of the screen in alphabetical order. Custom indices will display below the subscribed indices and are easily identified by the Delete

and Edit options.



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Switch between individual indices and the yield curve by using the buttons at the top of the screen.

Assign Ranks This setup screen allows users to set up a user-defined hierarchy for ranking relationships based on the value it brings to the institution. The ranks are displayed throughout the application and will only change once per month after the monthly update has been processed. There are six different measurements that can be used to assign ranks, and only one may be used at a time:

Gross Profit ($)

Contribution ($)

Profit ($)

Value Added ($)

ROA (%)

ROE (%)

Depending on the measurement chosen, each rank will display a lower limit and higher limit as well as a star ranking that can range from one half star to five stars. A maximum of 10 rankings can be defined.



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Manage Users This setup screen allows for the creation and maintenance of the application’s users. Administrator users or other users that have been given a permission to manage users have this ability.

To add a new user, click the button at the top of the screen and complete the Add User form

It is recommended that you use a consistent and established naming convention for user names. If a user needs to reset their password, they will need to be able to provide their user name. There is a predefined set of User Roles:

Administrator – Assign this role to users who need complete access to the application.

Branch Manager – Assign this role to users who are responsible for generating deposit volume and performing other duties generally associated with branch managers.

Loan Officer – Assign this role to users who are responsible for generating loan volume.

Relationship Manager – Assign this role to users who are responsible for evaluating the overall mix of products and services they can offer to clients.

The permissions of these predefined roles can be modified by clicking the button. The permissions of individual users can be modified by clicking the name of the user and activating the following option:



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To assign organization access, click the button on the Manage Users screen. By default, no organizations are initially selected for a new user. The organization tree displayed will match the organizational hierarchy maintained in the Organization Setup page.

The button can be used to provide senior officers with view-only access to their junior officers’ portfolios. This screen will display a list of all the users that the monthly update process identified as officers. To set the officer permissions for a user, select the check boxes for the officers in the list whose information should be available to that user throughout the application. Choose All Officers to select the entire list. This might be done, for example, for the institution’s Chief Lending Officer. Although users cannot be deleted, the user status option in the Manage Users screen can be changed to deactivate the user.

Organization Setup This setup screen allows institutions to have a customized organizational structure to meet their reporting needs. Users that have permissions to this area can add/remove organizations and make changes to the setup.

To add a new organization, click the at the top of the screen. The new organization’s place in the structure will depend on the selected organization at the time the Add button was selected.

On the right-hand side of the screen, fill out the following:

Organization Type – Choose Branch if there will be no units rolling up into the new unit. Choose Consolidated if other units will roll up into the new unit.

Name – Type in a unique alphanumeric name for the new unit.

Organization ID – Type in a unique alphanumeric ID for the new unit.

Belongs To – Specify the consolidated unit that the new unit should roll into.

Click Save when finished.



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To modify an existing organization, select the organization from the left-hand side and then make modifications on the right-hand side of the screen. Keep in mind that if a unit’s Organization Type is set to Branch, it cannot be changed.

To move an organization, select the organization from the left-hand side and use the buttons to move the organization up or down the list.

To delete an organization, select the organization from the left-hand side and click the button.

Display Settings The settings in this section affect how specific information is displayed elsewhere in the application.

The Performance Criteria setting determines the profit measure that is used to calculate relationship percentiles. There are four options:

Gross Profit – Monthly net interest margin, plus revenue from services, plus fees, minus loan loss provision.

Contribution – Monthly gross profit minus direct expenses.

Profit – Monthly contribution minus overhead expenses.

Value Added – Monthly historical profit minus cost of capital.

The Display Funds Transfer Pricing option enables a Funding Costs link on the Relationship View – Income Statement page for loans and deposits that are associated with products that are assigned an FTP method.



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Objectives Input This setup page allows an institution to set performance objectives, against which organization and officer performance can later be measured. Once objectives are set and monthly data is processed, a Performance vs. Objective standard report can be generated to show the performance against the established objective. To set up an objective, choose the type of objective, and then select an organization/branch or officer from the drop-down menu for which the objective will be measured.

Click the button to display fields for Profit Measure, Time Frame, and Objective.

The options for Profit Measure are:

Gross Profit

Contribution

Profit

Value Added

ROA

ROE

The selected profit measurement is calculated for all instruments that are assigned to the organization or officer selected.



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For the Time Frame, select the month and year by which the objective should be achieved. All historical months that have been loaded into the application as well as 18 future months are available. In the Objective field, enter the profit goal set for the organization or officer for the specified profit measurement and time frame. Repeat this process if multiple objectives are being set for a specific organization or officer and click Save when finished. To add objectives for a different organization or officer, make the change at the top of the screen and follow the same process.

Monthly Update Process Once all the expected data extract files have been received, a notification is sent to all administrator users that the monthly update process can be performed.

To perform the monthly update, click the Monthly Update Process link within the notification, or go to Setup > Monthly Update Process. Select the month that needs to be updated. If a month needs to be updated a second time, select the Overwrite option.

Click the button to begin the monthly update process.



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If the process encounters any exceptions, a notification will be sent.

Within the Monthly Update Process page, the number of exceptions will be displayed along with the option to view the exceptions.

Before continuing, all exceptions must be resolved. Click the View Exceptions button to open the Exceptions Summary page. Exceptions here are listed by the file along with the number of exceptions and the description.



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To view the individual records for an exception, click the # Of Records link.

For some exceptions, an Edit Grid option is available allowing individual records to be edited in the Applied Value field. If the user enters a value for all records and clicks the Save button, the exception will be resolved.



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On the Exceptions Detail screen, a Resolution drop-down list is available to resolve all records for a specific exception. The resolution methods may differ depending on the exception.

These are the resolution methods that may be available:

Apply Previous Value – The previous month’s value for each affected record is used for the month being updated. To determine if the previous values are valid, use the Edit Grid option.

Changes to Mapping – This method becomes available when the content of a particular field has not been defined in the setup. Once this option is selected, a Correction Value field will appear allowing the user to select the appropriate value. If the appropriate value does not appear in the drop-down list, the user will need to add it within the setup first. This is the only resolution method that provides a permanent fix.

Temporary Correction – If this method is selected, a Correction Value field will appear. Depending on the type of error, the user will either enter a value or select from a list of options. This resolution method will only affect the current month’s processing.

Accept with Default – When this method is selected, the application places a zero in any field where zero is an acceptable value. When zero cannot be used, the field is left blank.

Reject – If this method is used, the records are ignored and are not included in the monthly update. This resolution method is available for any exception.



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Once all the exceptions have been handled, the application returns to the Monthly Update Process page. To continue, click the Restart button.

The progress continues to the Calculations stage.

Once the update completes, a notification will be sent.



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Reporting Within this section, a user can view reports or create reports. A set of standard reports is included based on the licensed domains. The parameters of any additional reports that are created can be saved as a favorite for easy access in the future.

View Reports The page displays a list of recently generated reports with the newest at the top. Majority of these reports are generated from the Create Reports page; however, there are standard reports that are generated from the Pricing domain that will also display here. Those reports are:

Relationship Summary

Loan Summary

Loan Detail

Reports on this page will display an icon that indicates the status:

Ready – The report is available to view.

In process – The report is currently being generated.

Queued – The report is waiting to be generated.

Attention – The report was not generated due to an error. Once a report is ready, click the name of the report to display it. The data displayed in the report will correspond to the date and time the report was created, which shows in the Date column.

To remove a report from the list, click the delete button. Note: Reports shown on the View Reports tab automatically expire and are removed from the list after seven days. There is an option to save the report to a file or save a report as a favorite if the data needs to be saved longer.



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Create Reports This page displays a list of the institution’s licensed domains.

Click a domain to see the available standard reports. The reports associated with the selected domain will be listed alphabetically. To generate a report, click the report name and a list of report options will appear on the right side of the screen. Some options are specific to the selected report, while others apply to all reports.



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Once the report options have been chosen, click at the bottom of the screen. Click the View Reports page to view the status of the report. Once the report is ready, the status will show as ready and a notification will be received.

Clicking the notification will open up the View Reports screen. From this screen, click the report name to view the report. If a report has been saved as a favorite, access it by clicking the menu under the Create Reports page. Then, click the domain in which the report resides.

The favorite report can be generated again with the same parameters by clicking at the bottom of the screen.

The button will remove a report from the favorites list.

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