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Operating in today’s risk-management framework
Tony Hueston STAR Financial Bank
John Watts Experian
#vision2014
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
TOP
10
Tom Le Goff / Getty Images stock
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
10 Have ONLY compliance
officers on staff
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
9 Have on-staff appraisers
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
8 Achieve double-digits
ROEs on EVERY loan
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
7 Portfolio delinquency rates
are below 0.25%
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
6 Re-establish the open bar
in the bank’s break room
at 4:00 pm Friday
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
5
Your loan review
department stated
to the board of directors:
“We found NO concerns
last year”
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
4 Your portfolio has no
troubled debt restructures
(TDRs)
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
3
You received a letter from
your primary federal
regulator stating: “We will
only examine you once
every five years”
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
2 Loan growth is at
a 10-year high
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How executive management sleeps well at night (While dealing with regulations and growth challenges)
1 Focus on quality growth
Be a trusted advisor
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Introducing…
Tony Hueston
STAR Financial Bank
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Barriers
Competition
Regulations
Credit culture vs. sales initiatives
Growth
Legal lending limits vs. in-house limit
Loan enhancements
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Rate / margin squeeze
Pricing calculations (relationship ROE)
Open structure
Lack of structure from competition
How loose of a structure can you live with?
Competitive pressure
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How do you handle
opposition to appraisals?
Q: a) Obtain, but bank pays for it
b) Waive new appraisal if credit
has performed
c) Too bad – client will pay for it
d) Look for other ways to secure
note
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New or updated appraisal
► Who opposes?
● Client
● Account officer
Updated title work at renewal
Flood insurance
Appraisal regulations / other real estate due diligence
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Account officer has an in-depth discussion
with prospective small business client for
a new line of credit. After discussing, the
account officer states, “… our bank is not
a good fit, we need to pass…”
Q: YES
NO
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Accepting an application
► NO pre-screening
► DO NOT discourage
Requiring non-owning spouse to guarantee
► Paper applications?
Case study
► Discrimination settlement
Fair lending
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How do you handle
TDRs?
Q: a) Not an issue. Don’t have any!
b) Loan modifications are limited
to avoid TDR classification
c) Rely on examiners to classify
loans as TDR
d) Work with borrower in a
different fashion to avoid TDR
classification
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Growth objectives
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To remain competitive and grow,
have you done any of the following?
Q: a) Approve a longer-term
commercial mortgage
b) Re-structure the loan using
business assets rather than
real estate
c) Consider lending on an
unsecured basis
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Come from senior management and board of directors
Examples:
New agriculture loans
► Growth $XXX
► Rate 2.99%
Commercial real estate
► Growth of $XXX
► Calling efforts on CPA
Growth initiatives
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Targeting campaigns / calling efforts
Municipal lending
Professional practices
► Medical
► Attorney
Marketing
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How do you handle competitive
pricing issues? Is this a concern
for small business or commercial
lending?
Q: a) All pricing is determined by the
account officer. Pricing
exceptions are not a concern
for business lending
b) Maintain a rate sheet and
monitor rate exceptions
c) Pricing exceptions must be
made by senior management
or designated personnel
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Finance department involvement
Pricing model
► Focus on relationship ROE; MUST include treasury services
Targeted campaigns with thin margins
► Excess funds on balance sheet…earn a little or earn nothing
Pricing concerns
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Solving these issues
with the help of
technology
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Q&A
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Barriers can be overcome
Growth needs to be a goal and is attainable
Technology and systems are a key enabler
Sleep well…
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[email protected] | @jdubbs4
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