Farin LoanEDGE Quick Start

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1 Farin LoanEDGE Quick Start Web Site This is a client services page where you can launch the loan program (click on LoanEDGE Start Page), and also reach account management features for username and password management. Create a Username Use this link to create a username for use with the Farin model: Enter all values, and choose I am a GSB student in the Reason selection box. We get a notification and verify your registration before enabling your account. When we enable your account, you will get an with a reminder of the above home page link. Username Doesn t Work If you forget your username use the Lookup Username link on the web site page to have your username sent to your address. Password Doesn t Work Use the Reset Password link on the web page to have a temporary password sent to your address. You will probably want to change that password; to do so use the Account Management page: Log into this page with your existing password, then use the Change Password link on the Account Management tab to create a different password. Farin LoanEDGE Quick Start Page 1 of 7

2 Browser and Silverlight The application uses the Microsoft Silverlight plugin within your browser. If you have never run a Silverlight application from the web, you will be asked to download the Siverlight plugin the first time you use the iprice Loans link. Some IT policies prevent the downloading of plugins on corporate owned machines. In that case you will either have to get an exception to the policy or use a home machine that can download plugins. Recommended Configuration There are certain combinations of PC operating systems and browsers that do not work well with LoanEDGE; including interaction problems between Internet Explorer versions 6/7 and older versions of Windows. These problems are worse on a laptop or netbook with a small screen. Therefore we recommend the following minimum requirements for running the application. 1. Microsoft Windows 7, Windows Vista, or Macintosh OS X operating system. 2. Minimum screen resolution of 1024x768. If that is not possible, be sure to maximize the browser or run the browser in full screen mode. You can also use the browser zoom capabilities to reduce display size to less than 100% 3. Use Firefox, Google Chrome, or Internet Explorer version 8/9 browser if at all possible (and if permitted on institution owned equipment). Safari on Windows or Mac OS X is also compatible. LoanEDGE does not run on ipad or iphone at this time. 4. PC/laptop/notebook with dual core processors at 2 GHz or better are recommended. If no dual core available, use the fastest computer CPU you have available to you. Netbooks and older laptops have trouble refreshing the screen fast enough. Farin LoanEDGE Quick Start Page 2 of 7

3 Using The Model You must login to the application each session even if you have used the Account Management login for password management. Use the login link or login button on the first screen that loads. The first time you login, you will know everything is working if you see a page that looks like this and has LoanEDGE for GSB 20XX Intersession in the title: If you see something else, contact us as there may be an issue with your username s permissions within our network. Online Help Clicking on the Overview tab in the upper left will bring up a list of help topics. Much of what is mentioned in this guide is repeated there. Modeling a Scenario Any loan we analyze must be part of a customer relationship. So in order to model the scenarios in your assignment you must first create a relationship for each scenario. Once a relationship exists, you then add specific loan and deposit products to the relationship. We suggest creating a relationship for each of the scenarios in the exercise. Farin LoanEDGE Quick Start Page 3 of 7

4 1. From the Home page, click on the "Create New Relationship" link in the Tasks list upper right. 2. Enter a scenario name (production users typically enter a customer name here). 3. Click Add, and then after the relationships list finishes loading, you will add your first product to the relationship. Adding a Product 1. The Select an Account window appears immediately after you create a relationship. (In an existing relationship, use the Add Account button in the upper left.) 2. The Select Account window is an outline of the chart of accounts for this sample institution. Click on the plus next to the chart headings to open each category. Click here to open a category 3. When you see the account that resembles the product needed by the scenario, highlight it then use the Select button in the lower right to add it to the relationship. The product will be added, and its characteristics will appear in the relationship window: Farin LoanEDGE Quick Start Page 4 of 7

5 Editing When a product appears in the main window, you can begin editing - initially by supplying a rate, reprice rate if necessary, and amounts. Loan products also require selection of a credit grade or the manual entry of a credit loss value if no credit grades are available for that product. Changes are automatically saved - there is no need to look for a save button because there isn't one. When you finish working with the products in a relationship, just close the window with the red close icon in the upper right. Fields Origination - Enter the current rate or initial rate if a teaser or variable rate product. Enter nominal rate, not APY. Reprice - For variable or teaser rate products, enter the expected rate at the first reprice or reset. With a variable rate credit card or typical line of credit, this is likely going to be the same as the offer rate (don't try to anticipate rate movements because the profit model has a mechanism for interest rate risk effects). Amount - For typical term loan accounts or term deposits this is the initial balance. For non maturity products (revolving credit, credit card, line of credit) enter the expected average balance of the loan. For non maturity deposits (MMDA, Checking) also enter the expected average balance. Farin LoanEDGE Quick Start Page 5 of 7

6 Commitment Amount - This field will appear on revolving credit or line of credit loans, and should indicate the total credit commitment on this loan, which of course should be greater than the expected average balance. If you are modeling a credit account without any specific credit limit, just enter the same value as the balance amount. The commitment amount can be used in fee calculations if for example there is a commitment fee based on the total credit limit. Fees/Expenses - The fee and expense lists may already contain entries, which come from the chart of accounts characteristics which are setup and maintained by the administrators. For example it is typical to have a servicing cost assumption in the chart record that will show up in the expenses list. You can add items to either list, but you cannot change or remove expense items setup by an administrator. Changes are made by clicking on the edit button next to an item, which brings up an edit screen for that item. From there you change the description, amount, or select a different fee/expense type. To add new ones, use the Insert New link found under the list. This will create a new entry in the list then use the edit button to fill in the particulars. Amounts for dollar based methods (e.g. Initial $) are entered in whole dollar amounts. A $750 initial application fee would be entered as Rates are entered in decimal format, 1.5% is entered simply as Structure Most of the characteristics you see in this section are set as a result of the product chosen and cannot be changed. However you can change the term of a term loan, or the amortization length of a balloon loan. For example you may be considering a 3 year balloon loan in this relationship, but are also considering 4 or 5 year balloon structures and thus you might change the maturity of the balloon loan. If the chart account you selected was not what you intended - for example if you intended to model an amortizing loan, but chose a revolving line of credit product, you should remove this product from the relationship and then add the correct chart account. Risk - The credit risk expense for a prospective loan is determined by either the risk rating selected in the Credit Risk selection box, or by specifying a credit loss rate in the Credit Risk Value field. If credit ratings are setup by administrators for this particular account type, you will see the list of ratings in the selection box, and the selection you make will fill the Credit Risk Value. If there are no credit ratings assigned to the account, you just manually enter a credit loss rate. For accounts with risk ratings and only if your institution's administrator allows it, you can override a credit rating by selecting [manual edit] in the selection box, which will enable the Credit Risk Value field. Results and Details As you make changes to product amounts and characteristics, you will see the profitability results change automatically. The product profitability results are listed at the bottom of the product view while the relationship profitability results appear in the lower left blue box in the relationship view. The primary profit measure used, ROE, is easy to see and is a fairly simple calculation: Loan ROE = (Horizon Income$ / Allocated Capital$) / Horizon in Years However the components of the horizon income statement can involve many details. To see the breakdown of income, you can generate an Excel spreadsheet that shows all of the inputs with the details on all four of the profitability measures we use; spread to benchmark, market value, FTP income and horizon income. To generate a details spreadsheet, use the Details link either in the upper right of the product view or the lower left of the relationship view. From that link you will be provided with a file Save As dialog box and after choosing a location, and Excel file with the details is saved to your PC. Farin LoanEDGE Quick Start Page 6 of 7

7 Details Documented For a description of each of the components of the profit measures, we have a detailed PDF document that you can download by going to the Interpreting Results topic in the Overview section, and find the link at the bottom of that page. Farin LoanEDGE Quick Start Page 7 of 7