RETAIL BANKING. Consumer Lending. David Kemp President Bankers Management, Inc. McDonough, GA

Size: px

Start display at page:

Download "RETAIL BANKING. Consumer Lending. David Kemp President Bankers Management, Inc. McDonough, GA"

Mary Atkins
5 years ago
Views:

1 RETAIL BANKING Consumer Lending David Kemp President McDonough, GA August 7, 2018

2 Graduate School of Banking 2018 Presented By: David L. Kemp: BMI

2016 2015 2014 2013 2012 2007 # Charters 6,111 6,238 6,570 6,874 7,149 7,787 Loan Growth 7.26% 7.02% 7.10% 4.15% 2.84% 9.76% Past Due 1.68% 1.78% 2.23% 2.53% 3.

3 # Charters 6,111 6,238 6,570 6,874 7,149 7,787 Loan Growth 7.26% 7.02% 7.10% 4.15% 2.84% 9.76% Past Due 1.68% 1.78% 2.23% 2.53% 3.14% 2.20% Cost Staff $ 73,130 72,080 69,990 68,300 66,760 58,120 Eff Ratio 69.3% 70.4% 71.3% 72.2% 71.6% 68.9% ROA 0.82% 0.80% 0.77% 0.73% 0.71% 0.80% Source: BKD 1

4 Direct contact with large depositors Have branch personnel contact CD holders prior to maturity of deposits Pass on information about maturity procedures Discuss the availability of Wealth Management staff Ascertain if any additional funds exist Ask for referrals 2

5 Retail Loans Have lending staff contact recently paid-off borrowers to thank them for their handling of the loan: Inquire about any additional needs Inform about the collateral release process Inform about the array of different loan products Seek referrals (friends & associates) Preapprove loans for current applicants Review current applicants use of additional loan products Contact current mortgage holders for HIP s & HELOC s, for new opportunities 3

6 Bank sells are nationally at a very slow pace. This continues to be a buyers market: Sellers are being driven by the following forces: Tight margins Weak loan demand Loss of fee income Higher compliance cost Additional Capital requirements Change in generational ownership 4

7 Bank s make loans to borrowers with the Demonstrated Willingness and Capacity to pay!! Demonstrated Track record (they have done it before) Willingness Credit History, have they paid other creditors? Capacity $$$ DTI, Residual Income 5

8 What is the Consumer Loan Process? Properly taking the Application Investigating the application Making the final decision The Marginal Borrower How do we make the close call? The lender must apply their judgment to the facts & policy 6

9 Common Sense of the Lender Can you spot what does not fit? Does the loan fit the bank s objectives? Loan Officer Responsibilities Increased loan volume Improved Risk Management Credit Files Pre Approval Documents Proper Loan Pricing 7

10 Can I read your credit file and understand the following? The Purpose of the Loan To assist in loan structuring To review loan policy The Basis of the Credit Secured or Unsecured Collateral Valuation, $, Source 8

11 Conformity to Credit Policy (FDICIA) Written Credit Reasons for Exceptions Exception Policy & Procedures Identification of Risk What are the Risk? Why are they Acceptable? Completeness of Documents Documentation Exception Reports Responsible officer, Date of Exception 9

12 Credit Scores are statistical models that try to predict the likelihood of debt being repaid in the future. They are based on data that is in the borrowers credit report Not included : Income Assets Collateral Down Payment 10

13 Scoring Products Beacon FICO Emprica Scoring Range

14 Credit Reports Identifying Information DOB, Address, Name, Employment, SS# Trade Lines Date Opened, Payment Status, Credit Limit, Balance, High Credit, Paid Accounts Inquiries 5 6 months Hi Risk: *7 Day Rule Any inquires within the same seven day calendar period will be scored as one inquiry 12

15 Public Records & Collection Items The Fair Debt Reporting Act Derogatory Credit must drop from the credit report after seven years, except bankruptcy (10 years) Bankruptcy, Liens, Collections, Judgments, Foreclosure 72 months Low risk 13

16 Severity, Days past due How Recent* 0-11 months : High Risk 72 months: Low Risk *An account must be 30 days or more past due Frequency % of accounts with late payments 14

17 Number of accounts recently opened New Accounts: 2 Years or less: High Risk 10 Year rule; If the oldest opening date on any credit account is 10 years or more: improves score Average balance across all trade lines % of accounts with 0 balance Relationship between balance & limits Revolving debt 20% < Low Risk 80% > High Risk 15

18 Bank Cards Visa MasterCard Discover Risk Matrix 0 High Risk 1 Lower Risk 2 Lowest Risk 3 Higher Risk 4 Still Higher Risk 7 Highest Risk 16

19 Travel & Entertainment Cards Diners Club American Express 0 Neutral 1 Low Risk 2 High Risk Department Store & Gas Cards More than one: High risk 17

20 Personal Finance Companies High Risk Installment Loans 1 Open & 1> paid out: Low Risk 2 or more open: High Risk 18

21 FICO has announced a change to its current consideration of Medical Collections: Medical collections currently account for ½ of all consumer collections Paid medical collections will not be weighed at all Unpaid medical collections will carry less weight than before Any amount under $100 will be ignored Many scores will rise by more than 25 points 19

22 Credit scoring can not predict if an individual applicant will repay a loan. If you make 100 loans with a 600 beacon score: 1:8 will default or go 60 days past due, 12% (12 out of 100) will not pay 88% (88 out of 100) will pay: You can t tell WHO! 20

23 1. Does the borrower have the capacity to repay the loan? 2. Has the borrower demonstrated the willingness to pay? 3. What consideration should be given to Collateral? 21

24 Is income sufficient to repay the loan? Debt to Income ratio Residual Income Is income dependable? Same line of work Education related to work & high income potential Is current debt level manageable? Limited credit user Does the borrower demonstrate the ability to manage their debt? Consolidation Loan 22

25 Credit history Cut off Credit Score Underwriting guidelines Are you willing to be paid in the same manner that other creditors have been paid? Is a little slow OK? 23

26 Has value been independently established? What is the source of the information? Market value vs. Liquidation value Is loan- to- value sufficient to pay out loan? Can the collateral be sold for enough? Is the collateral marketable? (By the bank) Can you gain possession if needed? 24

Chapter 25 What is Credit?

The Nature of Credit Credit: The Promise to Pay Who Uses Credit? Advantages of Credit Disadvantages of Credit Summary Chapter 25 What is Credit? The Nature of Credit Credit: The Promise to Pay Who Uses