Office of Credit Risk Management Risk Management and RBR Redevelopment Overview

Transcription

1 Office of Credit Risk Management Risk Management and RBR Redevelopment Overview Presentation for the Western Pennsylvania Association of SBA-Guaranteed Lenders Small Business Lending Conference Seven Springs, Pennsylvania April 11, 2013

2 Risk Management and RBR Redevelopment Overview SBA Portfolio Overview Lender Risk Rating Redevelopment Risk Based Review Redevelopment PARRiS Concept 7(a) PARRiS Menu Card Composite Rating Guide 7(a) PARRiS Implementation 2

3 Lender Activity Stratification # of 7(a) Lenders Gross Active Balance % of 7(a) Portfolio # of 504 CDCs Gross Active Balance % of 504 Portfolio Total Lenders 6,971 $55,268,149, % 272 $26,110,039, % Inactive Lenders: With No Active Loans 2,577-0% 4-0% No Disbursements (past 3 years) 1,068 $1,177,555,063 2% 5 $13,503,907 0% No Disbursements (past 1 year) 1,111 $1,167,220,711 2% 9 $82,712,550 0% Inactive Total: 4,756 $2,344,775,774 4% 18 $122,158,485.4% <10 Disbursements/Year 1,706 $9,891,282,750 17% 103 $1,824,397,149 7% Disbursements/Year 421 $13,525,368,278 24% 113 $7,507,357,554 29% Disbursements/Year 50 $5,616,796,653 10% 19 $4,233,298,583 16% 100+ Disbursements/Year 38 $20,276,404,962 36% 19 $12,448,769,500 48% Active Total: 2,215 $49,309,852,643 89% 254 $26,013,822,788 99% Active defined as at least one disbursement in past 12 months * Lender reported data through 1/31/13 3

4 7(a) Portfolio 7(a) Balance Sheet Gross Active Balance $55,268,495 Active Loans 244,182 7(a) Regional Portfolios SBA Region # of Lenders Gross Active Balance # of Loans I - Boston 238 $2,058,272 16,704 II New York 163 $4,368,777 19,021 Current Balance $51,179,782 III - Philadelphia 272 $3,253,039 19,244 Past Due Balance $533,598 Deferred Balance $222,532 Delinquent Balance $826,974 Liquidation Balance $2,505,374 Non-Current Balance $4,088,478 Active Purchases $6,126,493 Note: dollars in thousands IV Atlanta 628 $9,065,169 33,696 V Chicago 1,045 $11,011,349 59,564 VI Dallas 633 $5,379,599 16,614 VII Kansas City 712 $2,089,818 9,887 VIII Denver 307 $6,370,892 28,265 IX San Francisco 271 $10,173,828 37,560 X Seattle 119 $1,532,044 5,658 Total* 4,388 $55,267, ,169 4

5 504 Portfolio 504 Balance Sheet Gross Active Balance $26,110,039 Active Loans 59, Regional Portfolios SBA Region # of Lenders Gross Active Balance # of Loans I - Boston 16 $1,345,587 3,934 Current Balance $24,497,366 II New York III - Philadelphia 9 $1,285,702 2, $1,297,983 2,696 Past Due Balance $80,940 Deferred Balance $159,869 Delinquent Balance $510,306 Catch-Up Balance $861,556 Non-Current Balance $1,612,672 Active Purchases $2,082,049 Note: dollars in thousands IV Atlanta 53 $3,445,666 8,382 V Chicago 45 $4,583,801 11,370 VI Dallas 32 $2,060,455 4,226 VII Kansas City 25 $1,089,814 2,810 VIII Denver 19 $1,862,288 7,321 IX San Francisco 33 $6,678,979 13,410 X Seattle 13 $1,334,944 3,112 Total* 267 $26,110,039 59,843 5

6 Portfolio Overview by SBPS Range 7(a) Portfolio by SBPS Range 504 Portfolio by SBPS Range SBPS Range # of Loans Gross Active Balance SBPS Range # of Loans Gross Active Balance High Risk (0-159) 66,894 $9,809,570 High Risk (0-159) 6,199 $2,388,354 Medium Risk ( ) 125,947 $24,286,125 Medium Risk ( ) 24,341 $10,346,518 Low Risk ( ) 67,317 $16,899,281 Low Risk ( ) 25,932 $10,924,551 * Dollars in Thousands 6

7 Portfolio Overview by Lender Risk Rating 7(a) Calculated Risk Rating 7(a)SBA Lender Risk Rating Calculated Risk Rating # of Lenders Gross Active Balance SBA Risk Rating # of Lenders Gross Active Balance 1 2,309 $4,014, ,236 $17,370, $24,218, $6,990, $65, Calculated Risk Rating 1 2,064 $3,561, ,051 $13,878, $21,483, $5,919, $7,815, SBA Lender Risk Rating Calculated Risk Rating # of Lenders Gross Active Balance SBA Risk Rating # of Lenders Gross Active Balance 1 52 $2,536, $16,409, $4,434, $454, $157, $2,536, $15,274, $4,508, $472, $1,200,300 * Dollars in Thousands 7

8 Portfolio Overview Risked Based Reviews 7(a) RBRs 310 Institutions in $10MM+ Peer Group RBRs 123 Institutions in $30MM+ Peer Group Review Year Net RBRs Issued Total # of Risk Based Reviews YTD Review Year Net RBRs Issued Total # of Risk Based Reviews YTD Total Total Subtotal Subtotal RBRs In Process 46 0 RBRs In Process

9 Summary Assessment Breakdown 7(a) Summary Assessments Summary Assessment Net Assessments Net Assessments YTD Net Total Acceptable Acceptable with Corrective Conditions Required Marginally Acceptable with Corrective Actions Require Less than Acceptable with Corrective Conditions Required Summary Assessments In Process* Total Summary Assessments Summary Assessment Net Assessments Net Assessments YTD Net Total Acceptable Acceptable with Corrective Conditions Required Marginally Acceptable with Corrective Actions Require Less than Acceptable with Corrective Conditions Required Summary Assessments In Process* Total * Summary Assessments In Process do not include an additional 46-7(a) and RBRs In Process as they are yet to be finalized 9

10 Risk Based Review Redevelopment 10

11 PARRiS Concept The PARRiS concept identifies five key components of lender risk to SBA. For each risk component the Redevelopment Team identified Quantitative and Qualitative risk consideration factors P A R Ri S Performance - Calculated Risk Rating and cash flow Asset and Liability Management - Quality of key lender origination, servicing and workout processes Regulatory Compliance Reporting & SBA regulatory (CFR, SOP, etc.) compliance Risk Management - Corporate governance, and internal controls Special Items - Additional high risk lender behaviors identified by OCRM 11

12 SMART Concept CDC Profile Assessment S M A R T Solvency - cash flow - profitability - reserves Management and Governance -CDC Management -Board involvement Asset Quality -Prudent underwriting, closing and servicing -Loan policies and procedures -Qualified and trained staff Regulatory Compliance -Reports to SBA are timely and accurate -Good standing with IRS and state -Economic impact of loans adequately analyzed Technical Issues -CDC s support of local economic development activities. -Management information systems 12

13 NEW Risk Based Review Process Flow RBR Redevelopment team has defined the review process in collaboration with 3 newly designed reports: 1. Benchmark & Regional Flash Reports / Lender Metric Survey Assessment Tool 2. Select Review 1. Identify higher risk lenders lenders with performance issues using newly developed Benchmark Report for entire RBR Lifecycle portfolio 2. Utilize Regional Flash Report to regional teams of analysts to further identify specific higher risk lenders with 5. Findings & Corrective Actions Supervision Enforcement Exit 3. Targeted On- Site Review performance issues on a regional level 3. Analyze lenders with performance issues using the redesigned Lender Metric Survey Assessment Tool and 4. Full On-Site define areas of risk exposure 13

14 Benchmark Report Internal SBA Portfolio Scoping Provides Impact and Probability Scores for each SBA Lender Impact Risk is magnitude risk Number of loans originated Number of loans in portfolio Dollars of loans outstanding Probability Risk is potential for problems to actually occur Non-performance rates Past purchase rates SBPS score average Projected purchase rates 14

15 Territory Flash Report Current report content: Regional Balance Sheet Total Active Lenders/CDCs Total Active Loans Loans Committed Gross Active Balance Current, Past Due, Deferred, Delinquent, Liquidation, and Non-Current Balances 12 Month Purchases, Active Purchases, and 12 Month Charge-Offs Top lenders by various risk metrics Contents of Territory Flash Report will be periodically revised based on OCRM risk management strategies 15

16 Lender Reported Data as of 11/30/12 U.S Small Business Administration Office of Credit Risk Management 7(a) Balance Sheet Territory Flash Report North Region I, II, V 504 Balance Sheet Total Active Lenders 1,448 Total Active CDCs 70 Total Active Loans 96,357 Total Active Loans 17,715 SBA Guaranteed # of Loans Dollars (000s) Rate # of Loans Dollars (000s) Rate Portion Loans Committed 9,121 $1,926,951 $1,354,772 Loans Committed 2,984 $2,191,063 Gross Active Balance 96,357 $17,414,304 $12,830,365 Gross Active Balance 17,715 $7,093,423 Current Balance 86,888 $15,967, % $11,785,111 Current Balance 16,799 $6,705, % Past Due Balance 1,388 $229, % $167,148 Past Due Balance 47 $12, % Deferrd Balance 346 $71, % $52,689 Deferred Balance 51 $27, % Delinquent Balance 2,835 $331, % $237,335 Delinquent Balance 398 $150, % Liquidation Balance 4,896 $814, % $588,009 In Catch-Up' Balance 420 $197, % Non-Current Balance 9,465 $1,447, % $1,045,255 Non-Current Balance 916 $388, % 12 Month Purchases 4,912 $612, % $433, Month Purchases 366 $170, % Active Purchases 7,198 $2,193,078 $1,630,058 Active Purchases 1,058 $503, Month Charge-Offs 4,030 $324, % $214, Month Charge-Offs 475 $227, % Total Exposure 112,676 $21,534,332 $15,815,195 Total Exposure 21,757 $9,787,883 Committed + Gross Active Balance + Active Purchases Committed + Gross Active Balance + Active Purchases Calculated Risk Rating # of Lenders 7(a) Portfolio by Risk Rating Gross Active Balance Current Balance Non Current Balance Active Purchases Calculated Risk Rating # of Lenders 504 Portfolio by Risk Rating Gross Active Current Balance Balance Non Current Balance Active Purchases Not Rated 0 $0 $0 $0 $6,924,880 Not Rated 0 $22,198,026 $20,713,062 $1,484,963 $8,165, $1,562,712,797 $1,515,293,206 $47,419,591 $31,301, $578,336,491 $555,893,389 $22,443,103 $27,626, $8,495,300,498 $7,915,695,241 $579,605,257 $711,719, $6,057,633,594 $5,740,921,794 $316,711,800 $431,904, $6,153,436,879 $5,572,138,847 $581,298,032 $1,194,608, $302,673,935 $265,688,619 $36,985,316 $24,072, $1,182,731,387 $954,088,349 $228,643,038 $246,580, $79,409,933 $75,065,226 $4,344,706 $1,955, $20,122,036 $10,010,552 $10,111,484 $1,942, $53,170,901 $46,776,902 $6,393,999 $9,671,750 Total 1,448 $17,414,303,597 $15,967,226,195 $1,447,077,402 $2,193,077,533 Total 70 $7,093,422,879 $6,705,058,991 $388,363,888 $503,396,912 16

17 LRR Lender Detailed Output 17

18 PARRiS and SMART Implementation Pilot Bridge Reviews Bridge Reviews will be performed for approximately Risk Based Reviews of the 2013 Fiscal Year SBA will evaluate results of the standards used for lender review selection, review scope determination, rating components and rating assessment determinations. RBR contract status A bridge contractor is working with SBA to implement new process Full RBR contract will be solicited in first or second quarter. 18

19 Example PARRiS Quantitative Factors Performance Low Risk Medium Risk High Risk Calculated Risk Rating 1 or or 5 Cumulative Net Cash Flow TBD TBD TBD Asset/Liability Management Last 12 Month Disbursements < to < High Risk Originations Percentage < 10% 11% to < 25% 25% Early Default Percentage < 1% 2% to < 4% 4% Early Problem Loan Percentage < 5% 5% to < 15% 15% Actual Last 12 Month Purchase Rate < 4% 5% to < 6% 6% Gross Active Balances ($) < $20 million $20.1 million to < $100 million $100 million Projected Next 12 Month Purchase Rate < 4% 5% to < 6% 6% Delinquency Rate < 1% 2% to < 3% 3% Non-Current Rate < 5$ 5% to < 10% 10% Balances in Liquidation + Active Purchases (s) < $2 million $2.1 million to < $20 million $20 million Projected Recovery Rate (placeholder) TBD TBD TBD Actual Recovery Rate (placeholder) TBD TBD TBD Liquidation + Active Purchase Rate < 15% 16% to < 30% 30% Recoveries Remittance Timing All submitted within 15 days Average 15 days remittance >15 days remittance Regulatory Lender holds sufficient permanent capital to support SBA lending activities [13 CFR (a)(1)]: Meets well-capitalized capital requirements. Meets minimum capital requirements Does not meet minimum requirements Risk-based Capital Ratio 10% 8% < 4% Tier 1 Risk-based Ratio 6 % 4% < 4% Leverage/Core Ratio 5% 4% < 4% Lender is current on all guaranty fee payments 95% 90% < 90% Lender is current on all 1502 reporting 95% 90% < 90% Lender is current on all on-going fees due and payable to SBA All paid and none late - within 30 days of bill All paid and current. Outstanding unpaid on-going fees. Lender is current on all review and monitoring fees. All paid and none late - within 30 days of bill All paid and current. Outstanding unpaid monitoring fees. Risk Management TBD TBD TBD TBD Special Items Loans Sold in Secondary Market TBD TBD TBD Acquired Portfolio Percent TBD TBD TBD 19

20 [P]ERFORMANCE PORTFOLIO COMPOSITION DELIVERY METHOD LOAN VOLUME [A]SSET/LIABILITY MANAGEMENT ORIGINATIONS QUALITY EARLY DEFAULTS CONCENTRATIONS COLLATERAL CLOSING EXPRESS/SCORECARD UNDERWRITING SERVICING RISK CLASSIFICATION SYSTEM AND RECLASSIFICATIONS CREDITWORTHINESS REVIEWS RESOLUTIONS LIQUIDATION MANAGEMENT GUARANTY PURCHASES ACTIVE PURCHASES MANAGEMENT [R]EGULATORY 7 SBA COMPLIANCE LENDER REGULATORY COMPLIANCE (13 CFR ) LOAN ELIGIBILITY (TYPE, SIZE, OWNERSHIP, USE OF PROCEEDS) (13 CFR ) 1502 REPORTING GUARANTY FEES OTHER LENDER FEES RECOVERY PAYMENTS (FORM 172) [Ri]SK MANAGEMENT CORPORATE GOVERNANCE AND SBA MANAGEMENT SBA OPERATING PLAN AND PERFORMANCE SBA MISSION COMPLIANCE AUDIT AND REVIEW PROGRAMS DELEGATED LENDER STATUS AND COMPLIANCE (13 CFR ) [S]PECIAL ITEMS FFIEC REGULATORY ENVIRONMENT USE OF LOAN AGENTS/BROKERS LENDER SERVICE PROVIDERS SECONDARY MARKET SALES MERGER/ACQUISITIONS OF SBA PORTFOLIOS PILOT PROGRAMS SALES, SECURITIZATIONS, PARTICIPATIONS, ETC. 20

21 Risk-Based Review Outcomes Still consistent with SOP 5100 Acceptable a satisfactory degree of understanding and management of the SBA loan program Acceptable with Corrective Action(s) Required lender demonstrates acceptable SBA program management but must improve in specific areas, which are identified Marginally Acceptable with Corrective Action(s) Required lender demonstrates serious deficiencies and demonstrates inadequate degree of understanding and management of the SBA loan program Less than Acceptable with Corrective Actions Required lender must improve its SBA loan program management immediately via Corrective Actions Required or risk consequences 21

22 Corrective Actions Still consistent with SOP 5100 Both reviews and exams (off-site reviews) may result in required Corrective Actions 7(a) Lender must address each Corrective Action Required 7(a) Lender response must demonstrate a change in behavior to correct undesired behavior 7(a) lender s responses to Corrective Actions Required may have impact on its continuing relationship with SBA Insufficient or unacceptable response may warrant elevated supervision or enforcement Reason(s) for a Finding/CA Required is an observed weakness which subjects the lender and SBA to elevated risk of loss If lender does not correct a Finding, elevated risk is not resolved 22

23 Next Action Steps Align redevelopment nomenclatures Lender Risk Ratings 1, 2, 3, 4 or 5 Quantitative Risk Assessment Categories Low, Medium or High risk: Qualitative Risk Assessment Categories Strong, Satisfactory, Weak RBR Types Select, Targeted, Full on-site RBR Assessment Ratings Acceptable, Acceptable with Corrective Actions, Marginally A/CA, Less than A/CA Finalize Report Format and Content Determine Final Composite Ranking / Rating Initiate Annual Risk Management Plan 23

24 Discussion Questions Bridge reviews timeline November, 2012 August, 2013 Bridge reviews contractor Fuentes Fernandez & Company, PSC Joseph A. Fuentes, President/CEO Bridge review quantity 19 7(a) Lenders 7 Certified Development Companies 24