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  • Keeping an eye on credit risk

    U.S. banks have been posting strong profitability, and credit quality remains sound thus far in 2018. In fact, regulators have noted as much in both the FDIC’s third-quarter banking profile and the OCC National Risk Committee’s semiannual report on risks issued recently. Despite the positive trends, these same regulators expressed…
  • What is effective challenge?

    By Alison Trapp Senior Consultant, Sageworks Advisory Services Effective challenge is a framework for providing critical analysis, and it is a critical component of risk management for an institution, model or practice. Effective challenge involves utilizing objective, informed parties who can identify limitations and assumptions and who can produce appropriate…
  • Why credit risk rating systems matter

    Low market rates and intense competition have been hallmarks of the lending environment in recent years, and regulators have taken notice that this can lead to weaker discipline around pricing and structuring of loans. Indeed, the Office of the Comptroller of the Currency in its…
  • This is why you should implement information systems to promote effective challenge

    Effective challenge is the backbone of risk management for financial institutions. It provides a framework for performing critical analysis by utilizing informed individuals who can objectively identify limitations and assumptions, as well as produce appropriate changes. This is a critical way to identify the factors that could put an institution…
  • What is effective challenge?

    By Alison Trapp Senior Consultant, Sageworks Advisory Services Effective challenge is a framework for providing critical analysis, and it is a critical component of risk management for an institution, model or practice. Effective challenge involves utilizing objective, informed parties who can identify limitations and assumptions and who can produce appropriate…
  • For more efficient lending, do this, not that

    Booking new loans can translate into increased earnings for community banks, so long as financial institutions are efficient in how they obtain, underwrite and onboard those loans. Small business loans, in particular, can contribute to an improved bottom line if an institution can increase the loan volume while booking those…
  • When credit risk ratings don't match expectations: What next?

    Consistency in risk ratings is critical for commercial lenders. There are plenty of best practices to follow when choosing your risk rating factors to ensure an effective and consistent risk rating process. Risk rating becomes a craft: the more you do it, the better you become at it. When you’re…
  • AAR annual risk software report recognizes Sageworks

    Allaboutrisk.com (AAR) recognizes Sageworks as a credit risk vendor in its 2017 Risk Software Report. AAR is the global leader for online news, product and innovation information on risk, compliance, and trading. The 10th annual report features 60 leading risk software vendors and consultants from around the world and across…
  • Registration deadline approaching - Risk management summit 2017

    One month before the primary registration period ends. Register now and save $100 per registration. The 2017 Risk Management Summit presented by Sageworks is set for September 25-27th in Denver, CO. The Summit is the industry’s leading life-of-loan conference, spanning loan origination through portfolio risk management in a CECL -…
  • Bank exam “hot spot”: Inflating policy limits to avoid scrutiny

    The desire to avoid examiner scrutiny may tempt some financial institutions to set the bar high when it comes to credit and liquidity risk management policy limits, but regulators are discouraging this approach.  Instead, the Federal Reserve said in a recent supervision news flash, boards should ensure that policy limits…
  • In a sea of tech companies, Sageworks rises to top award

    Over the past few years, the Research Triangle area of North Carolina, where Sageworks is headquartered, has been named among the fastest-growing cities in the U.S., the best places to live, the top boomtowns and the best places to start a business (among many other accolades). It’s also home to…
  • 5 "Check ups" for your risk rating process

    A robust risk rating system is a crucial component of any financial institution's credit risk management process. Risk ratings are multi-purpose, useful in pricing loans, stress testing the portfolio or individual customers and determining appropriate reserve for the allowance. As an important component in your risk management strategy, it's smart…
  • 5 common lending challenges and how software can help

    Institutions are equipped to solve five common challenges when they provide staff with the necessary data through an integrated software solution: 1. Improving transparency into business development. At most institutions, lenders track outstanding opportunities and their sales activities in spreadsheets, calendars and notebooks, and without a centralized system, it’s challenging…
  • Do you know your bank or credit union’s top priorities?

    Day in and day out, bankers face a number of pressures as they do their jobs. They must find new customers and keep current customers happy. They must keep a tight rein on expenses and avoid running afoul of the many regulatory requirements for their institutions. And they must keep…
  • Why financial institutions are updating loan pricing strategies

    Progressive banks are increasingly turning to stronger pricing models that incorporate loan risk, borrower profitability and bank strategy to ensure that the customer always sees the bank’s best rate. This rate may not be the lowest rate, but it will be its best rate that aligns with the strategic goals…
  • Banks should know these 5 Traits of Millennial business owners

    Everywhere you look, it seems, there are articles about Millennials: Millennial workers, Millennial customers, Millennial homeowners, Millennial voters. This generation -- described often as being born between the early 1980s and early 2000s (i.e., currently in their late teens to their mid-30s) -- seems to be both hated and loved,…
  • How to implement consistent credit risk pricing

    Many banks and credit unions have adopted sophisticated risk-management practices, and their board of directors has to play an active role in ensuring that risks are well understood in overseeing risk exposure. Credit risk refers to the potential for a loss if a borrower or a counterparty to the transaction…
  • FASB issues CECL – new standard for credit-loss recognition

    After years in the works, the Financial Accounting Standards Board (FASB) issued its final guidance on a new current expected credit loss (CECL) model, starting the clock for banks, credit unions, other entities and their preparers to implement the new requirements over the next few years.  “The CECL model will…
  • Supervisor focus: Credit risk management, stress testing

    Monitoring credit risk management, interest rate risk and banks’ ability to stress test loans affected by low oil prices are among the priorities for supervisors at the Office of the Comptroller of the Currency (OCC) these days, according to the agency’s recent mid-year status report on its operating plan. The…
  • Using better data for loan origination

    Sageworks focus grouped more than 100 bankers in 2015 to understand their goals and challenges. A recurring theme within origination was time-wasted with data entry – reading tax returns and typing the data into spreads. That wasted time meant lenders were spending less time trying to grow the portfolio and…
  • OCC calls for “responsible innovation” amid fintech wave

    The Office of the Comptroller of Currency, recognizing the sweeping changes in technology and business practices that are affecting financial institutions, is recommending U.S. banks incorporate “responsible innovation” as they adapt quickly to these advances, but what exactly does that mean?  In a recent whitepaper (download), the regulator outlined the…
  • Two keys to building a strong credit culture

    In today’s banking environment, there is strong pressure for banks and credit unions to grow the portfolio profitably. With more competition, institutions are lending in new areas, adjusting underwriting standards and seeking to grow via mergers and acquisitions. Despite the pressure, banks and credit unions must remain diligent across departments…
  • Lending to nonprofits: Considerations for credit analysis

    U.S. nonprofits are growing in number, revenue and assets, according to the most recent data available on this important segment of the economy. Financial institutions considering lending to nonprofits may want to be aware of these recent financial trends, as well as some of the ways lending to these organizations…
  • Obstacles to an effective loan review

    Click here to read the entire whitepaper written by Tim McPeak "A ship is always safe at the shore, but that is not what it is built for.” – Albert Einstein Banks generate most of their revenue by lending money, and lending money, by definition, involves a certain amount of…
  • 4 Reasons to review your bank’s risk rating system

    Risk rating practices for the loan portfolio can draw scrutiny from regulators, to be sure. One of every six financial institutions responding to the 2015 Sageworks Bank & Credit Union Examination Survey said that examiners criticized or required action related to their risk ratings practices.  But avoiding regulators’ inquisition isn’t…
  • How to weight your risk rating system

    In today’s environment, having an effective risk rating system in place helps beyond determining an institution’s credit approval process or loan pricing. These systems also impact broader risk management practices, including setting an institution’s reserve, stress testing, determining risk appetites and strategic planning. With little prescriptive guidance available, banks and…
  • FDIC cautions of increasing credit, interest-rate risks

    Add FDIC Chairman Martin J. Gruenberg to the list of regulators and industry officials warning about growing credit risks in the U.S. In prepared remarks for the release of the FDIC’s third-quarter version of the Quarterly Banking Profile, Gruenberg said growing interest-rate risk and credit risk warrant “timely attention” by…
  • Are your bankers making loans or managing credit risk?

    A tell-tale sign that winter is coming is the shrinking number of hours of daylight each day. As dusk falls earlier each day and as the sun rises later, we are reminded that summer has drawn to a close and cold weather is near.  For some people, this knowledge prompts…
  • OCC warns about increasing credit risk

    With the recession fading into the more distant past, banks – in particular, community banks – have seen several years of loan growth. Banks, according to Comptroller of the Currency Thomas Curry, are starting to reach for additional growth by lending to less creditworthy borrowers, a move that increases risk…
  • How to create a credit risk rating system

    For banks and credit unions, a popular tool to monitor credit risk is a standardized risk rating system, which can serve several purposes. These systems often determine credit approval processes, covenants placed on the borrower and how loans should be priced. They can also form the basis for broader risk…
  • How will NCUA’s new member-business lending rule impact risk management?

    As credit unions await the finalization of the National Credit Union Administration’s (NCUA) proposed changes to rules for business lending, they may do well to remember Spider-Man’s creed that “With great power comes great responsibility.” That’s because the proposed rule shifts from prescriptive rules to a principles-based approach that eliminates…
  • Loan underwriting and administration remain a top concern of bank examiners

    In its semiannual report last month, the Office of the Comptroller of the Currency (OCC) noted that the banking industry has loosened its standards for underwriting loans, bolstering the credit risk for financial institutions. While an increase in risk might be a red flag to the regulatory agencies, the reason…
  • How to stress test your ag portfolio

    According to recent data, lenders are seeing elevated agricultural loan demand largely as a result of tighter profit margins among producers. The report, from the Federal Reserve Bank of Kansas City, stated that demand could remain high since futures markets for fall crops show prices are likely to remain low…
  • Non-performing ag loans increase, says lender survey

    Agricultural lenders are reporting increases in non-performing farms loans and decreased farmland values, according to the latest Agricultural Lender Survey conducted by the Kansas State University Department of Agricultural Economics. Lenders reported that over the past three months, total farm dollar volume rose and is expected to increase in the…
  • 4 Tips for creating an effective credit policy

    Some view banks’ credit policies as somewhat of a necessary evil; many comprise hundreds of difficult-to-decipher pages intended to establish numerous policies for evaluating and undertaking risk. These credit policies outline banks’ appetite for risk, establish banks’ credit culture, determine the extent of decision-making delegation and describe how loan portfolio…
  • How the OCC risk governance framework applies to community banks

    In September, the Office of the Comptroller of the Currency (OCC) published final guidelines designed to “strengthen the governance and risk management practices of large financial institutions.” The guidelines apply to institutions with more than $50 billion in assets, and the effective date of the guidance varies by asset size.…
  • Expanding credit portfolios: 3 Growing pains

    Community banks are expanding their loan portfolios to include more small business loans, according to the most recent Community Bank Performance report by the FDIC. Loans across categories increased, with commercial and industrial loans growing at the fastest rate, roughly 5.3 percent over the 3rd quarter of 2013. These expansions…
  • Are you focusing more on risk management than your actual job function?

    According to the ABA Banking Journal, risk assessment is a trending topic and could grow out of hand if it detracts from other bank priorities. Risk assessments can be a lengthy, complex and ongoing process, which makes it difficult to discern when you should focus on managing risk and when…
  • Increasing interest in MBL for credit unions

    As credit unions continue to experience solid growth in traditional lending areas, many management teams are focusing attention on starting or expanding their member business lending program. Growing the business portfolio can provide a number of benefits for credit unions, including: • Diversifying the balance sheet and revenue streams, •…
  • Tech decisions for your bank's Board

    BankDirector recently released a new whitepaper, The Role of the Board in Technology, explaining how technology-investment decisions should include Board of Directors participation. More than just their impact on the bank’s budget, technology decisions often relate to strategy within the institution, including areas of growth, weaknesses identified through the exam…
  • Lending pace reaches pre-recession levels

    Banks are lending at a pace dangerously close to that of pre-recession 2007, according to Bloomberg’s Sridhar Natarajan. So why, after all the warning signs from the Federal Reserve, are banks taking on more risk? The answer: a record $10 trillion in cash deposits in U.S. banks. Even with loan…
  • Due diligence in third party risk management

    An effective risk management process includes a continuous lifecycle for all third-party relationships and covers planning, contract negotiation, ongoing monitoring, termination, and due diligence and third-party selection. An in-depth assessment of a third party’s ability to perform critical activities while complying with regulatory guidelines should be performed before entering into…
  • What the OCC’s heightened risk expectations mean for community banks

    New risk management requirements could come into effect in the near future, according to the OCC's announcement last week. Their proposal, which focused primarily on banks with more than $50 billion in assets, holds an individual institution’s board of directors responsible for the creation of internal tracking systems, as well as…
  • The profit squeeze is on for some financial institutions

    It’s getting harder for community banks to generate positive operating leverage, American Banker said in a recent review of third-quarter results posted by the industry. controlling costs, according to the report. Still, some remain willing to spend in order to generate additional revenue.  For example, Riverhead, N.Y.-based Suffolk Bancorp (NASDAQ:…
  • UCC revisions highlight ongoing guidance changes for financial institutions

    The first major changes in more than a decade to many states’ requirements for UCC (Uniform Commercial Code) filings took effect recently, highlighting one of the many credit-risk management issues that financial institutions deal with on an ongoing basis. Constantly changing rules and guidance can make it challenging for banks…
  • Credit administration among top OCC "Matters Requiring Attention” (MRAs)

    Recently, the Office of the Comptroller of the Currency’s National Risk Committee released its Semiannual Risk Perspective, a twice-yearly report that outlines some of the emerging threats to the safety and soundness of the U.S. financial system. Using data as of Dec. 31, 2012, the report outlined at a high…
  • 5 Tips for verifying borrower information

    In the underwriting and management of commercial relationships, bankers often trust the honesty of their borrowers. But it is necessary to dig a little deeper to assure a thorough understanding of how a borrower’s business is actually doing, according to Bob Viering, principal of River Point Group. Unfortunately, bankers do…
  • What to do with top down stress testing results

    By Emily Li, Sageworks In previous posts, we looked at the benefits that come with a top down or institution level stress test and reviewed the best methods for finding loss rates. Armed with that data, it's time to review the results. While financial institutions may be trying to stress…
  • Regulatory changes: Top of mind for bankers

    Spending a lot of time at your financial institution on regulatory issues? You’re not alone. A recent survey of bank executives by KPMG LLP found that regulatory issues are top of mind for many in the industry. Thirty-five percent of respondents expect bank management to spend most of its time…
  • FDIC officials: CECL implementation timeline unclear

    FDIC officials this week encouraged financial institutions to provide feedback by May 31 to the Financial Accounting Standards Board (FASB) on the board’s proposed new model for accounting for credit losses. During a teleconference on Thursday, officials in the FDIC’s Division of Risk Management Supervision described some key differences between…
  • Relationship-based banking benefits institutions & their clients

    While it may be more desired by customers, relationship-based banking can only be adopted alongside appropriate credit risk management processes. However, it is important to first understand what relationship-based lending is and how both financial institutions and customers can benefit. Relationship-based lending can be defined as financial institutions using personal…
  • Calculating living expenses in a global cash flow analysis

    Sageworks recently hosted a webinar, Global Cash Flow Analysis: What, When, Why, and How, which featured David Matricciano, owner of DM Analytics LLC, and Chuck Nwokocha, director of advisory services at Sageworks. They discussed best practices, adjusting for double counting, and inconsistencies with spreadsheet-based programs. During the presentation, several questions…
  • Traditional methods for predicting default

    Exposure to credit risk is widely recognized as the leading source of problems in financial institutions, and much regulatory and industry attention has focused on how credit risk contributed to the financial crisis and how investors, customers and taxpayers can be protected against future losses. Credit risk models like a…
  • Four companies that need a credit check

    More than three years after the official end to the recession, U.S. businesses are recovering but not recovered.  Uncertainty remains the mood of the day, with surveys showing that a sizable portion of private companies are worried that a potential lack of demand is a barrier to growth. Companies must…
  • Commercial lending bears watching

    Will the current growth in loans to businesses be good for the business of banks in the long run? As financial institutions diversify their loan portfolios with increased commercial and industrial (C&I) loans, qualified business borrowers may be finding the climate advantageous. But regulators and banking risk management experts are…
  • Private-company credit risk is lower

    Private U.S. companies have a slightly lower risk of defaulting this year than a year ago, according to a new financial statement analysis by Sageworks Inc., a financial information company. On average, the probability that a private company would default in the next year was 4.40 percent, based on data…
  • “Raising” a strong credit culture

    Creating an effective credit culture within your financial institution is a lot like raising a child, says Ancin Cooley, Principal of Synergy Bank Consulting. In this guest column, Cooley discusses four integral components that can transform your credit risk culture. Cultivating an effective credit culture: Four key components By Ancin Cooley…
  • Private companies are in better shape to borrow

    The Federal Reserve’s latest “Beige Book” report on economic activity indicated that a third of the 12 Fed districts are seeing stronger loan demand from consumers and businesses. And recent data from Sageworks, a financial information company, shows that privately held companies have improved two financial metrics that are often…
  • Lending environment changes, room for a PD Model

    Starting with the financial crisis, there has been a decided shift in the lending environment. Banks and credit unions with commercial lending have turned away from Commercial Real Estate loans (CRE) in favor of Commercial and Industrial Loans (C&I). If the C&I portfolio is well managed, it can be a…
  • Applying for a business loan? Why personal finances and credit scores matter

    Many business owners are required to submit their personal finances and credit scores for commercial loan applications, but why? In most cases, the owner is the guarantor for the loan and either contributes or receives income from the business. In addition, it is common especially for sole proprietors, to mix…
  • Why maintain a healthy business credit relationship

    Drive down any major road, and at some point you could run into trouble: A wreck that has shut down traffic, construction causing delays, or a dangerous object in your lane you must swerve to miss. Obviously, your best chances of avoiding a major problem are when you have warning…
  • Factors that affect small business credit

    Many small private businesses are finding it challenging to access financial resources for growth at a time when lenders are still cautious and facing pressure to avoid risky loans. Many businesses already know this, because they have seen their borrowing requests rejected by a lender. Others may be considering starting a…
  • Accounting pros: Clients can do more to check creditworthiness

    Businesses can do more to protect themselves against credit risks, accounting professionals said in a recent survey by Sageworks Inc., a financial information company. Sixty-five percent of accounting professionals responding to the online survey said business clients don’t do enough before extending credit, while 35 percent said clients sufficiently ensure…
  • Business credit: Making informed credit decisions

    Private companies pose unique challenges for banks and others trying to quantify the credit risk associated with those companies in an automated and standardized manner. Since privately held firms aren’t required to share financial information with outsiders, the number of parties with access to accurate, detailed information about the business…
  • 5 Financial metrics every business owner should know

    Is your business successful? How do you know? If you’re like most business owners, your days are filled by efforts to make your company successful. Those tasks might be focused on making a great product, generating sales, or building customer relationships. And you might be great at those things. But…
  • The collateral analysis: 5 Keys to help manage prudential regulatory expectations

    Guest post by Gary Welsh, CRCM Loan Review and Compliance Manager at Condley and Company LLP – Banking Services Group Meeting with the CEO of an East Texas community bank, I was discussing how the pendulum had swung in recent Safety and Soundness exams with the prudential regulators relative to…
  • “Hot-button” issues in lending: Documentation

    Guest post by John Baptista, Impact Training & Consulting As memberships in U.S. credit unions have grown, many institutions are expanding their offerings to include member business loans. Whether it’s a credit union making this move for the first time, or a bank diving deeper into commercial lending, I find…
  • Top bank regulator - Risk models key

    Banks that use models for risk management should compare results of those models to results from other approaches, narrowing their reliance on single approaches, U.S. Comptroller of the Currency Thomas Curry said Wednesday.The banking regulator warned that operational risk – the risk of loss due to failures of people, processes,…
  • Bernanke: Banks healthier despite ongoing challenges

    Federal Reserve Chairman Ben Bernanke believes conditions in the U.S. banking system have “improved significantly,” though he acknowledges lending for residential mortgages and for small business owners remains challenging.  In remarks prepared for a speech May 10 at the 48th Annual Conference on Bank Structure and Competition in Chicago, Bernanke…
  • Signs that business banking is back

    Business banking is back – well, mostly. Commercial lending has been growing, according to Federal Reserve data. And recent research by Sageworks, a financial information company, shows that businesses’ borrowing-related financial ratios have improved, making access to credit more likely. Based on Federal Reserve data, commercial and industrial (C&I) lending…
  • Avoid cash flow catastrophes: Part III - Frequency

      Cash flow forecast frequency: How often should you update? As with many things in finance, how often you perform or update your cash flow forecast depends on the business and your circumstances, according to Lauren Prosser, manager of advisory services at Sageworks. A retailer that sells many products of…
  • Avoid cash flow catastrophes: Part II

    Cash flow forecasting 101 Forecasting a business’ cash flow is critical to ensuring operations can continue without major disruptions. But one way you can tell that cash flow forecasting is a pain point for many people is the number of templates and software solutions that are available online.  Nevertheless, David…
  • Avoid cash flow catastrophes: Improve your forecasts

    Remember Borders books? Or Circuit City? How about Pan Am Airlines? Each of these once-highflying brands is now gone or radically changed because their companies eventually ran out of cash to pay bills. But it’s not just big companies with declining sales that run into problems with cash flow. Talk…
  • CFO Corner: Top-down approach to cash flow forecasting

    L. Heath Sampson, CFO at asset management and recovery company SquareTwo Financial, discusses talent and a top-down approach to cash flow forecasting. What was the biggest challenge your company faced over the last 12 months and how were you able to overcome it with financial leadership? One of the things…
  • Get your money faster: Four steps to minimize late payments

    Imagine having more than 1 out of every 3 dollars in your business tied up and inaccessible. That’s money you can’t use to advertise, to develop new products and services, or to hire employees. For many business owners, that scenario is a day-to-day reality as they sit with 35 percent…
  • Is access to credit improving for businesses?

    Results of the Federal Reserve’s December survey of loan officers could be released today, perhaps providing insight as to whether banks have eased standards on commercial and industrial loans recently. President Obama in his State of the Union address last week urged Congress to help “tear down regulations that prevent…
  • Private companies paying bills later - Sageworks Stats @ Forbes.com

    U.S. companies continued to guard their cash flows despite increasing sales in 2011, reflecting continued uncertainty in the economic recovery and slower paying customers. Privately held businesses, which account for up to 70 percent of GDP and generate 80 percent of new jobs, stretched their average time for making payments to…
  • Risky business- Protecting your business with risk management

    Recent service outages for Sony Corp.’s (NYSE: SNE) PlaystationNetwork and for Research in Motion’s (NASDAQ: RIMM) Blackberry services highlight major risks companies face when it comes to their businesses. Both events have created tumult in the companies’ day-to-day operations and in their customer relations. While many business owners might think…
  • Dining on quality credit information

    In many respects, the challenges that a chef encounters in delivering quality fare to restaurant patrons are quite analogous to those faced by bank information technology personnel in generating reports for credit analysts, loan officers, and credit committees.  That is, head chefs and CIOs are both responsible for transforming numerous…
  • Overcoming spreadsheet inertia: Steering away from Excel-based risk management practices

    In 1687, Isaac Newton published a three-volume treatise which revolutionized humanity’s understanding of the physical world.  Philosophiæ Naturalis Principia Mathematica explained natural phenomena so thoroughly and effectively that, three centuries later, high school teachers and college professors still impart its tenets to their students. Book One of Principia contains Newton’s…
  • Stress Testing: Drafting a Battle Plan for the CRE Portfolio

    Addressing the National Defense Executive Reserve Conference in Washington, D.C., in 1957, President Dwight D. Eisenhower made a fascinating observation.  “In preparing for battle,” he said, “I have always found that plans are useless, but planning is indispensable.”  Even though events never materialize exactly as planners envision, the preparation process…
  • Global cash flow analysis - common mistakes & helpful hints

    Global Cash Flow analysis is used by financial institutions to assess the combined cash flow of a group of people and/or entities to get a global picture of their ability to service the proposed debt. When performing a Global Cash Flow (GCF) analysis, there are several mistakes that financial institutions…