Western Banker - November/December 2016 - 9

'' Portfolio management should periodically remind relationship managers that the AR offers an opportunity to renew contact and sustain the relationship with the borrower. It is well documented that an existing borrowing relationship is much cheaper than opening a new relationship. Excessive extensions (EE) usually mask problem borrowers. Extensions occur from time to time to accommodate a borrower's schedule. For example, if the borrower is out of town or the borrower's accountant needs another month to complete the audit. Many banks permit the relationship manager one 90-day extension, but additional extensions usually require higher approval. Reporting and Monitoring: The Sooner the Better Increase the value of reporting and monitoring by following some simple tips. First, monthly is better than quarterly if only because you do not have to wait 90 days to discover you have a problem. Second, slice and dice by line of business and by geography. For example, Right Bank's wholesale loan portfolio has three lines of business (commercial, commercial real estate and private banking) and operates in three markets (metro, suburban and county), so disclosure should display the details so that management can observe results in county commercial or suburban private banking, for example. Third, the reporting should allow drilling down to the borrower, transaction and officer responsible for them. A few lenders usually account for LDEs and CPEs, and the detailed drilldown suggested allows these lenders to be identified for remedial training and personal coaching. Putting it all together, a monthly portfolio management report might look something like Figure 3's example. Among the embellishments to enhance this report would be totals for each of the three LOBs, totals for each of the three geographies, month-tomonth and year-to-date comparisons, Figure 3. Example of Right Bank Monthly Porƞolio Metrics Porƞolio Commercial Commercial Real Estate Metrics Metro Suburb County Metro Suburb County 30 dpd 0.14 0.15 0.16 0.04 0.01 0.14 90+ dpd 0.02 0.03 0.05 0.02 0.00 0.00 Crit 5.97 5.92 5.91 4.25 4.78 3.84 Class 4.48 4.24 4.00 3.76 2.78 1.89 N-A 1.26 1.01 1.04 1.09 1.34 1.65 NCO 0.15 0.14 0.10 0.02 0.45 0.65 LDE % 8.0 18.0 4.0 4.3 3.6 7.2 CPE % 6.5 16.5 3.5 0.0 1.5 9.2 Stale AR 14.9 10.1 4.8 0.0 2.4 3.7 % Stale RR 15.2 13.2 15.9 0.0 1.1 2.2 % EE # 5 2 0 0 1 0 Glossary: Dpd = days past due Crit = criƟcized Class = classified Other acronyms are explained in the arƟcle. Private Banking Metro Suburb 1.25 1.78 0.00 0.58 1.00 1.02 1.23 1.45 0.05 0.02 0.00 0.00 8.0 8.0 14.0 18.0 12.5 17.5 County 1.34 1.20 1.05 1.67 0.00 0.01 8.0 20.0 20.5 Bank Wide 0.14 0.02 5.97 4.48 1.26 0.15 8.0 6.5 14.9 Bk Std 1.50 0.50 6.00 4.00 1.50 0.50 5.0 10.0 5.0 12.0 16.0 18.3 15.2 5.0 6 8 5 27 5 '' bank standard metrics for each of the LOBs, color coding to indicate above and below standard performance and so on. Nevertheless, a casual perusal of this month's report suggests that while private banking is more informal about its administrative performance, its asset quality is better than the other two LOBs. Further, the Metro geography tends to perform better overall than its two counterparts. Portfolio management might consider focusing its attention on reviewing Private Banking's exceptions, stale ARs and RRs, and the reasons for its high EEs. The first place to start might be Private Banking's County personnel. Past Imperfect to Future Perfect Albert Einstein admitted, "I never think of the future. It comes soon enough," but the rest of us may not be able to ignore it. Moreover, we need to collect facts from the past to project our path forward. This article's portfolio credit metrics offer some effective measures and red flags for keeping your bank on the right road. Still, be careful; as physicist Neils Bohr warns, "Prediction is very difficult, especially if it's about the future." ● Dev Strischek is SVP and senior credit policy officer at SunTrust Bank in Atlanta. He oversees credit policy for the bank's wholesale lines of business-C&I lending, business banking, commercial real estate, private banking, corporate investment banking and capital markets. He frequently writes about credit and lending, credit risk management and financial analysis. Western Banker November/December 2016 9

Table of Contents for the Digital Edition of Western Banker - November/December 2016

A Message from the President & CEO
Back to the Future to Manage Portfolio Performance
The WIB App Store
Managing Your Bank’s Reputation by Taking an “Inside-Out” Approach to Communicating News
Interest Rate Risk and ALM: Most Institutions Are Doing it Wrong
Everything Old is New Again — Updating FCRA Compliance in a CFPB World
Professional Development
Secrets to Employee Engagement for Bank Managers
March of the Millennials: Cultivating Relationships Within the Digital Generation
Welcome New Members
Index of Advertisers
Western Banker - November/December 2016 - cover1
Western Banker - November/December 2016 - cover2
Western Banker - November/December 2016 - 3
Western Banker - November/December 2016 - 4
Western Banker - November/December 2016 - A Message from the President & CEO
Western Banker - November/December 2016 - Back to the Future to Manage Portfolio Performance
Western Banker - November/December 2016 - 7
Western Banker - November/December 2016 - 8
Western Banker - November/December 2016 - 9
Western Banker - November/December 2016 - The WIB App Store
Western Banker - November/December 2016 - 11
Western Banker - November/December 2016 - 12
Western Banker - November/December 2016 - Managing Your Bank’s Reputation by Taking an “Inside-Out” Approach to Communicating News
Western Banker - November/December 2016 - 14
Western Banker - November/December 2016 - Interest Rate Risk and ALM: Most Institutions Are Doing it Wrong
Western Banker - November/December 2016 - 16
Western Banker - November/December 2016 - 17
Western Banker - November/December 2016 - Everything Old is New Again — Updating FCRA Compliance in a CFPB World
Western Banker - November/December 2016 - 19
Western Banker - November/December 2016 - 20
Western Banker - November/December 2016 - Professional Development
Western Banker - November/December 2016 - Secrets to Employee Engagement for Bank Managers
Western Banker - November/December 2016 - 23
Western Banker - November/December 2016 - March of the Millennials: Cultivating Relationships Within the Digital Generation
Western Banker - November/December 2016 - 25
Western Banker - November/December 2016 - Index of Advertisers
Western Banker - November/December 2016 - cover3
Western Banker - November/December 2016 - cover4
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