SBA Lending

Are you afraid of SBA lending? Too much paperwork? Not worth the time? Too much risk?? Don’t feel you need to offer then to help your community??

Let’s look at ten $100,000 SBA loans in a loan portfolio that are 75% guaranteed by the SBA. Now assume the guaranteed portion of these loans have been sold. In today’s market you can get at least a 10% premium on the sale (actually it could be more, but let’s use 10%). Selling the guaranteed portion of the loans at a 10% premium would result in a $7,500 gain on each loan, for a total of $75,000.

Of the $250,000 in SBA loans remaining on the books, after the guaranteed portion has been sold ($100,000 less the $75,000 sale in the secondary market times 10 loans), let us now assume you lose 5% on the remaining loan SBA loan balances – or $12,500. This would leave the institution with a net gain of $62,500 on the original underwritten $1 million-dollar portfolio. If the secondary market for the guaranteed portion is higher than 10%, which it is now, the gain could be even higher. Since these loans typically make your financial institution a hero within your community, generally are accompanied with deposits, are “gold” with the regulators when it comes to your Community Reinvestment Act (CRA) program and result in a potential gain for the financial institution, aren’t these loans worth it? In addition, the regulators give the financial institution CRA credit for the original amount of the $100,000 loan underwritten not just the $25,000 remaining after the guaranteed portion has been sold.

If the financial institution is unsure on how to make these loans or think the staff is not big enough to take advantage of this opportunity, ABS can assist. Some of our experts have spent their careers dealing with SBA loans. We can not only help the financial institution with every facet of the SBA loan and its processes, but we can provide training to your staff in identifying potential borrowers and how to deal with the SBA. With the economy booming, you should not pass up these obvious opportunities. We can take all “the scary” out of it.

To see how this process works and costs for our various services, please contact us at 913-599-7471 or info@abs-core.com. We welcome the opportunity to meet with you

Technology

Technology can play a vital role in growing your organization. A well-structured technology plan can and should support the overall strategic plan of the organization. Many organizations find themselves however, in technology overload. They are sold a lot of promises of how this new technology can improve their bottom line only to find out it takes a lot of resources and time to not only install but maintain. How do you keep from getting caught in this dilemma? A good start is to have a Technology Committee formed with members from different areas of the organization. But “nobody has the expertise”, “We don’t even know where to begin” you say? That’s where ABS and its’ many resources can help your organization get started and provide the expertise to help ensure you are matching the right technology with the needs of the organization.

Our ABS team stays current on technology trends, ensuring our customers don’t fall into technology overload. We can provide the assistance you need to guide your organization to growth with technology. We know a lot of organizations can’t justify a full time Technology person, that is why ABS is going to introduce a Technology Committee subscription service to help organizations get answers to their technology questions as well as provide technology oversite for strategic planning. If you would like to be a part of the initial launch or just want more information, please let us know and we will have someone discuss what this means for your organization.

Great Opportunities

ABS is honored to be helping a few of our fast growing clients build a team.  If you are looking for growth opportunity and a great culture to work in, check out these positions!

  • Commercial Lenders in Kansas Area, Larned, KS, Manhattan, KS,  Missouri, Tulsa, OK and Corpus Christi, TX.   
  • Credit Analyst in Greater Kansas City Area
  • Assistant Controller in North Kansas City
  • Mortgage Lender-Selling to banks in Missouri for a Mortgage Company based in Kansas

If interested please send resume to abs@abs-core.com

FASB Proposes Delay in the Implementation Date for CECL for Nonpublic Financial Institutions

The Financial Accounting Standards Board (FASB) recently proposed delaying for one year the implementation date of its accounting standard on Current Expected Credit Losses (CECL).  In the proposal, the implementation date for nonpublic financial institutions would be delayed until years beginning after December 15, 2021, rather than the original date of December 15, 2020.  Additional information on the proposed delay can be viewed at:

https://www.fasb.org/cs/ContentServer?c=FASBContent_C&cid=1176171090132&d=&pagename=FASB%2FFASBContent_C%2FNewsPage

Please contact ABS for any of your needs with the implementation of this accounting standard.

Home Mortgage Disclosure Act Rule Implementation Issued

On August 31, 2018, the Bureau of Consumer Financial Protection (Bureau) issued an interpretive and procedural rule to implement and clarify changes made by section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) to the Home Mortgage Disclosure Act (HMDA). The rule is effective immediately upon publication in the Federal Register.

If you follow this link you can gain access to the Bureau’s executive summary which provides an overview of the 2018 HMDA Interpretive and Procedural Rule (2018 Rule).

The Act provides that an insured depository institution or insured credit union does not need to collect or report certain data with respect to closed-end mortgage loans if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years. Similarly, the Act provides that an insured depository institution or insured credit union does not need to collect or report certain data with respect to open-end lines of credit if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years. The Act further provides that these partial exemptions are unavailable to an insured depository institution if it received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent Community Reinvestment Act (CRA) examinations or a rating of “substantial noncompliance in meeting community credit needs” on its most recent CRA examination.

Please let ABS know if we can help you comply with the new HMDA requirements.

Federal Agencies Increase Threshold for Appraisals for Commercial Real Estate Transactions

 

In April 2018, The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a final rule that increased the threshold for commercial real estate (CRE) transactions requiring an appraisal from $250,000 to $500,000.  The higher threshold reflects increases in CRE transaction values since the adoption of the existing threshold in 1994 and increases in the general indices of inflation.  The CRE threshold also reflects the valuation cycles in the CRE market since 1994 and the agencies’ analysis of data losses relating to commercial real estate transactions.

The final rule requires evaluations for transactions at or below the $500,000 threshold for CRE transactions, although financial institutions may use appraisals for these exempt transactions in appropriate circumstances, such as for higher-risk transactions.   Evaluations provide a market value estimate of the real estate pledged as collateral, but an evaluation does not have to comply with the Uniform Standards of Professional Appraiser Practices and does not require completion by a state licensed or certified appraiser.  The final rule defines a commercial real estate transaction to mean “a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property.”  The second conforming change requires use of a state-certified appraiser for CRE transactions of more than $500,000. These requirements for evaluations and for use of state-certified appraisers are in the current appraisal rules; the conforming changes update the transaction levels for these requirements from $250,000 to $500,000.

The link to the final rule is here.  Advanced Business Solutions, LLC is here to assist you in reviewing your current appraisal policies and practices.

Interest Rate Risk

While many financial institutions have outsourced their interest rate risk reporting to a third-party, the financial institution still has responsibility for reviewing and testing the data prepared by the third-party. At a minimum, small financial institutions need to have the following items performed by an independent party:

•Review of the financial institution’s relevant policies related to Interest Rate Risk (IRR), ensuring all required items are addressed and the institution is operating within policy guidelines.

•Testing of the data utilized and imported into the IRR measurement tool; verifying the data is accurate and complete.

•Review of assumptions utilized, including prepayment assumptions, non-maturity deposit assumptions, driver rates for reasonableness and that the assumptions reflect the financial institution’s behavior.

•Obtain and review available model documentation provided by third-party vendor to ensure the model is tested by an independent third party.

•Review reports utilized to manage Interest Rate Risk and reported to the Board to ensure earnings analysis is performed over an acceptable time horizon, a no-growth or static balance sheet analysis is included, and appropriate scenarios are run and evaluated (+/- 100 to 400 shocks, non-parallel shocks etc.).

•Perform back test to compare actual or historical results to the results assumed or predicated by the Interest Rate Risk software.

If you are in need of an Interest Rate Risk review, our ABS expert is a phone call away. Please contact us at 913-599-7471 or via email at info@abs-core.com.

We knew this was coming!

It has been several months, but I wanted to bring this back to the top of your mind.  I just spoke with a Banker at a too-big-to-fail bank, and they are still getting pushed to reach goals.  So the community bank must make sure we do not make the same mistakes.  Now would be a good time to look at the CFPB’s Expectations for sales programs.

On November 28, 2016 the Consumer Finance Protection Bureau (CFPB) issued a bulletin warning supervised financial companies that creating incentives for employees and service providers to meet sales and other business goals can lead to consumer harm if not properly managed.  The CFPB does not mention Wells Fargo, but we all know that their issues are why they were prompted to release the bulletin.  It does not create any new regulations, but does give “The CFPB’s Expectations” for institutions that choose to utilize incentives.

The CFPB expects the institution’s compliance management program to include the following components:

  • Board of Directors and management oversight;
  • Compliance program, which includes:
    • Policies and procedures;
    • Training; and
    • Monitoring and corrective action;
  • Consumer complaint management program; and
  • Independent compliance audit.

The CFPB writes, “To limit incentives from leading to violations of law, supervised entities should take steps to ensure their CMS is effective”.  The regulatory agencies have not followed up with their own guidance or expectations, but if your institution has a cross sell or incentive program for your employees, I would familiarize yourself with these expectations and move towards incorporating them in your systems.

If you would like to discuss further what is expected, or would like someone to review your incentive program, ABS is here for you.

To read the entire Bulletin you can find it at:

http://www.consumerfinance.gov/documents/1537/201611_cfpb_Production_Incentives_Bulletin.pdf

CFPB Issues Bulletin on Expectations for Institutions Utilizing Incentives

On November 28, 2016 the Consumer Finance Protection Bureau (CFPB) issued a bulletin warning supervised financial companies that creating incentives for employees and service providers to meet sales and other business goals can lead to consumer harm if not properly managed.

The bulletin didn’t create any new regulations but does give “The CFPB’s Expectations” for institutions who choose to utilize incentives.

cfpb-bulletinThe CFPB expects the institution’s compliance management program to include the following components:

  • Board of Directors and management oversight
  • Compliance program, which includes:
    • Policies and procedures
    • Training; and
    • Monitoring and corrective action
  • Consumer complaint management program; and
  • Independent compliance audit

The CFPB stated: “To limit incentives from leading to violations of law, supervised entities should take steps to ensure their CMS is effective”.

The regulatory agencies haven’t followed up with their own guidance or expectations, but if your institution has a cross-sell or incentive program for your employees, you should familiarize yourself with these expectations and move toward incorporating them in your systems.

If you’d like to discuss further what’s expected or would like someone to review your incentive program, ABS is here for you.  Give us a call at 866-931-4682.

Click here to read the entire CFPB bulletin.

Are Your Meetings Productive?

meetingsAs with many of you, writing has never been one of my favorites. Now reading and learning – that is another story.  I always like to write about things that I love to learn about and one of those areas is how to be more efficient, to help more people in less time. 

Michael Hyatt has become one of my favorite authors and he has short and to the point blogs about efficiency and productivity.  His blog “Shave 10 Hours off Your Workweek” has some great tips.  One that I felt was the most prudent for most of my colleagues is “Fix or Quit Terrible Meetings.” 

Now let’s be real, how many of us have sat in meetings and wondered why we are actually there.  Of all the time killers in our workweek, meetings seem to be the biggest and have you ever asked yourself “Do I go to more productive meetings or meetings that are a waste of time?”

As Michael points out many times the meeting organizer isn’t prepared, the meeting objective isn’t defined, or you can’t really affect the outcome one way or the other.  Because meetings take up much of our time that could be productive in accomplishing our work, we try and take our work into our meetings.  We answer emails, try to finish reports, do prep for the next meeting, etc.  According to Harris-Clarizen poll, only two in five meeting attendees are not trying to multitask their way through meetings.  All in all, the unproductive meetings take more of our time and do not produce results.   

Michael brings up 5 ways to get some of your “meeting” time back.

1.    First, cancel standing meetings that no longer add value, if it’s in your power to do so.  Nothing is more appreciated by employees than a canceled meeting. Do it a couple of times, and it’s almost as welcome as a three-day weekend.  If the meeting isn’t adding the value necessary, be a hero and kill it.

2.    Second, challenge meetings that others have scheduled if you no longer believe they add value.Every meeting should have a clearly stated objective and a written agenda. If you don’t have these two minimal items, or they don’t line up with the desired outcome, push back. There’s nothing wrong with killing other people’s meetings if they’re not worth continuing.

3.    Third, consider or suggest alternatives to meetings. Sometimes we default to meetings even if they’re not the best solution for the team or the project we are trying to address.

4.    Fourth, cut—or recommend cutting—the length of meetings. The longer the allotted meeting time, the more likely it is that time is being wasted. Try cutting meeting times in half and see if you can still accomplish what needs to be done.

5.    Fifth, stop attending low-impact meetings. If the content of the meeting is irrelevant to you and your job, or if you don’t feel that you really add that much to the discussion, ask to be excused. And in some contexts you can just excuse yourself. What are you waiting for? Be you own hero!