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Future Ready Commercial Banking

Future Ready Commercial Banking

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Confidential & Privileged DocumentConfidential & Privileged Document
Prosper 2018: Innovation built & ready to go
FUTURE READY
COMMERCIAL BANKING
Presented by Steve Williams, Cornerstone Advisors
Banks $1 - $50
billion in assets
have grown loans
$1.3 trillion in the
past 10 years.
75% of this growth
has been in C&I,
CRE and specialty
lending.
We Had An Exciting Run of Growth
Confidential & Privileged DocumentConfidential & Privileged Document
75.00
80.00
85.00
90.00
95.00
100.00
2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2013Y 2014Y 2015Y 2016Y 2017Y
Loan to Deposit Ratio (%)
3.30
3.40
3.50
3.60
3.70
3.80
3.90
4.00
2007Y2008Y2009Y2010Y2011Y2012Y2013Y2014Y2015Y2016Y2017Y
Net Interest Margin (%)
Revenue Growth has Been Lending Driven
Confidential & Privileged DocumentConfidential & Privileged Document
Happy Days are Slowing in the CRE Boom
Confidential & Privileged DocumentConfidential & Privileged Document
The 30 Year Decline in Rates is Over
6
Zero
banker
thought
about
deposits!

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Future Ready Commercial Banking

  • 1. Confidential & Privileged DocumentConfidential & Privileged Document Prosper 2018: Innovation built & ready to go
  • 2. FUTURE READY COMMERCIAL BANKING Presented by Steve Williams, Cornerstone Advisors
  • 3. Banks $1 - $50 billion in assets have grown loans $1.3 trillion in the past 10 years. 75% of this growth has been in C&I, CRE and specialty lending. We Had An Exciting Run of Growth
  • 4. Confidential & Privileged DocumentConfidential & Privileged Document 75.00 80.00 85.00 90.00 95.00 100.00 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2013Y 2014Y 2015Y 2016Y 2017Y Loan to Deposit Ratio (%) 3.30 3.40 3.50 3.60 3.70 3.80 3.90 4.00 2007Y2008Y2009Y2010Y2011Y2012Y2013Y2014Y2015Y2016Y2017Y Net Interest Margin (%) Revenue Growth has Been Lending Driven
  • 5. Confidential & Privileged DocumentConfidential & Privileged Document Happy Days are Slowing in the CRE Boom
  • 6. Confidential & Privileged DocumentConfidential & Privileged Document The 30 Year Decline in Rates is Over 6 Zero banker thought about deposits!
  • 7. Confidential & Privileged Document When Loan Growth Flatlines for Commercial Bankers • Strengthen your RAROC discipline and leverage your CECL efforts for data strategy. • Continue to develop lending niches where you can forge a knowledge edge • Wake the organization up to the funding war – Commercial bankers growing deposits – Treasury management growth plan – Small business product and delivery strategy • Drive efficiency into the Commercial operation with Future Ready innovations.
  • 8. Confidential & Privileged DocumentConfidential & Privileged Document 62% 14% 66% 22% Commercial Loans % of Total Loans Commercial Deposits % of Total Deposits 2013 2017 2013 2017 Source: Cornerstone Performance Report Commercial loans and deposits
  • 9. Confidential & Privileged DocumentConfidential & Privileged Document No More Postponing the Future Of Commercial Banking!
  • 10. Confidential & Privileged DocumentConfidential & Privileged Document Stuck in the Manual Art of Commercial Lending “We’re still doing things we did 20 years ago. We’re stuck in an outdated model—heavy analysis, using outdated data. Can’t get outside of that box.” — Chief Risk Officer, $25 billion bank 10
  • 11. Confidential & Privileged DocumentConfidential & Privileged Document Commercial Lending Technology - 1987 11 Credit File Joel Pruis, Commercial Credit Analyst - Desktop Collateral File Loan Docs
  • 12. Confidential & Privileged DocumentConfidential & Privileged Document Commercial Lending Technology - 2017 12 New Technology Added Statement Spreading Ticklers Loan Pricing Access Database Shared Files Service Providers
  • 13. Confidential & Privileged DocumentConfidential & Privileged Document 13 And the results?
  • 15. BROKEN Price dependent Loan concentration Silo organization Knowledge bottled up Lender energy driven FIXES Niches beyond CRE Relationship pricing Bundle treasury & wealth Engineering process driven with strategic data culture COMMERCIAL MODEL STRESSED @gonzobanker
  • 17. Confidential & Privileged DocumentConfidential & Privileged Document Commercial LOS Credit Engineering - Engineering Over Energy 17 • Credit Memos • Call Memos • Narratives • Proposal Letters • Cash Flows • Collateral Analysis • Checklists • Borrower Data • Documentation • Pricing Models • Statement Spreading • Ticklers • Workflow Logs • Credit Policy Tracking Merging the Data Commercial Data Store
  • 18. Confidential & Privileged DocumentConfidential & Privileged Document Commercial LOS Credit Engineering - Engineering Over Energy 18 Integrating the Platform CRM Service Providers Core System Loan DocsImaging
  • 19. Confidential & Privileged DocumentConfidential & Privileged Document PEOPLE: Analytics Culture PROCESS/ TECH: Emerging technologies and self service METRICS: Relationship-based ROI STRATEGY: Profit and RAROC Optimizer Move from Order Take to Risk-Adjusted Return Optimizer PEOPLE: Integrated teams PROCESS/ TECH: Integrated platforms and workflow METRICS: Profit visibility STRATEGY: Relationship Manager PEOPLE: Specialized skills PROCESS/ TECH: Workflow automation METRICS: Balances with fees/yield/funding STRATEGY: Niche manager PEOPLE: Originator focused PROCESS/ TECH: Manual METRICS: Volume STRATEGY: Order taker Future Ready
  • 20. Confidential & Privileged DocumentConfidential & Privileged Document Key Priorities To Get Future Ready 1. Build a relationship management and RAROC infrastructure 2. Become deal-ready 3. Consumerize the commercial customer interface 4. Partner to explore opportunities for emerging technologies 5. Diversify funding sources. 20
  • 21. Confidential & Privileged DocumentConfidential & Privileged Document Words of Wisdom • The holy credit memo design needs serious thought, but then burned into a data and LOS strategy. CAM becomes critical in data capture! • Commercial deals are not mortgage deals – don’t overengineer the speed bumps and stops in the process, BUT make sure all data is complete for deal closing. • Humans have ADD – reminders and visual checklists always help NUDGE behavior • Clearly define the roles of each team member in the Future Ready model and take advantage of the leverage the team can achieve. 21
  • 22. DESIGN AROUND OUR DEFAULT SETTINGS Relationship Manager: want to run fast and sloppy with information “on the way”. Ops: expects processes and humans to be rational – always disappointed Credit: will want to over- engineer the analysis on most of the deals. Customer: wants it now while providing as little information as possible
  • 23. Confidential & Privileged DocumentConfidential & Privileged Document The Impact 23 • Response Times are best in market • Production Metrics at high performer levels • ALLL is optimized • CECL drives data foundation • Portfolio Stress Testing is real-time • Risk Rating Models help gain a RAROC edge • Loan/Portfolio Profitability drives the culture
  • 24. Confidential & Privileged DocumentConfidential & Privileged Document Partner to Create a Specific Future Ready Vision 24

Editor's Notes

  1. CONTROL OF SLIDE: RON SHEVLIN
  2. Old Bank Earnings Model (Regulatory-driven): Performance largely about Cost Management and Revenue mainly was about the energy of in-person individual lenders and sellers……rain makers. New Bank Earnings Model (Competition-driven): Sales, Marketing, & Service converging around delivery, increasingly remote. Performance more about revenue growth and scalable engineered process.
  3. CONTROL OF SLIDE: SAM KILMER Bank CEO Profile: Analyst, accounting/credit trained Extrovert, argues numbers for sport Internally partner on impact estimates.