Is Your Portfolio Ready for the Future?

As we move into the end of the first quarter of 2019, interesting economic trends are appearing:

• Personal credit card balances are up 10.7% between September 2018 and October 2018
• Personal auto loan delinquencies are at the highest since 2012
• A slowdown in the global markets is affecting international corporations
• Commercial loan delinquencies continued to be stable, and improved, for 2018 

So what does all this mean? Taken individually, it may mean nothing. Cumulatively, it may mean nothing. However, for your financial institution, this information - along with an understanding of your portfolio specifics -could give you a picture of your future portfolio issues. Having all the right information is the key to being ready for the future.

You have the information. What specifically do we mean when we ask if your portfolio is ready for the future? We recommend you consider the following:

• Do you track and understand the macro and micro level economic factors?
• Do you manage your portfolio concentrations? Not just commercial real estate. Do you understand your portfolio concentrations by industry (NAICS), region, bank product, score, average deposits, etc.?
• Do review and discuss how the macro and micro economic factors affects the various industries, regions, products?
• Do you analyze your exceptions by the same criteria listed above?
  • We are used to looking at exceptions by dollar exposure. What about industry? Bank product? Region? Are there any trends?
• Are you reactive or proactive with your portfolio management activities?
  • Reactive-just managing via past dues
  • Reactive-just clear exceptions as they arise
  • Proactive-monitoring behaviors to watch trends in
    • Guarantor scores
    • Business scores
    • Deposit behaviors
    • High line utilization
    • Trends in exceptions including hazard insurance, flood insurance

Are you a proactive or reactive financial institution? What types of data and analysis do you have?What are you missing? How do you proceed from here?

Angela Eikenbary and I will be presenting this topic at Baker Hill’s 2019 Prosper Conference in Nashville. Come join us to learn more about this topic and report capabilities available within the Baker Hill NextGen® platform!

Author Bio

As Director of Advisory Services, Stephanie Butler guides the implementation and strategic consulting for new and existing Baker Hill clients. Butler coordinates the Business Process Consultant team and is responsible for analyzing client goals and objectives and providing recommendations for best practices. Relying on more than 25 years of experience within the financial services industry, she successfully maintains a client base of banks and credit unions ranging from $100 million to $100 billion in asset size.

Butler earned her bachelor’s degree in Accounting from Davenport University and received her master’s degree in Management from Aquinas College.