Bank Board Letter June 2015 : Page 2

Age Segment and Average Household Income Total Millennials <$50K Millennials $50K-$99.9K Millennials $100K+ Generation X <50K Generation X $50K-$99.9K Generation X $100K+ Baby Boomers <$50K Baby Boomers $50K -$99.9K Baby Boomers $100K+ Greatest Gen all* Times Card Used Per Month 6.2 5.7 10.1 8.8 5.9 4.9 7.8 5.1 2.9 3.9 5.3 Average Spending $116 $117 $142 $173 $99 $142 the Federal Reserve Bank of Philadelphia, 90 percent of people who own a reload-able prepaid product also have a traditional checking account. So Much to Say their Starbucks mobile app. From a consumer’s usability standpoint, there really is no difference between a DDA check card and a pre-paid card. However, there is. The consumer doesn’t need to pass a credit check or have a clean financial history to get a prepaid card. Of course, just because millennials use one alternative product doesn’t mean that they eschew traditional banking products. According to When anything is new, it is called al-ternative. But just like our favorite bands $94 from college, the good ones stick around $103 and become mainstream. Prepaid cards are $72 at that point now. Prepaid products are not $144 just for the unbanked and underbanked. $85 They are being widely used by millenni-als as part of their financial product mix. Banks need to incorporate prepaid into their product offerings if they want to fully serve this group of adults as they enter their peak banking years. Kari Mitchum is the senior director of payments solutions at the American Bankers Association. Contact her at kmitchum@aba.com. Diversifying the Portfolio has multiPle benefits By Jay McKinney L oan diversification is an increasingly desirable strategy for community banks seeking to mitigate the risk associated with commercial real estate concentrations. It’s equally im-portant to institutions seeking to listen more to clients, re-sponding with loans that actually fit their needs rather than the same one or two cookie cutter products their system can handle. But moving into new loan products requires thoughtful change. It is a paradox of sorts. The introduction of new products to the mix for the purpose of reducing risk can actually increase risk if appropriate collateral management is not in place Ð methods that worked for monitoring real estate are completely inadequate for accounts-receivable finance, purchase-order fi-nance, or even asset-based lending. Banks considering expanding their offerings rightfully seek out new systems for monitoring their new products, which introduces yet another issue: disparate systems. Monitoring a variety of loan types on a patchwork of systems makes analyzing the portfolio quite challenging. Disconnects between systems often result in a loss of information, and valuable staff time is spent compiling data from different sources. The ideal solution is to manage all of the bank’s loan types in a single system of record, moving the client along a spectrum of Adding new loan products requires a change in collateral management. lending products to best match the situation at hand. One bank that knows well what it takes to make this type of transition is Bridge Bank in San Jose, Calif. We recently spoke with Lee Shodiss, executive vice presi-dent and regional director of the commercial lending division of Bridge Bank, to learn about its ongoing move to a single software platform, CADENCE. Bridge Bank’S Background Bridge Bank is a full-service, nationally chartered commercial bank with offices throughout the United States. Being acquired by Phoenix-based Western Alliance Bancorp., Bridge Bank has locations in Boston, Reston, Va., and Dallas, as well as through-out California. “We have a general commercial lending group, a technology lending group, an asset-based lending group, and then we do some real estate, which includes SBA,” explained Shodiss. “In the capital finance area of the bank, we offer asset-based lending and factoring structures paired with inventory and term loans on the lending side. And we are an Exim-certified lender, so we can consider international accounts eligible for our clients.” The capital finance division typically seeks borrowers from $2 million to $10 million, which usually translates to companies with $20 million to $50 million in revenue. Next moNth: Commercial RDC eRm Builds Shareholder Value

DIVERSIFYING THE PORTFOLIO HAS MULTIPLE BENEFITS

Jay McKinney


Adding new loan products requires a change in collateral management.

Loan diversification is an increasingly desirable strategy for community banks seeking to mitigate the risk associated with commercial real estate concentrations. It’s equally important to institutions seeking to listen more to clients, responding with loans that actually fit their needs rather than the same one or two cookie cutter products their system can handle.

But moving into new loan products requires thoughtful change.

It is a paradox of sorts. The introduction of new products to the mix for the purpose of reducing risk can actually increase risk if appropriate collateral management is not in place Ð methods that worked for monitoring real estate are completely inadequate for accounts-receivable finance, purchase-order finance, or even asset-based lending.

Banks considering expanding their offerings rightfully seek out new systems for monitoring their new products, which introduces yet another issue: disparate systems. Monitoring a variety of loan types on a patchwork of systems makes analyzing the portfolio quite challenging. Disconnects between systems often result in a loss of information, and valuable stafftime is spent compiling data from different sources.

The ideal solution is to manage all of the bank’s loan types in a single system of record, moving the client along a spectrum of lending products to best match the situation at hand. One bank that knows well what it takes to make this type of transition is Bridge Bank in San Jose, Calif.

We recently spoke with Lee Shodiss, executive vice president and regional director of the commercial lending division of Bridge Bank, to learn about its ongoing move to a single software platform, CADENCE.

BRIDGE BANK’S BACKGROUND
Bridge Bank is a full-service, nationally chartered commercial bank with offices throughout the United States. Being acquired by Phoenix-based Western Alliance Bancorp., Bridge Bank has locations in Boston, Reston, Va., and Dallas, as well as throughout California.

“We have a general commercial lending group, a technology lending group, an asset-based lending group, and then we do some real estate, which includes SBA,” explained Shodiss. “In the capital finance area of the bank, we offer asset-based lending and factoring structures paired with inventory and term loans on the lending side. And we are an Exim-certified lender, so we can consider international accounts eligible for our clients.”

The capital finance division typically seeks borrowers from $2 million to $10 million, which usually translates to companies with $20 million to $50 million in revenue.

“We offer asset-based lending and technology products at all of those locations,” says Shodiss. “The Silicon Valley is where we primarily offer the real estate and general commercial, but that’s changing over time. We’re expanding all four product sets to all regions.”

THE MOVE TO ONE SYSTEM
The primary motivation for moving to the CADENCE portfolio management system was the ability to offer all loan types on a single system. Bridge Bank has offered asset-based lending and factoring since 2002 Ð just one year after the inception of the bank. Both products are considered core competencies of the bank and both (all factoring and some asset-based lending) are being managed on the CADENCE system.

“Our intent is to have all of the asset-based and factoring clients using CADENCE first, and then a follow on to that is to integrate more commercial loans and the general commercial lending side onto the CADENCE technology as well,” says Shodiss.

In addition to providing one platform for all loan types, the move was made to increase efficiency, scalability and reliability.

Shodiss says the efficiency gains resulting from system’s workflow is based on approvals and authorities, which are automated.

“Instead of having people sign things physically and move pieces of paper around, we’re able to do everything in the system electronically,” he says. “It definitely saves time. People can use their computers, rather than having to run around, up and down elevators, to get approvals.”

Eliminating paper from the workflow has another benefit, Shodiss adds. “The imaging system has made the need for our third-party records management vendor obsolete with respect to storing the endless amount of paper associated with these products.”

Added efficiency goes hand-in-hand with scalability. “The lockbox interface and AutoCash application have allowed us to automate certain manual processes, allowing for additional growth while minimizing adding any additional staff.”

And on the reliability side, the system provides real security benefits, says Shodiss. “There is really no risk of something getting through that wasn’t approved by the proper authorities because it is all electronically managed.”

Additionally, the bank has the ability to automate advance approval authorities and other authorities at the user role level. Eliminating these manual controls minimizes processing errors and maximizes safety and soundness, which enhances compliance.

ONLINE PORTAL BENEFITS THE BANK AND ITS CLIENTS
Another major motivation for Bridge’s move was to increase web usability. The ClientWeb online portal gives Bridge’s clients 24/7 access to real time account data. Shodiss explains that adding the Internet access of ClientWeb to the workflow functionality of CADENCE allows for “much more efficiency, saving time and money while providing better client service. Clients can use the online portal to do all aspects of their banking at one location, as opposed to the multiple areas of access required by other systems.”

REPORTING FOR PROACTIVE MANAGEMENT
From a management standpoint, being able to easily get information out of the system has been an advantage to Bridge. “There’s a lot of customized reporting Ð you can pretty much get any report you want as a lender,” says Shodiss. “It is very helpful, in terms of the trending that the system provides to manage risks and proactively address them, as opposed to reactively addressing them.”

Until very recently, technology capable of handling the wide range of lending products in the C&I spectrum was something lenders could only wish for. Now it is available, and it opens up a whole new world of possibility in terms of how collaterals are managed, clients are serviced, and markets are approached. Flexible software systems are the key to portfolio diversity and well-managed risk.

Jay McKinney is senior vice president of Bayside Business Solutions.

Read the full article at http://omagdigital.com/article/DIVERSIFYING+THE+PORTFOLIO+HAS+MULTIPLE+BENEFITS/2031320/262312/article.html.

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