Bank Board Letter November 2015 : Page 2

the bank’s responsibility to review the results and conclude if the validation meets the bank’s standards of compliance. The second form of testing is variance analysis, commonly referred to as back-testing. The purpose of back-testing is to determine if applied results and assumptions make sense or are considered reliable. This involves comparing previous forecasts with actual results, which can identify errors in the model setup or flaws in the assumptions; this is critical, since model results are used in developing strategies. Lastly, the bank’s interest rate process should be subject to an independent review. This can be done in-house or by an outside consultant. This review should encompass all aspects of the inter-est rate risk management process, including the accuracy of input information; assumption development; and output reporting, including variance analysis. Common findings related to indepen-dent review include the lack of annual testing, deficiencies in scope, and testing not performed by qualified individuals. The process and requirements for managing interest rate risk are comprehensive, and this is just a small sample of things to consider when reflecting on your procedures. Having an effec-tive interest rate management framework in place is essential for a bank to sustain profitability and preserve capital in an expected rising interest rate environment. Kenneth Bishop is a partner in the Chicago office of BKD CPAs & Advisors. He can be contacted at 630-282-9500 or kbishop@bkd.com. AutomAting LoAn Processes imProves customer sAtisfAction By James Woods C ommunity banks, faced with increasingly strict regu-lation, often find it a challenge to meet profitability goals. More challenging still, the mobile and web ser-vices from larger institutions can draw away even the most loyal customers. The Bank of Tennessee is facing these realities head-on by using an application platform software strategy. This approach blends business process management with mobile and social capability, which has yielded a 30 per-cent improvement in loan processing in terms of speed, data quality and process visibility. Our loan officers now make full use of the mobile environment, processing loans and collabo-rating with clients from almost anywhere. Bank of Tennessee, which started in 1974, has grown to more than 250 professionals in 20 locations, and now has $926 million in assets and more than 50 loan officers. Of course, Bank of Tennessee competes with larger regional and national banks; these institu-tions have larger technology budgets that let them offer better customer responsiveness than many community banks. It is simply a fact that after competitive interest rates, customers are most con-cerned about closing their loan and funding their loan quickly. We knew that by improving key internal processes we could provide that speed and improve the customer experience. providing the mobile and social technologies of an intuitive and easy-to-use interface. Within process improvement, we took on mortgages first. Mortgage loans are critically important to our organization. We had to find a way to work through previous limitations in loan generation Ð things like manual hand-offs, paper-based systems, poor visibility into processes and inconsistent commu-nications among relevant parties. In particular, we knew we needed an implementation plan to offer mobile and social technology. The Appian application platform let us incorporate social collaboration in the context of business processes. DeveloPment in the ClouD We benchmarked against the regional and national banks for some idea of how they were addressing the same issues. We knew that we couldn’t compete with the national banks’ re-sources in delivering traditional custom solutions. So we looked to address our key requirements while keeping development and ongoing support affordable. That meant using an application platform for comprehensive, dynamic case management. In loan origination, large volumes of paperwork must be reviewed, approved and maintained across structured automation and unstructured collaborative in-person meetings. We used the application platform to integrate business rules, alerts and escalations. By presenting enterprise data in a simple social interface, established business processes can be sped up and streamlined, improving decision making Ð especially where there may be exceptions to standard policies. We built our mortgage loan origination application using Appian Cloud. That let us get a quick start on application de-velopment even though we were still waiting for on-premise deployment. Cloud architecture meant we could move the pro-duction deployment of the entire cloud application behind the Bank of Tennessee firewall. Our new custom loan origination system combines all pertinent communication, processes and data into one plat-form. Now, loan officers, managers and underwriters can AutomAting Business ProCesses We chose to start with business process management strategy for improvement. We knew that we needed a more mobile and collaborative environment, incorporating some aspects of social media. We chose the Appian application platform to create and deliver the process improvements we needed, along with Next moNth: the Board of the Future Portfolio Rate Shocks

AUTOMATING LOAN PROCESSES IMPROVES CUSTOMER SATISFACTION

James Woods


Community banks, faced with increasingly strict regulation, often find it a challenge to meet profitability goals. More challenging still, the mobile and web services from larger institutions can draw away even the most loyal customers. The Bank of Tennessee is facing these realities head-on by using an application platform software strategy. This approach blends business process management with mobile and social capability, which has yielded a 30 percent improvement in loan processing in terms of speed, data quality and process visibility. Our loan officers now make full use of the mobile environment, processing loans and collaborating with clients from almost anywhere.

Bank of Tennessee, which started in 1974, has grown to more than 250 professionals in 20 locations, and now has $926 million in assets and more than 50 loan officers. Of course, Bank of Tennessee competes with larger regional and national banks; these institutions have larger technology budgets that let them offer better customer responsiveness than many community banks. It is simply a fact that after competitive interest rates, customers are most concerned about closing their loan and funding their loan quickly. We knew that by improving key internal processes we could provide that speed and improve the customer experience.

AUTOMATING BUSINESS PROCESSES
We chose to start with business process management strategy for improvement. We knew that we needed a more mobile and collaborative environment, incorporating some aspects of social media. We chose the Appian application platform to create and deliver the process improvements we needed, along with providing the mobile and social technologies of an intuitive and easy-to-use interface.

Within process improvement, we took on mortgages first. Mortgage loans are critically important to our organization. We had to find a way to work through previous limitations in loan generation - things like manual hand-offs, paper-based systems, poor visibility into processes and inconsistent communications among relevant parties.

In particular, we knew we needed an implementation plan to offer mobile and social technology. The Appian application platform let us incorporate social collaboration in the context of business processes.

DEVELOPMENT IN THE CLOUD
We benchmarked against the regional and national banks for some idea of how they were addressing the same issues. We knew that we couldn’t compete with the national banks’ resources in delivering traditional custom solutions. So we looked to address our key requirements while keeping development and ongoing support affordable.

That meant using an application platform for comprehensive, dynamic case management. In loan origination, large volumes of paperwork must be reviewed, approved and maintained across structured automation and unstructured collaborative inperson meetings. We used the application platform to integrate business rules, alerts and escalations. By presenting enterprise data in a simple social interface, established business processes can be sped up and streamlined, improving decision making - especially where there may be exceptions to standard policies.

We built our mortgage loan origination application using Appian Cloud. That let us get a quick start on application development even though we were still waiting for on-premise deployment. Cloud architecture meant we could move the production deployment of the entire cloud application behind the Bank of Tennessee firewall.

Our new custom loan origination system combines all pertinent communication, processes and data into one platform. Now, loan officers, managers and underwriters can collaborate to process loans in less time and in a much more organized manner. We have automated business rules, for flexibility that has eliminated our reliance on paper forms, faxes, emails and regular mail.

Dynamic case management and structured automation has created better interaction between our loan officers and our customers. Because the application works natively on the iPad, iPhone, Android and BlackBerry, our loan officers can initiate, check on or modify a customer loan requests no matter where they may be.

IMPROVING THE CUSTOMER EXPERIENCE
By implementing this application, Bank of Tennessee has seen loan approvals processed in less time with better accuracy, which translates into a significant improvement in customer experience. Work moves from one step to the next automatically. We’ve also seen better data quality, less repetition of work processes, and greatly reduced training time for new loan officers.

By creating a loan origination application that automates processes, works natively on multiple mobile platforms and emulates already known social media environments, we’ve achieved numerous critical business objectives. We’ve made loan officers more productive while making our customers happier - all of which lets us compete on a more level playing field with much larger competitors.

James Woods is business process management developer at Bank of Tennessee, Kingsport.

Read the full article at http://omagdigital.com/article/AUTOMATING+LOAN+PROCESSES+IMPROVES+CUSTOMER+SATISFACTION/2325002/281314/article.html.

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