Community banks were founded with the mission to support the communities they serve. Like never before, the Paycheck Protection Program afforded community banks an opportunity to demonstrate their unwavering dedication to small businesses and their communities. Do your board of directors, shareholders and community realize the extent of your efforts?
The need for timely data, deliberately assigned data points and data analytics has never been so great. The key to any business’ effective utilization of data is how they store, handle, and present the information to key decision-makers, managers, and external parties. To achieve high levels of utilization within your organization:
- Begin with visualizing your customers and products so that the data can be architected for efficient presentation of the individual and appropriate groupings or segments.
- Next, the data should be stored in ways that lead to a clear presentation, reflective of proper database techniques and relevant coding.
- Finally, the delivery of the data should be performed in an easy-to-understand and flexible manner so that the same group of data points can be used by multiple stakeholders, departments, and for multiple purposes.
For financial institutions, the PPP program presents many significant data hurdles that generally apply to the storing and coding of data and as a result, many institutions have struggled in obtaining meaningful insights about the specific portfolio and participating customers in PPP Round 1. There simply wasn’t enough time to put data best practices in place first when hundreds (or thousands) of loan applications had to be processed swiftly and millions of dollars rolled onto the balance sheet in a matter of weeks.
As the program begins to make its second appearance, the KlariVis team wanted to share best practices for data management that paid dividends to those institutions that adopted them the first time around.
Maintain the proper data until loans can be boarded
If you are an institution that will not be able to board loans on day one of funding, the added task of planning and implementing the right temporary storage and onboarding process is critical for success. The temporary storage process should be as minimal as possible while still providing an efficient method of onboarding when time permits. Make sure all the required coding is included in the temporary records so that it is available when needed. Determine what data is critical for reporting, capture it and ensure all constituents are apprised of the abbreviated process.
Use your core system to remove manual work
Use your system’s database properties to segment your data. While the core’s database structure can sometimes be messy, there are primary codes that your core utilizes in reporting. Use these primary codes to their fullest extent by identifying products with unique or different characteristics and create codes that efficiently segment those products.
For the PPP program, the easiest way to present data on your PPP program’s success is to add a new integration code. Why would you want to scour through your Commercial loan records in the loan application to separate the information after the fact? Create the new codes on the front-end, so that your query system and cold storage reports segment this unique product without any additional manual work, ever.
This same strategy should be considered whenever a new product is implemented in order to quickly and efficiently monitor growth and risk associated with the new offering. Having the ability to segment the loan portfolio in various ways offers transparency not available without proper coding.
Use your GL system to remove manual work
In that same vein, use your GL system to separate out this information. Finance teams will need to forecast balance sheet movement in 2021 and 2022 and report on variances. Having a unique GL code will allow teams to quickly identify the impact of the PPP program on balance sheet variances during reporting over the next 2-3 years for both loans and deposits. Of course, these variances don’t exist just on the balance sheet; the yield impact of the low-rate loans and the loan fees should be tracked and measured as well.
Use transaction codes for identifying important program details
Loan transactions could easily reach into the thousands per day at many institutions. With that volume, using your core’s loan application parameters to help identify certain transactions (fees) or concessions will provide meaningful insights about your customer. As with all new codes, this can be a burden on the operations and processing teams and institutions will be tasked with staff education to alleviate the burden. However, the long-term value in quickly segmenting and measuring these unique transactions will easily offset the additional time spent on processing and education.
Educate Loan Operations personnel to make sure renewals, extensions and loan modifications are input accurately in the core. This ensures renewals are counted accurately and extensions are identified as concessions to the normal contract repayment terms. Institutions which want to report on these factors will need accurate data input around these transactions.
Think about deposit tracking
At the beginning of the Pandemic, most CFOs that we talked to, immediately went out and shored up liquidity on their balance sheet. During the Pandemic and still today, many of these same CFOs have been sitting on significant amounts of excess cash, negatively impacting their NIM, without any true ability to predict when or if these excess cash balances will be used. And, unfortunately for a number of reasons, most institutions do not have the tools to quickly understand their deposit ebbs and flows in a normal cycle at the most granular customer level, so it is difficult to glean insights as to whether the excess cash balances are driven by PPP, stimulus, extra unemployment benefits, or normal customer behavior.
Consider establishing a separate deposit account (with a separate GL account and integration type code specifically for PPP deposits) for each PPP Loan customer so you can easily track the initial funding into your balance sheet. This will also allow you to identify if the funds are wired out to another institution and give you the insights needed to cross-sell this relationship. As with loans, create new coding on the front end for these specific deposit accounts, so your query system and cold storage reports segment the unique product without any additional manual work. At KlariVis, we also recommend our clients add NAICS codes to their deposit accounts to allow for proper industry segmentation in reporting.
Bringing it all together
As a financial institution, you have an abundance of specific data points about your customers, but having this massive volume of data does not automatically correlate to having valuable insights. The value is found in being able to easily turn this cache of data into actionable insights that answer business questions, support sales and marketing, manage risk, and deliver value to your customers, in a timely and efficient manner. Recognize and treat data as an enterprise-wide asset by embedding data best practices into all business processes across your entire organization.
