Loan Boot Camp
Learning Objectives:
This program, presented by industry expert Tom Farin, is aimed at ALCO and loan pricing teams. The webinar focus is assisting in developing effective loan product and pricing strategies. The goal is to lead the ALCO and pricing team to a concrete plan of action
Program Content:
- What you need to know to effectively price a loan – The first session examines the input needed to model a loan and evaluate the effectiveness of current and proposed pricing in meeting profitability objectives. Loans are bundles of cash flows. A portion of this session is spent on factors affecting loan principal cash flows including maturity, amortization, and prepayment. Factors affecting interest cash flows are examined including origination rate, repricing rate, repricing frequency, and caps. Rate adjustments for interest rate risk, credit risk, and servicing cost are discussed as well as capital allocation models.
- Loan pricing models – This session examines four different conceptual models for evaluating the effectiveness of a loans price. The first two focus on market measures – evaluating profitability in relation to investment alternatives, and determining the market value of a loan after origination. The remaining two models use Funds Transfer Pricing techniques to examine the profitability of a loan in the context of the institution’s balance sheet, including risk adjusted return on capital and net income produced by the loan. A decision tree provides a framework for the use of these four tools in decision making.
- Pricing commodity loans – This session applies techniques introduced in the first two sessions to a series of commodity loan examples. This focus is primarily on retail loans, loans that typically appear on a financial institution’s rate sheet. A significant portion of this session is spent examining anomalies introduced in the loan pricing process caused by moving from collateral based pricing to risk based pricing. A number of “outside the box” ideas are introduced and discussed.
- Pricing deals and relationships – This session focuses on loans that are typically priced on a deal by deal basis. Most commercial loans fall into this category. A number of individual types of commercial loans are examined – commercial real estate, commercial equipment, and operating lines. The concept of relationship pricing is introduced. A portion of this session is spent on how to evaluate the contribution brought to the table by a deposit relationship. Then multiple loans are combined with deposits to look at making pricing decisions based on an entire customer relationship. Issues with relationship pricing are brought into the picture including dealing with old loans and deposits, picking an appropriate horizon for evaluating profitability, and dealing with the difference between contractual and actual behavior.
What are the financial institution takeaways from Loan Boot Camp?
- A solid understanding of issues in selecting and implementing a loan pricing model.
- An understanding of tradeoffs between the different conceptual models available for making loan pricing decisions.
- A set of “outside the box” product ideas to be implemented at the institution.
- An understanding of some of the issues brought to the table in attempting to make relationship pricing decisions.
Program Prerequisites: CEO, CFO, controller, lenders, retail officers, and ALCO teams
Program Level: Intermediate
Advanced Preparation: Please read the designated articles before you attend the first session.
Cost, Dates & Registration Information:
Please see www.farin.com for times and dates available.
This webinar consists of four 100 minutes sessions offered through WebEx. Since the
sessions are delivered using state-of-the-art distance education tools, you incur no travel costs!
People can attend without ever leaving the office!
This 4-course session costs $795.00
Attendees will also have access to a resource page containing recordings of all sessions and reading material designed to supplement materials presented in the course.
Upcoming Dates:
Instructional Method of Delivery: Group Internet Based
Presented with the help of Webex. Founded in 1996, WebEx has grown into the worldwide leader in online meeting applications, with 64% market share. More than 3.5 million people use WebEx every month to communicate and collaborate online. They continue to develop technological advances without sacrificing the reliability and security that enables on-demand collaboration. With over 25,000 customers, they are the proven technology leader, with first-class global support.
CPE Credit
Farin is able to offer 8 CPE credits per internet connection/paid registration. You must sit through the classes and be an active participant to obtain these credits. They are based on 1 credit per 50 minute increment.
Refunds
Refunds will be issued in the form of a credit to be applied to a future FARIN educational event.
For more information regarding refunds, complaints, and program cancellation policies, or any other matters, please contact Jackie Myers at 800.236.3724 or registration@farin.com.
Farin & Associates is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, 37219-2417. Web Site: www.nasba.org