Baker Hill Prosper 2017 - Effective Exception Tracking to Minimize Risk

1. EFFECTIVE EXCEPTION TRACKING TO MINIMIZE RISKFran Brashares Sabrina Robbins

2. Confidential & Privileged Document Three key takeaways • You know what you don’t have • Everything is in one place • Reduce paper copies

3. Confidential & Privileged Document Queries are great! • Custom queries for major tracking items • Different users work unique queries • Each loan officer has their own query

4. Confidential & Privileged Document Marquette Bank’s view on tracking • Everything is a tracking item • No issues with auditors • Marquette Bank is growing their business by making solid business decisions

5. CHECKLISTS

6. Confidential & Privileged Document Checklists = Consistency • Pre-closing checklists – CIP – Title commitment – Initial insurance • Documentation checklists – Mortgages – Assignment of rents – UCC

7. Confidential & Privileged Document Appraisal checklists • Queries to track appraisals: – Request appraisal – Quoted appraisal – Ordered appraisal – Received appraisal – Reviewed appraisal – Payment for appraisal – Payment for appraisal review fee

8. APPRAISAL TRACKING

9. Confidential & Privileged Document Appraisal monitoring When residence is collateral on commercial loans: • Monitor appraisals • ECOA – Appraisal within 3 days of closing

10. Confidential & Privileged Document Appraisal tracking • Based on LTV o  70%: Every 5 Years o 50% - 60%: Every 7 Years o < 50%: Not Required • Annual Appraisal Requirement o OREO Properties o Troubled Debt Restructure (TDR) and a Watch Credit o Substandard

11. Confidential & Privileged Document Appraisers • Use service providers for appraisers: – Appraisers get a grade/score based on: • Done on time • Price • Errors • Use acronyms for property types using BDFs – Single family – 20 unit apartment – Mixed use building

12. CREDIT DEPARTMENT QUERIES

13. Confidential & Privileged Document Credit risk department queries • Annual reviews • Financial statements & covenants • Risk of loss with site visits • Formula driven loans / asset-based lending

14. Confidential & Privileged Document Receivables tracking • Formula-Driven Lines – Require BBC, AR, AP – Use Query for “When Drawn” requirements or other criteria – Tie to product to show balance on query – Allows mass update of ticklers

15. REPORTING: TO TIE OR NOT TO TIE

16. Confidential & Privileged Document Tie tracking item to product • Allows loan balance to be part of reporting – AR requirements based on balance – Annual reviews based on balance • $250K to $500K at officer level • $500K and up requires analyst input – Exception exposure based on % of portfolio

17. Confidential & Privileged Document Percentage of borrowers with exceptions 27.73% 3.85% 26.10% 0.19% 1.30% 4.18% % of Borrowers with Exceptions Annual Reviews Documentation Financial Statements Insurance Real Estate Taxes Site Visits

18. RISK RATING REVIEWS

19. Confidential & Privileged Document Triggers for risk rating review • Financial tracking exceptions • Annual review exceptions • Covenant violations – Debt Service Coverage – Net Worth – LTV

20. LETTERS

21. Confidential & Privileged Document Letters • Send financial statement letters in April and October – En masse – Or one-offs by customer

22. Q&A

23. ASK US ABOUT HOW TO USE QUERIES TO REDUCE RISK THANK YOU! Presenter Contact Info Fbrashares@emarquettebank.com Sabrina.Robbins@bakerhill.com

Baker Hill Prosper 2017 - Effective Exception Tracking to Minimize Risk

Baker Hill Prosper 2017 - Effective Exception Tracking to Minimize Risk

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