We recently hosted a webinar in which I shared the top 10 loan reports that (I think!) should be reviewed on a regular basis. For my own curiosity’s sake, I polled our audience of over 200 attendees to ask how many reports they look at individually on a monthly basis.
I wasn’t surprised to have a decent spread across the board here (apart from “1 perfect report”), but I’ll say I was a tad surprised that 2-4 reports per month had the most number of respondents. I thought the number would be higher! Now, of course, there could exist a caveat that one person’s single report could contain as much information as another’s combination of 10 reports. So, 2-4 reports could be perfectly comprehensive of what someone would need. Regardless, here is my list. Maybe there’s something here you can add to your own report list!
Don’t be turned off by the simplicity of a basic concentrations report! There’s plenty of insight to glean from gaining a bird’s-eye view of your portfolio by looking at balances by type code, loan category, credit score, etc.
Delinquency figures are always important to view. Balances, ratios, and the impact of your delinquent loans relative to non-delinquent loans are what I like to look at here.
In a perfect world, we would have no charge-off loans (...or perhaps no loans at all? Wow, I think I just realized that even charge-off loans are a necessary opposition in life. Cue sappy music and characters Joy and Sadness from Inside Out sharing an embrace.). But alas, a perfect world we live not in. Therefore, ensure that your charge-off balances are correct each month. There are implications to Timbuctu and back (CECL anyone?).
#7 Trends and New Production
In part an extension from number ten, we look at concentrations and statistical figures over time. Tracking new loans and their balances month over month is a great way to see which products are striking a chord with your target audience.
We use the weighted-average interest rate and subtract out a one-year charge-off ratio to calculate a net yield percentage (other parameters like operating expenses and fees can be factored in from a percentage basis). Do this by loan type to identify the most profitable products, or do so by the original credit score to justify your institution’s risk-based pricing model.
#5 Credit Score Migration
There’s too much to say here...must...be...succinct. It is incredibly useful to view credit score migration between credit tiers comparing original scores to updated scores. A second perspective is to view migration “severity” (positive or negative) by comparing original credit score values to the number of points that a loan has migrated. For example, how many loans in your portfolio that originated with a score of 720+ have increased by at least 25 points? Or, how many of the same loans have decreased by 75 points or more? If you pull regular credit score updates on your borrowers, migration analysis becomes more meaningful.
#4 Line of Credit Monitoring
This analysis piggybacks on number five. Updated credit scores on your loans are pivotal to making this work. Take your credit card portfolio, for example, and break it into buckets by utilization percentage. Do you have cards with medium to high utilization AND spiraling credit scores? If so, there’s an argument to potentially freeze these lines. On the flip side, you may consider increasing lines where utilization is higher and credit scores are rising.
#3 Indirect Analysis
Not all institutions have an indirect auto portfolio, but it is heavily regulated for those who do. This should consist of several metrics, including concentrations, delinquencies, and statistics by credit score, LTV, and auto dealer to help you monitor the performance of these loans and ongoing business relationships.
#2 Watch Lists
I was very tempted to make this number one! But with so many great report types, I couldn’t justify a watch list being the number one report to look at. However, these are very useful and actionable. Create watch lists based on any criteria you deem worthy, and then track that information each month and over time. Your collections team should be able to use these lists to make contact with borrowers in an effort to get delinquent loans current.
#1 Secured Loans
Your institution likely invests a great deal of money into collateralized loans. Are you able to calculate updated collateral values each month to show an accurate LTV representation? Where does your portfolio have the most exposure? Monitoring these loans and their associated collateral pieces may be one of the most important measures you can take to protect your portfolio and institution.
There you have it! We can teach you best practices on creating these types of reports within Visible Equity if you aren’t already analyzing these data. Which reports am I missing that you cannot live without?
To watch the Top 10 Loan Reports You Can’t Live Without webinar, existing Visible Equity clients can login and access the resources in our Help section. If you are not an existing client but are interested in watching, click here to request resource access.