Solving Regulatory and Operational Needs for Today AND Tomorrow

June 18, 2014

How Stable Is Your Risk and Finance Process?

04/11/2023 3

Market Travels

• Over the past 3 years, have visited ~83 of the top 250 banks, or 33%.

• Primarily spoken to CFOs, CROs, CCOs, and Controllers

• Topics included our space, primary bank challenges, future initiatives

Category # of banks Visited Banks %

Banks/GSEs >$50b of loans 25 18 72%

Btwn $10b - $50b of loans 50 18 36%

Btwn $2b - $10b of loans 175 47 27%

Top 250 banks 250 83 33%

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1. “Tsunami of Change” --- Today and Future

2. Making Money

3. Integration of Risk / Finance Functions

4. Need for Greater Analytical / Forecasting Capabilities

5. Process Inefficiencies / Long Close Cycles

Top Challenges

5

What are the Common Elements Preventing You from Dealing with These Challenges?

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Data1

2

3

4

Models / Model Execution + Skills

Accounting / Reserving Automation

Reporting

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Challenges and Initiatives

Data1

Challenges Initiatives

1. Chief Data Officer

2. Servicing System Upgrades

3. Loan Risk / Finance Centralized Data – ONE COMMON SOURCE

4. Operational Procedure Changes (SHOULD NOT BE TABOO!!!)

1. Data History

2. Data Quality / Gaps

3. Decentralized Data

4. Data Not in Digital Form

5. Data Governance

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Challenges and Initiatives

Challenges Initiatives

1. Model Estimations (Tier 1)

2. Third Party Model Provider Implementations (Tier 1 and Community)

3. Model Validation Efforts

4. Model Teams

1. Lack of Models (Community Banks)

2. Lack of a Centralized Model Execution Platform (Tier 1 Banks)

3. Model Relevance to Concentrations (Community Bank)

4. Lack of Skilled Personnel with Model Backgrounds

2 Models / Model Execution + Skills

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Challenges and Initiatives

Challenges Initiatives

1. Investment in Automation to Eliminate Spreadsheets

2. Outsourcing

3. Unified Reserving Projects

4. Separation of Operational Accounting vs. Specialty Loan Accounting

1. Manual Loan Accounting

2. Manual Reserving

3. Recons, Recons, Recons

4. Disaggregated Loan Basis

5. No True Sub-ledger

3 Accounting / Reserving Automation

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Challenges and Initiatives

Challenges Initiatives

1. Who Doesn’t Have a Data Warehouse Project Going?

2. The Dreaded Reporting Data Mart Project

1. All Manual / Time-Consuming

2. Level of Granularity Not There

3. No Ability to Drill / Analyze

4. Multiple Perspectives, Unreconciled

5. Too Late

4 Reporting

04/11/2023 11

So What Can’t I Do?

1. Reconcile Risk vs. Finance Perspectives

2. Adequately Explain My Reserves

3. Scale My People

4. Stop the Firedrills

Current Stuff

Future Stuff1. Unprepared for Stress Testing

2. BASEL

3. CECL

4. Acquisitions

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What Type Of Architecture are Banks Contemplating to Address All This?

04/11/2023 13

Sources

Transaction Data

Risk Data

Views

Current (GL and

Regulatory)

Future (Forecast)

Core Banking / Servicing Systems Cash and Operational

Entries

CRE Mortgage Consumer C&I

Op

erat

ion

al

Lif

ecyc

leR

isk

and

Fin

ance

L

ifec

ycle

Data Enrichment

and Management

Common Data Layer for Risk and Finance

Credit / Reserving Automation

Loan Accounting Automation

Loan Level Risk and Finance

Reporting

Models / Model Execution

M&A Accounting

Integrated Risk / Finance

Data1

2

3

4

Models / Model Execution +

Skills

Accounting / Reserving

Automation

Reporting / Disclosures

CECLStress TestingCurrent

Reserving

One Platform architected to address the four primary components can serve as the one solution for all loan risk and finance needs.

Rule #1: If every room has a leak due to a crack in your main water line, don’t patch each room…..FIX THE CRACK!

Point Solution = NO!!! Integrated Solution = YES!!!

Rule #2: Putting in a Data Warehouse simply to enable every group to do their own thing is like building your house on sand

Data SQLs with Offline Spreadsheets = NO!!!

Common Data Layer with Integrated Solutions = YES!!!

Rule #3: Saying that an “Accounting Problem” should be solved for by an “Accounting Firm” is like hiring a home inspector to build you’re new extension

Accounting Experts Only = INCOMPLETE!!!Experts + Integrated Software= YES!!!

Strong Foundation + Smart Integration = More Profitable Inn

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Contact

NameJeff SantCo-Founder and EVPPrimatics Financial8401 Greensboro DriveSuite 300McLean, VA 22102