Case Studies

CASE STUDY

CU Manages Growing Loan Portfolio With New 2020 Platform

When it comes to analytics access and customizable data reporting, Twenty Twenty’s new loan portfolio management platform was the best option for Memphis City Employees Credit Union, says Nathan Stevens, CPA. The $275 million asset credit union has six branches in the Memphis area, approximately 32,000 members, and gross loans of about $125 million — all of which are consumer loans, including residential real estate and credit card loans.

Currently, the credit union is working to increase its 54% loan-to-share ratio, and the platform helps in that effort, says Stevens. The online tool also provides the framework the credit union needs for profitability analysis, peer-to-peer comparisons, credit risk management, implementation of the Financial Accounting Standards Board’s current expected credit loss (CECL) standard, and more.

“The platform continues to evolve and improve as new functionality is added,” says Stevens. “The new tool allows better access to the analytics 2020 provides. Furthermore, as we move toward CECL implementation, we can use the tools previously developed by 2020 along with the modeling scenarios for our CECL modeling.”

Specifically, the credit union’s CECL model focuses on probability of default methodology, althoughit’s also running static pool for comparison, as a basis for the historical components of its methodology. “I like the additional features that have been added, where we can shock our portfolio for unemployment and changes in collateral values, plus throw in interest-rate shocks,” says Stevens. “And 2020 has been very responsive to any suggestions I’ve had, and has implemented the good ones.”

Specifically, the credit union’s CECL model focuses on probability of default methodology, althoughit’s also running static pool for comparison, as a basis for the historical components of its methodology. “I like the additional features that have been added, where we can shock our portfolio for unemployment and changes in collateral values, plus throw in interest-rate shocks,” says Stevens. “And 2020 has been very responsive to any suggestions I’ve had, and has implemented the good ones.”

The new platform allows credit unions to extract data to plain text CSV and Excel formats, and builds on Twenty Twenty Analytics’ credit risk model to provide credit unions with interactive visualizations so they can:

  • Evaluate credit risk and concentrations of risk
  • Analyze loan type and risk ratings’ contributions to the bottom line
  • Drill down within visualizations based on parameters relevant to the credit union
  • View and download individual loans or pools of loans

“Members benefit because credit unions using this data intelligence operate efficient, balanced loan portfolios. For example, pricing loans commensurate with their credit risk across the loan type and credit risk spectrum means that each member is paying only his or her fair share.”

Dan PriceManaging Director, 2O2O Analytics

“There are a lot of options out there to obtain data analytics, but they don’t always provide great support.
I’ve found that when we’ve needed something, or wanted to run an additional scenario or add a new feature to the platform, 2O2O has been very responsive and willing to work with us to meet our needs. The responsive and dynamic working relationship with 2O2O’s personnel, along with the ability of the product to be customized and updated as business needs change, is what makes 2O2O the right fit for us.”

Nathan Stevens, CPAMemphis City Employees Credit Union

Beyond the new platform, 2O2O Analytics has worked with Memphis City Employees recently to provide these analytics enhancements:

Added a probability of default calculation and static pool analysis model.

Since the credit union had been working with 2O2O since 2012, portfolio data since then provided the basis of the static pool development.

Added new loan classes, and disaggregated the portfolio by the new classes, FICO bands, loan-to-value ranges, and more.

The credit union now can aggregate these classifications, and match up with call reporting and GAAP-
based financial reporting disclosures. This creates efficiencies for the credit union because it no longer must move data from one format to another and massage it to fit the different reporting requirements.

Assisted with an independent credit risk valuation of loans acquired through a merger.

The credit union will include this information in its analysis going forward, which will help in future discount adjustments for the purchase credit-impaired loans.

Used profitability analysis to see what products the credit union needs to tweak from a pricing standpoint.

2O2O also identified where it can afford to take on more risk to increase return and loan volume.

CASE STUDY

Web-Based Platform Gains Traction at Chartway Federal Credit Union

In 2013, Chartway Federal Credit Union hired 2O2O Analytics to provide multidimensional loan portfolio analytics. The $2.2 billion asset credit union, headquartered in Virginia Beach, Virginia, considered several partners, and chose 2O2O because the company offered a wealth of personalized assistance and data.

The new platform gives credit unions peer analytics functionality — the ability to see how the organization stacks up against others in their peer group. Credit unions can create peer
groups based on NCUA region and/or asset size, and then dynamically set risk-based price tiers to match the credit union’s underwriting parameters. From there, the credit union can evaluate factors such as:

  • Portfolio composition by loan type and FICO tier
  • Concentration of risk as a percentage of net worth by loan type and FICO tier
  • Interest rates by loan type, risk-based pricing tier, and origination date, among other factors

2020 Analytics is constantly adapting its services to meet the needs of an evolving industry, both from a regulatory and an operating standpoint. Services also include:

  • Consumer loan portfolio risk analysis and collateral valuation: Multidimensional solutions that provide a “credit quality grade” at an individual loan level, based on the current characteristics of each borrower and the borrower’s
    collateral. This risk-based approach is widely accepted by NCUA in reviews of credit union loan portfolios.
  • Proactive credit card credit line management solutions: Credit unions can evaluate their credit card loan portfolios to identify members who may be candidates
    for proactive credit line increases. This is a full-service, customizable solution including FICO scores, debt-to-income, and total income estimates from TransUnion.

“The analytics they provide not only help with regulatory compliance, but also, more importantly, provide us with extremely useful data, assisting us in ensuring and increasing our knowledge of the loan portfolio demographics,
performance, and other
factors.”

Rick LiebermanVice President, Consumer Lending, Chartway Federal Credit Union

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