Benefits of Our Outsourced Solution

As a PRA client you automatically gain access to your own secure Loan Portfolio Analytics Platform running on the Amazon cloud servers. Following the implementation stage, PRA will deliver each month a package of loan management reports enabling you to:

Benefit to You

With our service, you will obtain monthly side-by-side comparison calculations of CECL and the methodology you currently use to calculate the ALL. By providing you with CECL calculations using 3 different methods, you can determine over time what method makes the most sense for your institution. This is a form of statistical Bayesian inference that allows you to trend toward the method that shows to be the most predictive for your situation.

Track and Select the Best CECL Method for YOUR Institution

PRA delivers results under your existing methodology and three of the most common methods for CECL: Vintage, Probability of Default / Severity of Loss, and Migration Analysis[1].

Over time you migrate towards the best one suited for your loan portfolio characteristics and loan management philosophy. Some vendors state that they don’t need any institution specific data to calculate the CECL compliant ALL because they have national data available to use. We believe that relying solely on national data will not result in you having a GAAP complaint CECL calculation. Different types of loans and different areas of the country repay and react to changes in economic conditions and changes in the real estate market differently. There are often differences in the lending guidelines, experience and expertise of loan officers, and other factors that we believe necessitates using data on your specific loan portfolio to calculate CECL even subject to such data being statistically predictive. With the ARM partnership, we will be able to benchmark the CECL accrual by considering national data.

Review Historical Change-off Data on the Websites of Regulators: the Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC) and you will see vastly different charge-off data by loan types or in different areas of the country during the “Savings and Loan Crisis” of the late 1980’s and early 1990’s and the most recent “Economic Crisis” that occurred between 2007 and 2010.

PRA Standard Loan Management Reports

Obtain data and various graphs that allow you to evaluate and manage risk in your loan portfolio since PRA segments your loan portfolio by:

  • Collateral type using at least 46 different collateral types – PRA designed these reports to measure the weighted average risk rating / FICO credit score, weighted average yields, and average balances at a granular collateral type level.Many CECL vendors only use the loan types used in standard call reports submitted to the FDIC or NCUA or only a limited number of loan types may not be properly segmenting your loan portfolio. This broad segmentation is unacceptable in our view and we expect such path will cause your CECL calculations to come under criticism by your regulators or audit firm. For example, the loan type, “Other nonfarm nonresidential real estate” is a separate line item in FDIC bank call report schedule RC-C. This category could include a bar, a hotel, a commercial building with multiple tenants, a commercial building with one tenant, or a wide assortment of other property types. Generally, would you characterize a loan secured by a bar as having the same level of risk as a loan on a commercial building with multiple tenants? Probably not.
  • Loan-to-Value ratio (“LTV”) – PRA separated your loan portfolio into various ranges of the LTV.
  • Ability of the Borrower – PRA designed this report to evaluate the borrowers’ ability to pay the loan. For commercial loans we separate the loans into ranges of the debt service coverage ratio, while for consumer loans we use ranges to separate the loans by the debt to income ratio.
  • Risk Ratings / FICO Credit Scores – PRA segmented the commercial loans by your risk ratings, while for consumer loans we separate the loans by FICO credit scores.
  • Loan Concentration – The commercial, consumer, and agricultural real estate loans are seen by the city and state by the location of the collateral, so you can consider whether the collateral is found inside or outside the institution’s normal trade territory.
  • Commercial Construction Loans for single family residential loans separated by builder as well as presold and spec homes.
  • Delinquency Aging category, the amount of loans acquired by participation, and the amount of loans where the collateral is in a state where you don’t have branch locations.

Benefits to You

You will have the information you need to evaluate trends and be able to evaluate the level of inherent risk and profitability of your loan portfolio. In our experience there are numerous benefits to using a larger number of collateral types, including:

  • it allows you to isolate higher levels of charge-offs to a smaller balance of loans which preserves capital,
  • it gives you the information needed to maintain adequate diversity in your portfolio, and
  • it allows you to better price loans based on risk.

The Loan Porfolio Analytics You’ve Been Waiting For is Here

More Metrics, More Methods, More Power.

Benefit to You

They say what you can measure you can manage. That’s certainly true with loan officers. You will be able to evaluate whether an individual loan officer is obtaining a sufficient level of return on his or her portfolio, the level of risk they are exposing the institution to, and whether they are adequately growing their loan portfolio all at the click of a button.

PRA Loan Officer Performance Report

PRA is the only CECL vendor providing you with the analytics to provide you insights into the performance of your loan officers. You will receive the number and dollar amount of loans managed, the dollar amount and number of new loans generated each month and year-to-date, the level of fee income generated by month and year-to-date, the weighted average risk rating and yields for the loan portfolios managed by each individual officer. You also will receive a report on each loan officer that shows the number and unpaid balance of loans, loans by collateral type as well as the weighted average risk rating and yield for each collateral type.

[1] We purposefully omitted in our base platform the other acceptable CECL method – Discounted Cash Flows (“DCF”) method-. In our opinion, our target client, institutions with between $50 million and $3 billion in total assets don’t have the necessary data nor the means to obtain the required data for this method. For a calculation of DCF to be credible, an institution would likely need cash flow information for loans for at least 7 to 10 years.


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