Standard Reports Available in ODP Manager

Strunk’s ODP Manager hosted software includes a standard suite of reports that summarize the information from the most recent extract file imported. These reports can be used by management and by daily users to analyze ODP Program performance and assist with program compliance.

The Summary Report includes totals for overdrawn and not overdrawn accounts, number of accounts by ODP Status Codes, and recommended totals for overdrawn accounts reserve by branch and product. A trend graph displays the accounts with limit, the used commitment, and aggregate privilege over time. NSF and OD Fees and Refunds are also displayed in bar charts. Additional overdrawn account information and reserve information is summarized in the Overdraft Detail Report and the Overdraft Aging Report.

The Overdraft Aging and New Accounts Reports show individual accounts that should be reviewed daily to determine the assignment and removal of overdraft limits. The Fresh Start Tracking Report allows users to monitor accounts with Fresh Start Repayment Plans. The Letters Printed YTD report allows your institution to track the total number of letters and which letter templates are generated by month and year.

The Status Tracking and Heavy OD Users Reports show accounts that do not currently have overdraft limits assigned. These accounts should be reviewed at least quarterly to determine if the accounts now meet the qualifying criteria to be assigned an OD Limit. Consistent review of these accounts will help maintain a high percentage of eligible accounts in the Overdraft Privilege Program.

The Utilization Analysis, Opt-In Impact Analysis, and LOC/Sweep Analysis reports focus on performance analysis.  These reports include a Branch Summary and Product Summary table. Monitoring the percent of accounts with overdraft limits and the percent of accounts opted in for Regulation E is very important to maintaining or improving ODP program performance. The LOC/Sweep Analysis Report allows comparison of the number of accounts with ODP to the number of accounts with other options to cover overdrafts, such as lines of credit or sweeps from other deposit accounts.

If you have any questions about reports available in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Highlight on the American Bankers Association’s Poll Regarding Overdrafts

Legislators are continuing to push for changes in overdraft fees, which they describe as unnecessary and even predatory. They have dubbed these fees as “junk fees.” We know that overdraft fees are not “junk fees,” but rather a convenience for informed consumers. The American Bankers Association (ABA) has pushed back, stating, ‘The administration’s latest attempt to suggest that highly regulated bank fees already disclosed under federal law are ‘junk’-or even illegal- continues to mislead the American people’. According to a survey conducted by Morning Consult from March 8-10, 2024, for the ABA, most Americans have a positive view of the current banking and financial services available to them. The survey specifically revealed that a strong majority of Americans appreciate the value and convenience of bank overdraft programs.

Consumers are more knowledgeable than ever about their banking products. More than two-thirds of consumers (67%) find their bank’s overdraft protection valuable, compared to only 16% who do not per the survey. 8 in 10 consumers who have paid an overdraft fee in the past year were glad their bank covered their overdraft payment, rather than returning or declining payment. Consumers understand the immediate consequences of a returned payment, such as the embarrassment of not being able to pay at a restaurant or other places. They also understand the long-term repercussions, such as late fees, repossessions, tax penalties, or even evictions. If overdrafts are no longer allowed, banks will be able to make up for lost revenue through other means, but consumers may not be able to recover from a financial mistake. According to the Morning Consult survey, 64% of consumers find it reasonable for banks to charge fees for overdrafts, while only 23% don’t think it’s justified. Close to 75% of the participants consider overdraft fees reasonable when it comes to larger payments like mortgages or rent payments are covered and paid on time or protected from late fees or penalties. Overdraft protection provides seamless financial support when needed, making it important to preserve.

Policymakers continue to believe that consumers don’t understand how overdraft protection works or that they don’t have access to their account information. According to the survey, almost 90% of consumers find it easy to check their account balance to avoid overdrawing their accounts. Additionally, two-thirds of consumers are aware that they can opt-out of receiving overdraft protection at any time after they have accepted the service. This is in contrast to only 7% who mistakenly believe that customers are obliged to stay in the program after accepting the service. Approximately 80% of consumers who are currently utilizing overdraft protection have never given serious thought to discontinuing or opting out of the service. Almost 70% of them have expressed their preference that their bank offers overdraft protection as an option to their customers, whether or not a fee is involved, as opposed to only 13% who would rather their bank not offer overdraft protection at all. The ABA survey continues to show how policymakers seem to be out of touch with their constituents and what their true needs and wants are. Policymakers should ensure customers are given a full and fair opportunity to choose overdraft protection, and financial institutions should use it as an opportunity to help customers make better financial decisions in the future. Overdraft protection provides peace of mind, allowing consumers to make sound financial decisions without worrying about the consequences of overdrawing their accounts.

Strunk at ICBA LIVE 2024

This year’s ICBA LIVE, hosted by the Independent Community Bankers Association, was held in sunny Orlando, Florida from March 14-17 at the Orlando World Center Marriott. In addition to various roundtable discussions, ThinkTECH presentations, and Learning Labs attendees enjoyed visiting with vendors in the Marketplace.

Strunk was excited to meet with so many bankers, discussing a variety of topics important to them today. Many banks are taking advantage of Strunk’s Pricing Manager solution, a full-featured loan and deposit pricing application. Banks are able to deploy a tool to all lenders to ensure they are armed to price loans profitably and consistently based on each bank’s target profitability objectives. It also provides the ability to understand the details of relationship profitability so that better pricing decisions can be made. Pricing Manager is affordable, easy to implement and use, and it will increase the bank’s net interest income by 25-50 basis points.

Many banks are understandably concerned about lost fee income, so another hot topic of conversation was Secure Checking. The program will allow banks to implement a monthly maintenance fee on each checking account and not worry about consumer backlash. It’s a tried and true program that works every time – at literally hundreds and hundreds of FIs across the country. Through the program, fee income increases at least $50 per account, per year. These consumer demanded features are supported by a company that has been in this business for 50 years and Strunk has been working with them for a decade.

Strunk continues to provide value-added SaaS solutions that help community banks increase profitability, while controlling operating expense. In addition to these offerings, Strunk discussed their overdraft service and best-in-class governance, risk and compliance solution, Risk Manager.

For more information on Pricing Manager, Secure Checking or Strunk’s other solutions, visit  https://strunkaccess.com/ or contact Strunk at info@strunkaccess.com.

User Administration and User Roles in ODP Manager

Part of effective use of the ODP Manager software is regularly reviewing, maintaining, and updating user records and access.  ODP Manager users can be assigned four different roles for access to different features in the hosted software.

Users who will need to access all software features but will not need to make administrative software setup changes should be assigned ODP User rights. Users with ODP Admin rights are able to perform all the functions performed by ODP Users, but they are also able to add and change users, revert imported files, and make or request software setup updates. Users with ODP Report User rights can access ODP Manager Reports and Account Inquiry. They are not able to generate letters or import the extract file into ODP Manager daily.

For institutions that would like to separate the User Administration function from the rest of the ODP Admin functions, users can be assigned User Admin rights if they need to add or change ODP Manager users. Users that need to be able to revert imported files or make and request other software setup changes should be assigned ODP Manager rights.

ODP Admins or User Admins can export a list of all users as a PDF or Excel file for reporting purposes. In addition to basic User information, it also includes each user’s assigned role and last login. ODP Admins and User Admins are also able to view and export logs of user changes.

If users no longer need access to ODP Manager, a user’s rights can be updated by an ODP Admin or User Admin to remove the assigned ODP Admin, ODP Manager, ODP User, ODP Report User, or User Admin role. If the user is no longer employed by the financial institution, updating the user’s status to Former Employee will remove the individual’s access without having to remove the user’s access rights.

If you have any questions about User Administration or User Roles in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Is it Time to Rethink Free Checking?

The banking industry has lost nearly $20B in service charge income over the past 15 years and it has affected banks across the country regardless of size. Free Checking was offered by most every bank between 1990 and 2020 but now fewer banks give away anything for free. Why should they? What other service provider gives anything away for free?

In the early 1990s banks offered overdraft payment programs that provided a much needed customer service while increasing the bottom line at the same time. When checks were the primary source of payment no one wanted their overdrawn check sent back to the merchant. Free Checking flourished and banks still made a profit.

Then came debit cards. The regulators jumped (for a good reason) and protected consumers from overdraft fees unless the consumer consented to the debit card caused overdraft. Some people opted in and others just had their debit card denied at the point of sale to avoid overdrawing their account.

Now the CFPB wants to curtail what a bank can charge for an overdraft…equal to what it costs a bank to process the item. President Biden refers to these as “junk fees” and wants the regulators to significantly reduce them. So, why would a bank continue to offer Free Checking now as new government proposed regulations will curtail service charge income even more? Banking has changed and we need to change our product offerings as well.

Strunk’s Secure Checking program will generate significant amounts of service charge income while keeping free checking for those customers who want it. Since 2011, over 1,200 banks have offered the benefits added checking account to their offerings. You can expect income to go up by at least $50 per checking account per year. The program is easy to implement and easy to manage.

Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn more about fee income programs offered by Strunk. You will be glad you did.

 

Over Pricing Your Largest Most Profitable Customers

One of the biggest mistakes many FIs make when setting pricing strategy is to establish a ‘base lending rate’. Often this ‘base rate’ is applied regardless of the type, size, or term of the loan, and worse, is often set to Prime. For example, when considering a five-year fixed rate on a commercial real estate loan, from time to time we come across a client or prospect that applies their ‘base rate’ of Prime which today would be 8.5%. The problem with that approach is we are ignoring a fundamental principle of finance – we’re ignoring interest rate risk and the term structure of rates.

The Prime lending rate is an overnight rate – technically Prime can change any day. Obviously a 5-year rate is a much longer-term rate. Comparing Prime to a five-year fixed rate is really comparing apples and oranges. Let’s dig into this a little further. Today, Prime is 8.5% and a five-year fixed rate advance from the FHLB is 4.25% – a difference of 4.25%. In February of 2022 Prime was 3.25% and a five-year FHLB advance was 2.25% – a difference of only 1.00%. In February of 2020 Prime was 4.75% and a five-year FHLB advance was 1.50% – a difference of 3.25%. And in February of 2018 Prime was 4.50% and a five-year FHLB advance was 3.00% – a difference of only 1.50%. As you can see, the relationship between five-year rates and Prime is highly inconsistent. Over the past 6 years Prime has been as much as 4.25% and as little as 1.00% above a five-year rate. So, we have to ask ourselves, why would I tie the rate on a five-year fixed rate loan to Prime?

The other challenge this practice can lead to in the current environment is over-pricing some of our largest, most profitable customers or prospects – which could lead to losing existing relationships or get in the way of winning new relationships. We model loan scenarios for FIs all across the country many times each day so we see a large number of loan opportunities and how they are being priced in the market. Particularly on larger deals – say $1,500,000 and above – we often see rates in the mid to low 7% range. However, we also see rates as high as 8.5% on the exact same scenarios – particularly when the FI currently follows the ‘base lending rate’ philosophy. One of the ways Pricing Manager can help your FI earn more net interest income is by helping win more larger, profitable deals by pricing more competitively.

If you would like to learn more about Pricing Manager, please contact Strunk at info@strunkaccess.com or 800-728-3116.

Strunk Response to January 2024 CFPB Proposed Changes to Overdraft Fees

In mid-January of this year, the Consumer Financial Protection Bureau (CFPB) proposed a new rule to restrict overdraft fees charged by very large financial institutions (Those with assets over $10B). View the PDF of the Proposed Rule with Request for Comment here:

https://files.consumerfinance.gov/f/documents/cfpb_overdraft-credit-very-large-financial-institutions_proposed-rule_2024-01.pdf

When the Board of Governors of the Federal Reserve System first adopted Regulation Z in 1969, it excepted from Regulation Z’s definition of finance charge any charges for honoring checks that overdraw a checking account unless the payment of the check and imposition of the fee were previously agreed upon in writing. The Board subsequently made “minor editorial changes” to this exception, (e.g., to reflect “items that are similar to checks), such as negotiable orders of withdrawal. Under the new proposed rule, Regulation Z would generally apply to overdraft credit provided by very large institutions unless it is provided at or below costs and losses as a courtesy to consumers.

The proposed rule would accomplish this by updating two regulatory exceptions from the statutory definition of finance charge. First, the proposal would update an exception that currently provides that a charge for overdraft is not a finance charge if the financial institution has not previously agreed in writing to pay items that overdraw an account so that the exception would not apply to “above breakeven overdraft credit”. Second, the proposal would update a related exception that provides that a charge imposed in connection with an overdraft credit feature (e.g., a charge for each item that results in an overdraft) is not a finance charge if the charge does not exceed the charge for a similar transaction account without a credit feature (e.g., the charge for returning each item). The CFPB has provided two options to very large financial institutions to determine whether an overdraft charge is considered above breakeven overdraft credit. A financial institution may calculate its own “breakeven standard,” charging a fee required to cover losses and direct costs related to the provision of courtesy overdrafts; or a financial institution may use a “benchmark fee” of either $3, $6, $7, or $14, determined by the CFPB by analyzing charge-off losses and cost data.

The proposed rule represents a pivotal development in consumer finance regulation and would have a negative impact on the financial industry and consumers. Overdraft protection has been beneficial to millions of consumers since its inception. Research supports the fact that consumers who use overdraft protection, especially those who use it frequently, value the service. Even the Consumer Financial Protection Bureau’s (CFPB) research supports this fact. Furthermore, the CFPB has access to consumer complaint data in its own database, showing that complaints regarding overdraft protection and fees are extremely low. Strunk believes that a regulatory agency essentially setting limits on fees that can be charged by a financial institution sets a very dangerous precedent.

At present, the proposal pertains to financial institutions under the CFPB’s jurisdiction – those with assets over $10 billion. It is unclear what the impact will be on institutions with assets of $10B and below. However, if this proposal is enacted, the possibility exists that it will be adopted by other regulatory bodies. Also, regardless of additional regulatory action, all institutions may feel “competitive pressure” to follow the standard set by the very large financial institutions.

For now, no changes to existing overdraft programs should be made prior to knowing exactly how this process will play out. When discussing Overdraft Privilege and the current regulatory landscape, Strunk always emphasizes two things:

  1. If you charge a sustained or continuous overdraft fee today, discontinue this practice immediately. Strunk has never endorsed that practice, and it is a flash point for regulators.
  2.  If you charge re-presentment OD fees, discontinue this practice as well and investigate the 24-month look-back restitution to consumers. This is an area where regulators have come out with clear guidance in the last 18 months and Strunk has previously issued recommendations to clients.

If your organization has questions regarding this matter or would like to schedule time to discuss, please contact us at support@strunkaccess.com or 800-728-3116.

Strunk at the ABA’s Conference for Community Bankers 2024

This year, the American Bankers Association hosted the Conference for Community Bankers in San Antonio, Texas at the beautiful JW Marriott San Antonio Hill Country from February 11-14. Attendees kicked the event off with a golf tournament, some educational sessions and once again, celebrated the Super Bowl with a Big Game Tailgate Party!

Speakers discussed topics such as how the FHLBs and the ABA work together most effectively, strategies for retaining customers, how to outperform peers and the state of our commercial lending markets. The highlight of the general sessions was quite possibly James Olson, a former Chief of Counterintelligence for the CIA who shared insights into his undercover career. Bankers and vendors alike enjoyed a reception on Monday evening celebrating Willy Wonka’s Chocolate Factory.

Strunk was excited to have the opportunity to show their newest solution, Pricing Manager, to clients as well as many new faces. Pricing Manager is a full-featured loan and deposit pricing solution that will provide banks with the ability to set loan and deposit pricing consistently and profitably. Commercial loans can be priced consistently by every lender, creating options for customers that all achieve the bank’s profitability targets. Additionally, rate sheets for consumer loans, residential mortgage loans, and deposits were introduced. These rate sheets can easily be created also based on established profit objectives. Not only will Pricing Manager drive consistent achievement of profitability targets – it will also help banks win more quality deals!

Strunk’s goal is to continually provide value-added SaaS solutions that help community banks increase profitability, while controlling operating expense. In addition to their latest offering, Strunk highlighted their overdraft service and best-in-class governance, risk and compliance solution, Risk Manager.

For more information on Pricing Manager or any of Strunk’s other solutions, visit https://strunkaccess.com/ or contact Strunk at info@strunkaccess.com.

Repayment Plan Management from Beginning to End

A Fresh Start Repayment Plan is a tool available to overdrawn customers that will allow them to repay the overdrawn balance in up to four payments and will also allow them to retain the use of their checking account. It also may help financial institutions recover and collect on accounts which may have otherwise charged off.

Included with Strunk’s hosted ODP Manager software, financial institutions have access to Strunk’s library of Fresh Start documentation. The library contains a Fresh Start Profile that addresses recommended features and optional considerations, a recommended Fresh Start Policy and Procedure Guidelines, a suggested Assessment template to determine Account holder’s ability to repay the Fresh Start Repayment Plan, and a recommended Fresh Start Agreement. These documents provide the necessary information to start offering and setting up Fresh Start Repayment Plans.

ODP Manager Formal Demand and Final Demand collection letters advise customers overdrawn for more than $100 to ask if a Fresh Start might be an option to repay the overdrawn balance in 4 payments or less. Once a customer contacts the institution, an assessment should be completed to confirm the customer’s ability to repay the Fresh Start Repayment Plan.

If a customer qualifies and accepts the Repayment Plan, ODP Manager users can enter a repayment schedule for each account. The repayment schedule can be used to generate the Fresh Start Agreement to be signed by the customer. It will also create payment reminders to show when a repayment should be due. The payment should be verified in the core system and then tracked in the repayment schedule once paid. If the account defaults on the repayment plan, the Fresh Start Default Letter can be generated in ODP Manager to inform the customer that the account has been closed, charged off, and reported to the appropriate agencies.

ODP Manager offers two reports related to Repayment Plans. The Fresh Start Tracking Report lists all accounts that have been identified as being in repayment by an ODP Status Code. A Repayment Schedules summary report can also be used to track the status of Fresh Starts, including payments made and outstanding balances. Both report options can be exported to PDF or Excel.

If you have any questions about Fresh Start Repayment Plan options in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Setting Rates for Loans and Deposits

When setting rates for loans or deposits many factors come into consideration. The credit risk of the borrower; collateral for the loan; ability to repay the loan; the term of the loan; and competition are all factors that most banks look at when determining the interest rate. One big factor that many financial institutions don’t consider is the size of the loan. That is a critical misstep when it comes to the profitability of that loan to the bank.

Similarly, banks set rates on deposits on market factors such as liquidity, borrowing capacity from the Federal Reserve or FHLB, and what the competition is offering. Money market rates are sometimes tiered based on the amount in the account but rarely do we see rates tiered on certificate of deposits or other interest bearing accounts. Occasionally banks will have a jumbo CD rate for accounts over $100K.

Most community banks lack the ability to determine costs associated with making loans or handling deposit accounts. With Strunk’s Loan, Relationship and Deposit pricing tool you can set target goals for profitability such as return in equity. Our solution will determine what rate you need to achieve on loans and what rate you can offer on deposits to meet that goal.

Give your loan officers a simple program to use to win more deals while meeting your profitability goals. Size matters when it comes to loans and deposits. Strunk’s loan and deposit pricing tool can make your bank a lot of money. Contact Strunk at 800.728.3116 or info@strunkaccess.com to see how it works.