Today’s Overdraft Environment

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In today’s financial environment, having access to emergency funds is more crucial than ever. Many individuals are struggling to cover everyday expenses, and overdraft privilege can offer reassurance to customers who require fast access to short-term funds. Consumers, especially those who use overdraft services, continue to show a strong understanding of overdrafts and the options available to them. Consumers would much rather have their transactions paid for than returned. In either case, the financial institution will charge a fee. In the last two years, just over half of consumers have needed immediate access to funds to pay their bills. Political leaders tend to believe that overdraft privilege only affects lower-income consumers, but consumers earning between $100,000 and $150,000 also need access to short-term emergency funds. This is not a matter of wealth, but rather of having access to available cash. For consumers with accounts at financial institutions, having access to cash when needed is crucial. The benefit of not paying a fee unless they use the service is the type of access they are looking for.

Half of all account holders will need help with liquidity at some point. Consumers can’t predict when they will need access to emergency funds, but they want to be certain that if a crisis arises, it will not have a long-term effect on them or their credit. More than 60% of overdrafts come from consumers who intend to use the service and appreciate the value it adds to their checking account. Consumers are looking for a solution without a long-term commitment, such as credit card debt or a personal loan, and overdraft privilege provides that to them. Having access to additional funds when a consumer is in need is highly beneficial, and they do not want to experience any reductions in their ability to use the service. Approximately 30% of consumers use overdraft services, indicating a sustained demand for this offering. It is crucial for financial institutions to provide alternatives within their framework, such as Overdraft Privilege, Line of Credit, and a transfer from another account so that consumers can manage their fees and protect their income. Additionally, a repayment program is available to assist consumers who are having difficulty with their budgets, providing them with extra time to repay their overdraft limit. Strunk offers Overdraft Privilege consulting services and the best software to ensure your Overdraft Privilege program is an ongoing success.

Can Community Banks Compete?

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More than 10,000 banks have vanished in the last forty years and the trend is frightening as we get close to 4,000 banks left in our country.

Some of the reasons for this drop can easily be explained such as bank failures and mergers of multi-bank holding companies. Of course banks in rural markets have sold as bank owners get older and no family member is there to continue the family legacy. But, many banks sell because they think they no longer can compete with larger banks. This is nonsense!

Bank regulations are never ending and continue to hamper the ability to compete. Costs associated with running the bank such as core processing, compliance and employee expense seem to rise each year. What can be done about it? Have you turned over every rock to see what other banks are doing?

Strunk is an expert in delivering fee income and net interest income programs that hundreds of banks have implemented. We have a variety of services that have been time and market tested. Overdraft Privilege is the program we are best known for with over 1,800 bank clients.

Secure Checking is the “overdraft privilege” of the 2020’s. It will deliver similar fee income as ODP did in the 2000’s. Our loan and deposit pricing tool will deliver similar numbers to the bottom line in the way of net interest income.

Strunk is here to help banks make more money. Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn more about income programs offered by Strunk. You will be glad you did.

Why use Strunk’s Issue Manager instead of Excel

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How does your financial institution keep track of internal and external audit findings, customer complaints, and comments from regulators that require corrective action? Many financial institutions use Excel spreadsheets to monitor these outstanding issues. It’s no surprise that financial institutions rely on Excel for these tasks, as it remains one of the most widely used business software programs out there. Most employees find Excel convenient and believe it meets their needs for issue tracking.

Many financial institutions may not be aware of the risks and downsides of using Excel as their main document for tracking audit findings, customer complaints, and regulatory comments. Excel currently lacks a clear visual history of file updates, requiring users to save multiple versions of a file to track changes. This leads to numerous duplicate copies, time wasted on figuring out the latest version, and a high risk of lost data. Furthermore, the process can be disrupted when key personnel responsible for the Excel spreadsheet leave the business without providing proper instructions. As regulators demand complete audit trails and transparency, Excel cannot meet this requirement. Another issue with Excel is its lack of access control tracking, which can lead to unauthorized access, data corruption, or accidental deletion. Managing Excel spreadsheets is a manual, time-consuming, and highly inefficient process. With labor costs constantly rising, financial institutions are beginning to understand that increasing employee productivity by using efficient software solutions can significantly impact their bottom line.

Strunk’s Issues Manager module can help your financial institution to solve the problem of tracking audit findings, customer complaints, and regulatory comments in Excel. Strunk’s hosted solution allows financial institutions to track issues that arise and assign responsibility to associates within the organization. Issues Manager also enables you to attach documents, assign priority and due dates, and track the status of the issues within the solution, while generating reports for auditors or external use. Contact Strunk if you would like to automate your issue tracking in a secure environment that creates full audit trails.

Leverage Extract File Date Fields to Filter Results

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The daily extract file imported into hosted ODP Manager includes many fields that may assist with managing an institution’s Overdraft Privilege program. These fields are used to show letters due and also to populate the standard suite of reports included in ODP Manager. In addition to these purposes, institutions may also benefit from using this data to display filtered results of accounts that share specified criteria. These additional filter options may facilitate monitoring of accounts in specific areas of interest.

The first step to leveraging additional filter and group options is to decide which fields and criteria should be applied to the accounts. Once determined, there are three main areas in ODP Manager that are able to use the additional filter groups: account-level Reports, Account Inquiry, and Custom Query.

Users can apply the filters as needed by typing the desired criteria in the filter boxes displayed below the ODP Manager header rows. If users are entering the same criteria regularly, it may be more efficient to request the creation of an institution-specific query group. Once the individual column filters have been applied or the query group selected, users can view the information in the browser, export the filtered results to either Excel or PDF in Reports, or to Excel in Account Inquiry and Custom Query.

In Account Inquiry, users can choose from three different views to select which extract file fields are available for filtering or export. Both the Default View and Original View display different sets of commonly used fields. The All Fields View displays all fields mapped and available in the hosted software.

If an institution’s users need to limit not only the results displayed but also specify which columns are included, a Custom Query can be created. This Custom Query can be downloaded daily (or as needed) to Excel and will include the accounts that meet the specified criteria.

If you have any questions about setting up additional filter groups in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com for more details.

How to Replace Lost Fee Income for Banks?

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Strunk has helped over 2000 banks increase their bottom line from a variety of income producing programs that started in 1993 with their Overdraft Privilege program. The service benefited both consumers and banks and although income is down from NSF/OD fees it still remains popular even after tremendous regulatory scrutiny.

In 2010, banks were required to obtain consumer consent before charging an overdraft fee for a debit card transaction that overdrew the account. Service charge income went down significantly. In 2011 FDIC regulated banks had to notify consumers after every 6th overdraft charge in a rolling twelve month period. Service charge income went down again.

More recently banks have discontinued charging NSF fees if their core processor can’t determine if the item had already been presented. Some banks have discontinued allowing consumers to overdraw their account and they have eliminated overdraft fees. To total all of these changes up our industry has seen more than a 50% drop in service charge income in the past 15 years.

What can a bank do about it? Strunk’s Secure Checking program allows consumers to get highly sought after services from their bank while paying a small monthly fee for their checking account. Banks see a net increase in income per checking account of $50 per year. Strunk’s Loan and Deposit Pricing tool will help banks increase net interest income by at least 25bp. For a $100M loan portfolio that is $250K per year.

Strunk is here to help banks make more money. Contact Strunk at 800.728.3116 email at info@strunkaccess.com to learn more about income programs offered by Strunk. You will be glad you did.

Regulation E Option to Opt In Online

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Strunk’s ODP Manager recommended custom letter templates include copies of the Consent Form for Overdraft Service. This allows consumers that have not already opted in the opportunity to opt in to authorize and pay overdrafts for ATM and everyday debit card transactions. Customers should have the option to opt in or opt out of Reg E by phone, by mail, or in person. If available, consumers should also be able to opt in to Reg E electronically.

If a financial institution’s online banking does not already offer customers the ability to choose to opt in or opt out, the hosted ODP Manager software can provide an electronic option. An online form will be created that matches the content in the ODP Manager letter templates. Once created, the form will be linked on the institution’s website. Customers can electronically complete the form to consent to opt in to or opt out of the ATM and everyday debit card coverage. After submitting the form, both the customer and a designated institution email address will receive a confirmation of the request.

After the request is submitted, ODP Manager users will regularly review new requests tracked in ODP Manager. The list of requests can be exported so that the accounts can be updated appropriately in the core system. The hosted software is able to identify new responses that have not yet been downloaded. Once downloaded, the software still retains the prior responses within the ODP Manager software.

If you have any questions about setting up online Reg E Opt-In and Reg E Opt-Out forms in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com for more details.

Should Lenders Price Their Own Loans?

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Bankers should consider several factors when pricing loans that meet the bank’s profitability target and also win the deal. Often times when asked what the rate is for commercial loan, a banker will give the same rate regardless if the loan is for $2M or for $250K. In other words many banks price their loans based on the type of loan and not the size. This is a mistake.

Size matters. So does the term, fees, risk, return to the bank and cost of funds. Does the customer have other loans or deposits with the bank and are they profitable? Do your lenders know what the cost to originate or service the loan is? How can they price the loan if they don’t know these things?

Competition is fierce especially for the A rated borrowers. Community banks saw finance companies and car dealerships steal installment lending from them in the 1990’s. Farm Credit is a huge competitor for Ag real estate loans. How can a bank possibly compete with rates they offer your customers? The short answer is you can.

With net interest margins narrowing, now is the time to look at a loan pricing solution that takes all of these factors into consideration. Don’t lose another deal due to price before you look at how you can compete and meet your profitability goals.

Contact Strunk at 800-728-3116 or email at info@strunkaccess.com to learn about how our loan pricing tool will increase net interest income by at least 25 bp.

Excessive ODP Use and Alternatives to ODP

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The hosted ODP Manager software includes a letter template that allows financial institutions to inform customers of alternatives to fee-based overdraft coverage. These letters are sent to customers that have demonstrated excessive consumer Overdraft Privilege activity.

FDIC regulated institutions are expected to give customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling twelve-month period a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage. Strunk also recommends that institutions not regulated by the FDIC also communicate available alternatives to ODP on an annual basis to accounts with insufficient funds items.

Alternatives to ODP could include an Overdraft Protection credit line or an Overdraft Protection transfer from another account with the financial institution. The letter template includes details related to line amounts, charges, and fees so customers can make an informed decision about how best to cover overdrafts.

Letters can be generated based on information included in the extract file. If the file includes data that indicates when an account has met the qualifications for the letter, hosted ODP Manager can automatically show when the letter is due. If the data cannot be added to the extract file but accounts that qualify can be identified by an existing core report or other method, the letter can be generated as needed by account number as an Ad Hoc letter. Once generated, the letter is tracked and retained within ODP Manager.

If you have any questions about sending Excessive Use Notification letters in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

ODP Manager: Import Events and User Events

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The information displayed in ODP Manager is provided by an extract file from an institution’s core system. This file is updated after close of business and is imported daily into ODP Manager. Once the import has occurred successfully, the letters due and reports are updated with the information for the current as of date.

A benefit of the hosted ODP Manager software is the advanced history tracking. This feature allows users to view and search for recorded events by account number or date. There are three main types of events that are stored within ODP Manager: import events, letter events, and user created events.

Import events are recorded at the time an import of the extract file is successfully processed. Events are identified by comparison of the current as of date’s file to the last file imported. Accounts are updated to note if accounts are now closed, are overdrawn, or now in good standing. If an overdraft limit is assigned or removed or if an account opts in or opts out for Regulation E, an event is also created in the account history.

As part of the daily tasks in ODP Manager, users will generate letters that are due. As letters are generated, a PDF of the letter is retained in the event history. The letter type, template name, and date are also recorded.

Users also can create events as needed. Comments allow users to make account notes that can be viewed by all hosted software users. Reminders allow not only notes to be added, but also allow a due date to be assigned to the item for future follow-up. Both notes and reminders can include attachments. Repayment plans can be added to generate Fresh Start agreements and to track payments made towards the repayment schedule. For accounts that have charged off, users can create a charge-off item to track recoveries and to streamline charge-off reporting. All user-created events can be viewed and updated by all users with access to ODP Manager.

Once events are tracked in ODP Manager, they can be searched by account number or by date or date range. Individual account information can be exported to PDF and events that occur in a specified date range can be exported to Excel.

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

A Loan Pricing Solution that will help banks make more money

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Loan pricing solutions were popular twenty years ago but they were too expensive for a lot of community banks. With banks looking for ways to make more money now might be the time to look at an affordable, easy to implement loan, relationship and deposit pricing tool.

Many banks don’t take the size of the loan into consideration when pricing commercial or commercial real estate loans. Size of the loan is one of the biggest contributing factors to the profitability to the bank. Most banks over price their biggest most profitable customers and under price their smallest least profitable customers.

Do you know which customers are the most profitable and which ones your lenders think are most profitable? A pricing tool that takes the loan and deposit relationship into consideration will give you a precise look at customer profitability. It will also tell you when to price up and when you can provide a better deal for the borrower…to win or keep the deal.

Some loan customers are fee averse. Although we never recommend not charging a fee for a loan, what rate provides the same return to the bank if there was no fee? Fees on all loans matter, but they really don’t contribute to the overall profitability of a customer on larger loans with a longer expected life of the loan.

Do you factor in deposits when pricing commercial loans? Are the deposits in interest bearing accounts or non–interest bearing? Does a large depositor necessarily warrant giving a lower rate on a commercial loan? The short answer is “no” but a pricing tool will help your lenders with that decision.

Do you price consumer loans based on the term of the loan? Do you consider the size of the loan when determining the rate? Do you collect fees on consumer loans and is it a driving factor to overall profitability?

Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn about how our loan pricing tool will increase net interest income by at least 25bp. For a $200M loan portfolio that is $500K per year.

 

An independent certified public accountant has examined Strunk’s operations and found them to be in compliance with the AICPA’s Trust Service Principles. It was determined that Strunk meets the Security, Availability, Processing Integrity, Confidentiality, and Privacy criteria for SOC 2 established by the AICPA.