In this Article
- What is Relationship Impact?
- Reading the Relationship Impact Chart
- Strategic Value
- Funds Transfer Value
- Adjusting Relationship Impact Views
What is Relationship Impact?
When pricing an opportunity for a Relationship that has existing business with your bank, PrecisionLender allows you to perform a visual "what-if" analysis by examining that relationship's existing business. By identifying existing accounts that are either "At Risk" or that would be Paid Off by new business, PrecisionLender can show you three pictures of the relationship:
- What do things look like today?
- What will things look like if we win the opportunity?
- What will things look like if we lose the opportunity?
Sample Relationship Impact Chart
Reading the Relationship Impact Chart
Always start in the middle of the chart on the column labeled "Existing". The chart then moves left or right depending on the result of the opportunity. Refer to the numbered steps below corresponding to the chart columns.
What do things look like today?
- Existing: The Column labeled "Existing" shows the Relationship as it exists today.
What will things look like if we win?
- Payoff / Renewal: This column represents the accounts that disappear if we win. These are being renewed or paid off by new loans being priced within the opportunity and are represented with a downward arrow.
- New Opportunity: This column represents the new accounts being priced within the opportunity and are represented with a upward arrow.
- If We Win: This column represents the resulting relationship if you were to win the opportunity and retain existing accounts that are not being renewed or paid off. The Net Funding row reflects the payoff that will be made when the opportunity closes, which may be different from the paid-off accounts’ current balance from the Payoff / Renewal column.
What will things look like if we lose?
- At Risk: This column represents accounts (loans, deposits, or other fee-based business) that could leave the bank if the opportunity is not won. If the borrower accepts a competitive offer, there is a good chance that the competitor will also poach this existing business from you. This column is represented with a downward arrow.
- If We Lose: This column represents the resulting relationship if you were to lose the opportunity to a competitor, assuming that the competitor also takes the accounts you have marked as "At Risk".
When pricing an Opportunity in PrecisionLender, you are pricing everything that is "in front of you" today; all the business that you have a chance to win.
For example, suppose that you are pricing an Opportunity containing a Commercial Real Estate (CRE) loan account. You then see the opportunity to bring over the borrower's operating account with a $50,000 average balance as well. In PrecisionLender, this is quite easy to do and you find that you can offer this borrower a more competitive rate on the CRE (if necessary) to win the entire Opportunity (the CRE plus the deposit account). This is what we call "Full Opportunity Pricing." But where does this deposit come from? Well, it was part of the competing bank's relationship. You were, in essence, able to use the value of their relationship against them in competing for this Opportunity.
We use this same simple idea to define the concept of Strategic Value: If the pricing of an Opportunity goes competitive, one bank's Full Opportunity will include the value of the competing bank's relationship. The Strategic Value of the Active Loan and Deposit Accounts in PrecisionLender is designed to estimate the value of those accounts within your competitor's Full Opportunity.
Put differently, if you are pricing a new Opportunity to an existing Relationship, and that Opportunity goes competitive, how much value is there for your competitor to use against you? How badly would it hurt for this Opportunity to go competitive?
Note that strategic value is NOT the historical profitability of those loans and deposits. A loan or deposit with lower strategic value versus another should not be considered bad or inferior. Strategic value simply tells you how much value is there today that your competitor could use against you if your next deal with this customer goes competitive.
Funds Transfer Value
Funds Transfer (FTP) Value represents the value of the relationship as of the date the loans were last repriced; for fixed rate loans, this will be when the loan originated, and for floating or adjustable rate loans, it will be when the loan last adjusted.
Adjusting Relationship Impact Views
Strategic Value is the default profitability calculation view except when FTP Financial Statements are set as the default view at the enterprise level. To adjust to a different view, select "Strategic Value," "FTP Value," or "Both Strategic/FTP" from the Profitability Calculation field on the Header bar in the Relationship Tab within an opportunity or the top of the Relationship Pricing Tab on the Relationship Screen.
Below the Relationship Impact and Strategic/FTP Value charts you will find the Existing Accounts section. This area contains all Loan, Deposit, and Other accounts currently associated with the relationship.
Each product name has a link that can be selected to open a window with detailed account information, including Import Data and Strategic/FTP Value calculations.
Tables in the Existing Accounts section can be sorted by column headers. Accounts can also be filtered using the "Group By" field in the Header bar. For example, when filtering by "Product", all accounts with the same Product type will be grouped together. Each Product type can be expanded to see the full list of accounts.
You can mark individual accounts as being At Risk, mark all accounts (such as loans) At Risk, and if "Group By" is set to Product or Relationship, then you can also mark all of a given product type or specific account At Risk.