PROFITability Enhancements Included in the 2006, 2007, and 2008 Editions of the Software
~Maturity/Repricing~
Maturity/Repricing Module in the PROFITability Side of the Suite
PROFITstar Suite users now have complete access to the Maturity/Repricing module, and all of its related settings and functionality. It is no longer necessary for someone working in PROFITability to switch to PROFITstar in order to make Maturity/Repricing changes. As a result, projections can be completed from either side since Maturity/Repricing information is now fully available.
(PA Suite Only)
~FTP~
FTP Rate New Volume Statistical Data Item Added
A new FTP Information data item has been added for balance sheet accounts in PROFITability—FTP Rate New Volume. This information is accumulated and saved during the download, like the Avg Rate New Accts statistic.
This data item can be viewed and edited in the History and Budget modules; displayed in the Projections module; and incorporated into Report Writer reports and User-Defined Graphs.
FTP Average Life Calculation Improved
The FTP Average Life calculation has been improved so that it excludes actual prepayments that may have occurred on a record.
~Allocations~
Important Allocations Exceptions Flagged with Red Icons
In the Allocations module screen, important allocation exceptions, which should not be ignored, are now marked with red light bulbs. Click a light bulb icon to obtain a brief explanation of why a certain item was not allocated.
All of the underlying issues that are causing the red light bulbs to appear need to be resolved. When this is done, allocations can be rerun.
Conditions that will cause important allocation exceptions are listed below:
n Transfer Price is Zero
n Quantity is Zero
n Source Percent is Zero
n Source Unit is Closed
n No Active Units
n Target Account is a Subtotal
n Target Account is Missing
n Methodology is Missing
n Rule is Missing
n Source Unit is Missing
n FTP Rate is Zero
n Methodology Formula Failed
n No Units For FTP
Exceptions that are less serious, and possibly acceptable, are flagged with a yellow light bulb and question mark icon.
To review all of the allocation exceptions in one place, print or preview the Organization Allocation or Product Allocation Exception reports. The new Type column on these reports specifies whether each exception is "Red" or "Yellow."
~Setup~
New PA Purpose Option Added
On the Organization Setup tab of Preferences Setup, a new item—Service Center—has been added to the list of PA Purpose options.
~Reporting~
More Net Contribution Components on the Product Profitability Detail Report
The ability to export unit cost information from PROFITability, to other customer profitablity applications such as ProfitStars' RPM tool, has been enhanced. Three more items have been added to the Net Contribution Components options list for the Product Profitability Detail report—Activity Costs, Provision for Loan Loss, and Net Taxes and Adjustments.
This Report Wizard report is found under Allocations > Product Profitability Detail.
Relative Ranking Capital Setup Report
For your Relative Ranking Capital methodologies, you can now generate a report that documents all of the Risk Level Assignment settings. From the Reports menu, select Report Wizard > Documentation > Setup >Relative Ranking to preview or print this report.
~History~
Pre-Allocated Product Data
Pre-allocated product data is now calculated and saved whenever product allocations are initialized. You can now view pre-allocated product data in the History, Projections, and Budget data entry grids (for any months that have been initialized in the Allocations module). In addition, these same pre-allocated product values can be accessed in the Report Writer.
~Ratios~
Changes to Ratio Formulas
Various ratios have been enhanced. Some have been changed to include the effect of entities below the consolidated level, such as ROE by product.
Clients upgrading to the 2007 edition, can review formula changes by looking at the ratio logs that are stored in the Reports folder of the data directory. Double-click the most recent log (after installing 2007) to see the old and new formulas for every updated ratio, as well as the formulas for every new ratio account.
Note: During the conversion process, a ratio log file is created for every model. Therefore, Ratio 000 is the log file for the base model, Ratio 001 relates to What-If #1, and so on.
As always, you can also utilize the Ratio Analyzer to drill down into any ratio's standard or regulatory formulas.
The ratios modified for the 2007 edition are listed below:
n MTD Average Fixed Assets – A new Special Calculation—Total Average Fixed Assets (SC 13)—was created for this ratio.
n Tax Equiv Inv Inc Differential – The standard formula for this ratio, which was previously known as "Tax Equivalent Invest Income," was changed to match the regulatory formula. State taxes are not included in this ratio since the affected investments tend to be municipals, which are still taxable at the state level.
n Tax Equiv Loan Inc Differential – The regulatory formula for this ratio, which was previously known as "Tax Equivalent Loan Income," has been changed to include the State Tax rate.
n Cost on Average Assets – The standard formula was changed to divide by Average Total Assets instead of Total Liabs & Capital.
n Spread on Average Assets – The standard and regulatory formulas were changed to include the effect of post-allocated Net FTP. (This is necessary for branches or products, but has a net effect of zero on consolidating, balancing entities.)
n ROA Before Taxes and Loan Loss – The regulatory formula was changed to include the effect of post-allocated Net FTP. (This is necessary for branches or products, but has a net effect of zero on consolidating, balancing entities.)
n ROE Org/Prod by Period – For this new ratio, the standard formula was created to be independent of ROA, since nonbalancing entities, such as products or branches, do not have a valid ROA. The regulatory formula is the same as ROE by Period.
n ROE Org/Prod YTD – For this new ratio, the standard formula was created to be independent of ROA, since nonbalancing entities, such as products or branches, do not have a valid ROA. The regulatory formula is the same as ROE Year-to-Date.
n PA Net Interest Margin – The effect of post-allocated Net FTP was removed from this ratio.
n Annualized Net Interest Income – The standard and regulatory formulas for this ratio, which was previously known as "Net Interest Income," have been changed to include the effect of post-allocated Net FTP. (This is necessary for branches or products, but has a net effect of zero on consolidating, balancing entities.)
~Allocation Rules~
New “Create Pass” Feature in Allocation Rules Setup
The right-click menu for the Allocation Rule list, in Allocation Rules Setup, has been enhanced to include a Create Pass feature. When this option is used, any rules below the highlighted rule have their pass number increased by one.
~FTP~
”Account Identifiers” Flag in Download Preferences
If unique account identifiers are available in your application files, the PROFITability program makes it possible to calculate the FTP rate at the time of origination, or at each repricing interval, and have that rate stay with an instrument throughout its life.
However, if the account identifier field is mapped but the identifiers in the file are not truly unique (which might occur if identifiers are downloaded just for reference purposes), the FTP rate will need to be recalculated for each record with a duplicate identifier and entries will be logged during the link process, in the Download Exception report.
In 2007, if this situation occurs, the application file type can be flagged so that the program knows to recalculate the FTP rate for all records in the file and not to log any "Duplicate account identifier" exceptions.
To do this, click the Preferences button from the Download Setup screen to open the Download Preferences dialog. In the Account Identifiers Unique area, the default setting is for each file type to be selected. Clearing a check box tells the program that account identifiers associated with that file type are not unique.
New Basis Setting Available in FTP Setup
The new Basis setting lets you specify the accrual basis for FTP charge and credit calculations. The options are 30/360 (the default setting) or COA Basis, which uses the basis assigned to each rate-bearing account on the Inc Stmt tab of Chart of Accounts setup.
FTP Funding Date and Term Logic Enhanced
Various enhancements have been made to the FTP logic used to interpret an instrument's funding date and funding term.
These changes only affect clients using the "Matched Funded, Yield Curve" FTP methodology. Of these, clients with ARM loans that are in the fixed portion of the contract and that lack the Last Repricing Date field will benefit the most from this improvement.
~FTP~
Including or Excluding the Effects of Prepayments
A new column—Prepayment Assumptions—now appears on the FTP Setup screen. When the Matched Funded method is active, fixed-rate accounts with a Rate Account setting of Yield Curve have the option of including or excluding the effect of prepayments when calculating the account’s weighted average life.
~Product Profitability~
Utilizing Organizations within the Product Dimension
n You can now specify a specific organization, or “All Organizations,” to be the Source Unit in Allocation Rules Setup. This eliminates the need to set up an artificial, organization-assigned product (such as having to assign a HumRes organization to a “Human Resources” product).
n In addition, PROFITability now lets you combine organizations within the Product dimension. For example, you could combine all branches into one organization called Branches, and then select this new organization as the Source Unit for subsequent allocation rules.
n The work of grouping your organizational units into Combined Organizations is done in the Product Setup screen.
Using Work Groups within the Product Dimension
n A Work Group is an identifiable team of employees, performing similar activities. Typically, the respective expenses are combined with other work group expenses and reported at the organizational level. For example, Tellers, Personal Bankers, and Branch Managers are all Work Groups with expenses that are reported at the Branch organizational level.
n Since a Work Group can be selected as an allocation rule’s Source Unit, this feature can be used to allocate compensation expense more accurately to the unique activities that each Work Group performs. This is accomplished, first by allocating compensation to the respective Work Groups, and then allocating these expenses to the activities and products that they support.
n Work Groups are created in the Product Setup screen.
Adding a New Category Code
n Overhead—a new Category code—is available for Organization and Product Non-Interest Inc/Exp Allocation rules. The Category selections now listed are Direct Income/Expense, Indirect Income/Expense, or Overhead.
n This will be used primarily for responsibility reporting. Branch Managers may be held accountable for Income after Direct Expenses while Line of Business Managers may be held accountable for Income after Direct & Indirect Expenses.
Utilizing a New User-Defined Classification Code
n In the Product dimension, each Non-Interest Income/Expense allocation rule now has a new Classification code that can be user defined. You can utilize this feature as an additional way to break out allocations for reporting purposes, similar to the Direct/Indirect/Overhead Category feature. The default fields are Net Margin, Assigned, Servicing, Production, and Other. Net Margin and Assigned are hard-coded for reporting purposes and are not editable. The Assigned classification is applied whenever an account is assigned directly to a product. Net Margin is applied for interest income/expense and funds credit/charge. You may also want to select Net Margin when allocating Loan Loss Provisions, for reporting purposes.
n In addition, you now have the capability to report on the cost to produce a loan versus the cost to service the loan. Activities not related directly to production or servicing should be coded as Other. Examples of this would be Branch Manager activities or miscellaneous overhead activities.
n The Servicing, Production, and Other classification codes can be modified by opening Product Allocation Classification Setup, from Setup > Allocations > Product Allocation Classification. You can also create more user-defined codes, if needed.
n During the conversion to 2006, the Servicing classification code will automatically be applied to all current Non-Interest Income/Expense allocations. Following the conversion, you can change this setting for any of the affected rules.
n A new Allocation Report—Contribution Variance—utilizes Classification codes as it summarizes the profitability components for each product and calculates an annualized return on assigned capital for comparison with other products.
~Reporting~
Making Sense of Product PROFITability with New Reports
n Allocations / Unit Classification Summary – This report is valid only when Product Allocations have been performed. The report summarizes product unit income/expense by classification, compared to a rolling 12-month average.
n Allocations / Contribution Variance – This report compares the current month against one additional monthly time frame. It summarizes the profitability components for each product and calculates an annualized return on assigned capital for comparison with other products.
n Analytical / New Volumes – This report shows the rate spread of downloaded instruments for all FTP methodologies.
Select Pre-Allocated Databank Values in Report Writer
Previously, you could not specify a Data Value for Databank accounts in PROFITability, using the Formula Assistant or Quick Data Function. Now either Pre- or Post-Allocated values can be requested.
Use Dimensional Views in Report Writer
n Dimensional View Groups can now be selected from the Formula Assistant and the Quick Data Function.n Dimensional View Groups can be used for both titles and for data. (Only Dimensional View Groups—not the Dimensional Views themselves—can be selected.)
n Dimensional views can also be referenced in data formulas. (The models selected must match.)
n Since Dimensional Views are model-specific, you must choose a specific model from the Model list before Dimensional Views will show up in the Organization or Product lists. /
PROFITability Predefined Report Packet