(800) 234-1111

FINPACK News

How to Use Portfolio Risk Analyst (PRA)

by | May 5, 2022

Each borrower, be they Ag or Commercial, has their own unique business risks. You also need to know how your entire loan portfolio is positioned to face the volatility of today’s business environment.

PRA (Portfolio Risk Analyst) creates a database of your Ag or Commercial borrowers and generates reports that help you see where the stress points are if market conditions change. You can base stress tests on either past or projected financial performance, analyze the financial position and performance of portfolio segments with clear, concise reports, and identify borrowers who contribute most to portfolio risk. In addition, you can provide customers with benchmarks of their financial performance, building customer loyalty in the process.

How does it work?

For your ag portfolio, aggregate and stress test either past performance or projection data on your farm customers. For past performance analysis, choose between FINPACK Financial Analysis (FINAN) or Schedule F Cash to Accrual data. Then use the Shock Selection tab to choose what % changes in your gross income, operating expenses, interest rates, or assets you’d like to stress test. Apply whichever client criteria suits your analysis — Farm Type, Gross Income, Profitability, Total Assets, or D to A Ratio — and FINPACK’s PRA tool will generate the stress report, which you can then output as a PDF. For forward-looking analysis, either monthly or annual types of FINPACK Projections can be analyzed by PRA.

For your commercial portfolio, PRA stress tests FINPACK’s C & I Business Analysis data. Choose to shock Net Sales, COGS, Operating Expenses, Interest Rates, or Current and Noncurrent Assets, set the % change you want to investigate, then select your client criteria. PRA creates a database of this FINPACK information on your borrowers and then generates reports to help you see where stress points lie, should market conditions change.

PRA Commercial Stress Test report [sample]

Benchmarking Customers

You can also use PRA to prepare benchmark reports on your ag customers, using your customer group to identify the financial strengths and weaknesses of your individual borrowers. The benchmark reports can be pared down by farm type, size of farm, profitability level, and solvency position. Here the performance of an individual farm is rated against their peer group from your bank’s portfolio.

PRA Benchmark report sample.

Summary

Use the PRA tool to get a better sense of how your entire portfolio — both Ag and Commercial — is positioned to face the volatility of today’s business environment, and build customer loyalty by providing them benchmarks of their financial performance. The Portfolio Risk Analyst (PRA) tool is included in the FINPACK system-wide license at no additional cost, and will soon be accessible right inside the FINPACK+ environment. Contact us today to learn more about the benefits of using PRA to evaluate your portfolio.

Relationship Manager at | 612-301-1413 | dmaguire@umn.edu | + posts

David Maguire became the FINPACK Relationship Manager in 2021. He helps Ag and Commercial lenders across the country understand the value of using FINPACK for credit analysis and loan management. David has worked in the marketing, training and education fields in Minnesota, Ireland and Germany.

Latest News
FINPACK Digest – September 2022

FINPACK Digest – September 2022

Sleuthing positive cash discrepancy errors, registration for FINPACK Lender training and the FINPACK Lenders Conference, and introducing the FINPACK Flyover Register Now for September FINPACK Lender Training Registration is open for the next in-person FINPACK...

Register today for the 2022 FINPACK Lenders Conference

Register today for the 2022 FINPACK Lenders Conference

The FINPACK Lenders Conference is back in-person! Join us for two days of great content: Get the latest updates in ag and commercial lendingListen to our outstanding lineup of speakers including Brad Stevens, Frayne Olson, Joe Santos and the return of Dr. David...

Register Now for FINPACK Lender Training

Register Now for FINPACK Lender Training

Registration is open for the next FINPACK Lender training on October 11th and 12th on the University of Minnesota, St. Paul campus. Covering all the components of FINPACK and with a focus on credit analysis of both agricultural and commercial businesses, the...

How to Sleuth Positive Cash Discrepancy Triggers

How to Sleuth Positive Cash Discrepancy Triggers

Doing a thorough, accurate evaluation of a customer’s past performance is key to feeling confident when evaluating credit requests. Oftentimes in agriculture, the customer data received to perform this analysis is incomplete. Therefore, cash discrepancy errors can...