Gulf Coast Bank Presentation Quiz

Question 1

What does a bank do?

Answer 1

Buys and sells money

Question 2

How does a bank buy money?

Answer 2

Deposits

Question 3

How does a bank sell money?

Answer 3

Loans

Question 4

Three types of banks

Answer 4

• National
• Community
• Regional

Question 5

National Banks

Answer 5

Examples - Chase, Capital One, Bank of America
- Profit driven, not interested in you

Advantages:
- Convenient locations all across the country
- New, innovative products

Disadvantages:
- Centralized, tight underwriting
- No flexibility in credit decisions-score driven
- Difficult to get some things accomplished
- Money is not necessarily kept local

Question 6

Community Banks

Answer 6

Examples:
- Gulf Coast Bank, Rayne State Bank, Community First Bank

Advantages:
- Reinvests into local area
- Privately held
- Flexible underwriting on credit decisions
- Easier to get an answer when there is a problem

Disadvantages:
- Locations limited to smaller geographic footprint
- Later to the game on technology

Question 7

Regional Banks

Answer 7

Examples:
- First Horizon, Regions Bank, Hancock Whitney, Home Bank

Advantages:
- Located in contiguous states (national bank like with hometown feel)
- Publicly traded like a national bank
- Guided by profit

Disadvantages:
- Often bound by the same underwriting criteria as national banks
- Often part of mergers and acquisitions with other regionals and national banks

Question 8

5 C’s of Credit

Answer 8

• Credit History
• Capacity
• Capital
• Collateral
• Character

Question 9

Credit History

Answer 9

Likeliness/willingness that you’ll pay back the loan
- Credit scoring and reports provide lenders with a record of their past and current repayment history

Question 10

Capacity

Answer 10

Availability to pay back the loan
- DTI = Debt to Income Ratio has to be less than 50%
- A borrower’s verifiable income needs to be enough to support the proposed debt and all other outstanding obligations

Question 11

DTI (Debt to Income Ratio)

Answer 11

Total monthly obligations divided by gross monthly income

Question 12

Capital

Answer 12

Injection into buying something
- Ex. Down payment on a car
- Shows the bank the borrower is invested into the project and has something to risk

Question 13

Collateral

Answer 13

When a bank takes your car, sells it, and uses the money to pay off some of the loan
- Granting the lender a secured interest in something of value
- Ex. Mortgage on property, car, equipment, real estate

Question 14

Character

Answer 14

A person of good character will always pay back the loan
- Not necessarily measurable on an application
- Avoids the three B’s (Booze, Bookies, Babes)

Question 15

The three B’s

Answer 15

Booze - drug, alcohol problems

Bookies - gambling problems

Babes - women problems (divorce is the #1 cause of bankruptcy)

Question 16

Fair Isaac (FICO)

Answer 16

Company that writes credit reporting software for the three credit bureaus:
- Equifax
- Trans Union
- Experian

Question 17

What is the range of credit scores?

Answer 17

350-850

Question 18

Breakdown of Credit Score

Answer 18

• 35% Repayment History
• 30% Debt to Limit Ratios
• 15% Average Age of Credit
• 10% Number o Inquiries
• 10% Number of Open and Active Revolving Accounts

Question 19

Debt to Limit Ratios

Answer 19

Calculated by taking the total balances on credit cards divided into the limits of those cards
- A lot of the time it’d be better to pay off cards but not cancel them so that the ratio is good

Question 20

15% - Average Age of Credit

Answer 20

Calculated by taking the start date of all the active credit tradelines
- The older the average age, the higher the score
- Mature experience with credit typically means someone is less likely to default on obligations

Question 21

10% - Number of Inquiries

Answer 21

Statistics show that credit default happens more frequently with people who seek for credit often
- “Pulling” credit affects a consumer’s score by 3-4 points on average
- Fair credit laws mandate that any credit pulls within 30 days of another pull will only affect the credit score as if one credit pull was done

Question 22

10% - number of Open and Active Revolving Accounts

Answer 22

The “magic number” of open credit cards is three
- Having 0 or 10 or more open credit cards gives a consumer the least amount of points

Question 23

Hard Pull vs. Soft Pull

Answer 23

Hard pull would be using credit score to buy a car/house

Soft pull would be like checking insurance

Question 24

Great credit score (sweet spot):

Answer 24

720