LOCKBOX PROCESSING A Study in Efficiency

Introduction & Services  Sunwest Bank internal Lockbox – 30+ years  AQ2 Technologies AQURIT 7 Solution  Types of Services: Property Management / Home Owners Association processing Loan Payments for other banking institutions Deposit Processing – high volume business clients Remote Remittance – lockbox scanner & software at client’s site Full-Page Image Processing – Accounts Receivables

Efficiency Opportunity  Loan Portfolio  Sunwest Bank – 1,250  Syringa Bank acquisition (doubled volumes and added small dollar consumer loans)  We estimated it would take one additional FTE position in our Loan Servicing Department to process the Syringa Bank volume.  What to do ? Automate loan payment processing with lockbox capture process

Summary of Project  Create a Master File  Define File Transfer Process  Open Bancontrol Account  Establish Block Number(s) with Fiserv  Work With Statement Vendor (billing coupon)  Establish New PO Box to collect payments  Create New Posting File (Block) for Fiserv  Create Reports for the Loan Servicing Department  Enable Research Portal Access – Coupons, Check Images, & Reports  Update Operational Procedures (Balancing Loans in Process GL)  Notify clients via loan statement insert – new look, how to prepare payment, use of envelope, update bill pay payment address

Creating a Master File  Business Analytics module can be used to extract and format loan account data to create a Master File to upload to the Lockbox software. Example: FIELDLENGTHDESCRIPTION Account Number10Right-Justified and Zero-Filled Customer Name 140Left-Justified and Space-Filled Customer Name 2 40Left-Justified and Space-Filled Customer Name 3 40Left-Justified and Space-Filled Address 140Left-Justified and Space-Filled City40Left-Justified and Space-Filled State2 Zip Code10Left-Justified and Space-Filled Lockout Flag10Right-Justified and Space-Filled  Sunwest Bank works with many different types of Master Files – each client has unique capabilities and expertise. Custom programming directs data properly.  File is used by software to reduce errors such as to validate loan account data, and reject payments for lock-out loans. File can also be used to look-up client info for mis-read rejects, and repair payment information.

Moving Files (DEPCON)  Sunwest Bank utilizes DEPCON to handle incoming report batches and to deliver the final product to a designated file folder.  Moving reports/files internally:  Business Analytics report is placed in DEPCON (Fiserv can assist in auto- loading Business Analytics reports to a variety of places, including Director)  DEPCON moves file to Lockbox server (internal to Sunwest)  Lockbox software looks for Master File updates on timed frequency, ingests file and replaces prior Master File  Moving reports/files externally: Option A: push report to MOVEit site (SFTP). Sunwest downloads from MOVEit site Option B: An external party could send encrypted with attached file

Statement Format (Fiserv Doc Solutions)

Inputs & Outputs  Inputs:  Master File used for validation & look ups  Payment coupons  Checks (capture process)  Lockbox Engine: job processing rules, image capture, balancing, file creation  Outputs:  X-9.37 file of check images cleared to Fiserv Item Processing via MOVEit  Posting Block created to update core system with loan payment information sent to Fiserv Data Center by way of MOVEit, offsets to Loan Clearing GL defined by Loan Department  Lockbox Server updated with images, and data for retention and research  Reports – customized based on Loan Servicing needs

IES Posting Block Format (output) Note: Determine the block number to be used FIELDLENGTHDESCRIPTION Account Number16Right-Justified and Zero-Filled Check Number10N/A Tran Code3375 (Regular Payment – With Extra to Principal) Tran Amount10Right-Justified and Zero-Filled Tran Date6MMDDYY Reversal Flag1N/A Trace Number12N/A Memo Post Flag1N/A Recurring Frequency1N/A Max Number of Times4N/A Filler6 Description80Left-Justified and Space-Filled

Loan Pym’t Processing Report (output)  Date Processed  Transaction Number  Sequence Number  Document Type  Check Number  Account Number  Document Scan Line  Amount

Lockbox Research Portal(output)

Summary/Questions  Motivated by sudden increasing volumes  Created Step by Step action plan  Leveraged current processes and vendors  Project plan and meetings helped keep group on track  Took about 4 months, but could have been shortened to 60 days if other priorities had not occurred  Another installation using Sunwest as a base model could be as short as 30 days (document approval & testing)