CFC Quarterly Financial Performance
CCBX.CO
CCBX LOAN PORTFOLIO STATISTICS & LENDING APPROACH
1. Well-Funded Partner Cash Reserve Accounts
Partner pledges/places cash in a Bank controlled deposit account at an agreed percentage of the loan balance:
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We call this account the cash reserve pledge account;
The Bank has the right to access the cash reserve account for losses when they occur;
The percentage in the cash reserve account is determined based on underwriting criteria and the loss rate expected on the loan
category and frequency on which the account must be replenished/backfilled (weekly or monthly); and
We monitor cash pledge accounts regularly to determine if any replenishment amounts are late and to determine consistency of losses
with underwriting.
2. Underlying Financial Strength of Our Partners
CCBX Partner ("Partner") contractually agrees to cover credit and fraud losses on loans they originate beyond the cash pledge account and to
replenish the cash pledge account:
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Terms are specified in program agreement;
We compensate the Partner for taking on this risk by paying Partner for credit and fraud enhancements which are reflected as BaaS loan
expense on our books; and
If losses are managed well and lower than expected, then the Partner has higher net revenue (revenue received from the Bank less losses
paid to the Bank)- they have a financial incentive to underwrite correctly and reduce/contain losses. We call this skin in the game.
3. Full Economic Benefit and Retention of Loans
Credit enhancement waterfall approach:
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Cash reserve pledge account is available to cover ongoing loan losses and is replenished weekly or monthly;
The Partner contractually agrees to replenish the cash pledge reserve account based on its financial wherewithal (cash, capital
reserves, and future earnings);
If account is not replenished, then the partner is in default of the agreement and the Bank can withhold credit and fraud
enhancement and loan servicing revenue until the account is replenished - the Bank has back-up loan servicing options for partners
if it needs to take over servicing;
If the partner defaults, then the Bank retains all interest to cover future loans, would write-off any amounts due from the partner.
Note - Loan losses on the loan portfolio will have already been incurred and recognized from using the cash pledge reserve and the
cash pledge reserve replenishment feature (financial wherewithal of Partner) so the portfolio that the Bank will be taking over and
incurring losses on will be partially or fully seasoned, so loan losses going forward would be anticipated to be lower than the initial
losses on the portfolio already incurred by the Partner.
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