Take Care of the Small Things

All to often when you have several loans to close, customers waiting to see you and a myriad of committee meetings that you have to get to, something inevitably gets missed.   However, with quality control, aka loan review – hopefully, that item missed will be found.  But what if it is not?

So many times in doing reviews for my clients I will see something that seems so innocuous,  but could have a huge impact on the particular loan or borrower.  For instance, I once saw a financial statement where the borrower had included the face amount of a life insurance policy in assets on the bank’s personal financial statement.  After I made the adjustments to the PFS the resulting NW was negative.  Or the time where the customer did not want the loan officer to come out to his house to review some collateral.  His excuse was that he was ashamed of how his place looked and didn’t want the officer to see his house.  As it turns out, the borrower was manufacturing drugs.  It is easy, especially in a small town community bank environment to allow the customer some lee-way – we know the customer, we went to high school with them, we’ve grown up with them all our lives, we go to church with them – you’ve heard all these, may have even used one of these a time or two.  The truth is:  familiarity breeds loose loan files.

Don’t overlook the small things in your loan workup, regardless of size.  Look at your own portfolio; look at the average size of the charge-offs.  Or look at the charge-off for the entire bank.  I would venture a guess that the average size is relatively small. We let the small loans go unattended while we issue our focus on the large loans.  Pay attention to the details; re-add the PFS.  Listen to the customer.  Make sure the collateral is perfected.  When ratios do not make sense, ask the pertinent questions.  Details, while seemingly burdensome are important.


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