Lending Officer Pain Points

Posted on Wed, Aug 06, 2014 @ 06:08 PM

clarke farmer Author: Clarke Farmer,

My family recently vacationed in the mountains. The highlight of the trip was our hike to the summit of Wheeler Peak near Taos, NM. As you know, a stroll up to 13,161 feet can become quite dangerous in July if one lingers too long to enjoy the view. It didn’t seem to matter how prepared we were for the hazards of the journey, I still couldn’t get my wife and kids down that mountain fast enough when the afternoon storms started brewing. Furthermore, I’m not sure why I subjected my poor body to the aches and pains that followed the next day. Wouldn’t it be nice if lenders could simply “head down the mountain” when things get dangerous or painful with a lending relationship?

After a few conversations with lenders I’ve met in my travels, I am curious to know more about what causes “pain” for lenders in this post-recession era. How have those concerns changed in recent years?

What I have so far seems consistent with most time-honored industry issues, elementary to those lenders that have been around for a while. Below is a very brief summary of a few items gathered over coffee. Please consider chiming in to add your commentary.

Credit losses rank at the top of my client’s concerns. This usually occurs when the business becomes less profitable, undercapitalized or shrinks. The causes seem consistent over time:

  • Changes in the industry
  • Changes in the local market or economy
  • Something specific to the borrower such as poor or ineffective management
  • Etc…

Losing a new client opportunity to competition ranks high as well. With the strong liquidity of recent years, many institutions are hungry for new loan business. A lender whose compensation plan is influenced by portfolio loan growth doesn’t want to lose any good business to the other guys. The challenges remain historically consistent here. How do we maintain credit standards while haggling over the rates, terms and products?

Losing a good current customer to the competition can be personally painful for the lender. All of the variables affecting new relationships apply, in addition to the customer’s banking experience. If the personal relationships are solid, what caused the customer to make the business decision to leave? Was it…

  • Rate, terms or product?
  • A customer service issue?
  • An organizational/reputational issue with the institution?

How does today’s regulatory environment impact all of the above? The most senior bank executives I visited believe this has a significant ripple effect. Consider just a few of the negative effects caused by enhanced regulatory pressures:

  • Dilutes staffing – placing more administrative responsibly on customer-facing bank employees; may reduce quality of customer service
  • Limits ability to offer product variety
  • Limits ability to offer broader range of terms or structure

So, what have I missed? I’m thinking about additional variables such as client-facing technology, mobile applications, non-bank competition or organizational culture.

As readers of this blog, what would you add to the discussion from your perspective?

Tags: loans, loan volume, lenders, lending opportunities, loan profitability

Economic Outlook – Time to dust off that crystal ball

Posted on Wed, Apr 20, 2011 @ 11:15 AM

PatTrue 50x50 Author: Pat True,

PS GlobeCrystalBall 042011Forest Gump definitely would recognize the current US economy because it so closely resembles his box of chocolates.  You never quite know what to expect each day when you try to gauge the business outlook.  Some industries, like transportation appear to be making their way back from historically low levels while others are still limping along.  For some sectors its business as usual while others, such as energy and auto manufacturing, are engaged in the process of totally re-inventing themselves.  The same can be said of the American work force.  Unemployment rates continue to hover above 9% and consumer confidence charts look like the blueprint for your average roller coaster.  The questions for those of us in banking are – How will all of this impact our business during the current year, and will we see a return to loan growth?

As many businesses begin a stage of measured growth to pre-recession levels, demand for bank loans is likely to follow.  Much has been written in the press about the credit crunch as one reason for the slowdown of bank lending, but little has been noted about the fact that loan demand has been low to nonexistent during the past three years.  For banks ranging in size from $100M to $1B, Commercial & Industrial loans on the books declined by more than 8.5% during 2010.  That trend is not likely to continue.  Key industries within the US are poised to experience more significant growth as 2011 continues.  Moreover, these industries are the tried and true banking clients including farm equipment, auto parts, aircraft parts, building material, machine tool and others.  Most of these are capital intensive business sectors that require investment in equipment as well as working capital financing – especially as annual growth rates exceed 5%.  These are also industries that help create opportunity for smaller satellite firms as well as for the labor force.  Here is a brief list of some of the more promising industry growth forecast courtesy of *First Research:

Prospecting Metric: Industry Growth Forecast




Wind Power Generation


Residential Real Estate Construction


Home Centers and Hardware Stores


Manufactured Housing


Solar Power Generation


HVAC and Plumbing Contractors


Building Material Supply


Electrical Contractors


Roofing, Siding, and Sheet Metal Contractors


Drywall, Plaster, Acoustic & Insulation Contractors


Painting and Wall Covering Contractors


Framing Contractors


Site Preparation Contractors


Concrete and Masonry Contractors


Wood Flooring Manufacture


Truck and Bus Manufacturing


Automobile Manufacture


Commercial Construction Contractors


Machine Tool Manufacture


Automobile Parts Wholesale-Retail


Industrial Machinery Wholesalers


Automobile Dealerships


Wireless Telecommunications Services


Construction Machinery Manufacturing


Computer and Office Equipment Distributors


Search, Detection, and Navigation Equipment Manufacture


Timber Operations


Paint and Wallpaper Stores


Paint and Coating Manufacturing


Computer Manufacture


Aircraft Parts Manufacture


Farm Equipment Distributors


Material Handling Equipment Distribution


The big question for the next twelve months is - Will it be enough?  At best, the current US economy is a mixed bag.  Labor markets appear to be mending, but the return to an unemployment rate south of 6% is likely to take several years.  In the short term, higher fuel and food prices are likely to curb consumer spending and slow the recovery.  Ongoing crises overseas are also likely to impact the rate of expansion here in the US.  Still though, I’m optimistic on the economy because of the opportunities it presents.  We have a chance to change everything from how we work to how we make cars to how we create energy.  Those changes themselves will create new industries and new jobs that will lead both the US and the global economy forward.

*Data taken from March 11, 2011 report provided by First Research, a division of Hoovers, Inc.   Hoovers is a Dunn and Bradstreet Company.

Tags: loans, loan growth, economy, economic, global

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