Advice General

WE’VE GOT A SECRET

Posted on September 9, 2016 Published by

In the past eight years, we have had the privilege to work with numerous financial institutions and have embedded ourselves into a variety of credit cultures, credit processes, and credit quality. Once we begin to work with a client, it does not take much time to gain a good understanding of the performance of the institution regarding credit administration and loan portfolio management. In our experience, we believe there is one critical role within a financial institution that may be taken for granted, and it seems to be one of the best kept secrets in the industry.

Credit administration is a high-demand, low-glamour role that requires accountability, oversight, and quality control to function at a high level. For purposes of this blog, credit administration refers to loan documentation, loan closing, post-closing, imaging, processing, exception management, and the on-going tracking of a credit relationship. The credit administration management process takes both attention to detail and the right individual to effectively manage people and reinforce an appropriate risk management culture for the institution. Success always starts with the right people in the right roles. It is a uniquely talented professional who possess the skills and desire to truly excel in a credit administration position. These people can truly be “rock stars” of the organization, driving efficiency and effectiveness for the institution. We believe this role is under-rated in the impact they can provide to effective portfolio management, customer experience, and profitability of the institution.

Credit administration can either flourish or flounder. The credit culture set by both the institution’s senior management and credit policies will greatly influence the significance and support afforded to the credit administration function. It is our observation the higher performing institutions align their risk philosophy with the expectations placed upon individuals in these positions. As such, the higher performing institutions have placed their trust in people who understand and appreciate the significance of their role and the overall contribution they can make to the organization. It is these institutions that have the right people in the right places. They understand how critical their role is and how pervasive their tone may be throughout the rest of the company.

Credit administration plays a vital role to the overall health of the institution. It should be a control point within the credit process where credit culture and credit policy are reinforced. We believe the significance of this role can be under-appreciated in many institutions for a variety of reasons. However, with the right people and processes, credit administration can contribute to a healthier credit culture, possibly minimizing controllable losses for the institution, and affording more time for customer-facing employees to be more effective. This secret might be one worth sharing.

 

Enlighten Financial is a specialized consulting firm that focuses on loan review and risk management services to community banks and credit unions. Enlighten Financial has made it our business to shed light on the complex financial landscape, and lead clients in the right direction. We work with financial institutions and other providers to mitigate risk. To talk to us directly, please call: (920) 445-8881.

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“The staff at Enlighten have been available for questions, in addition to the engaged work that they do. They've been very helpful as a resource beyond the major audit.”
— Meghann Kasper, Chief Credit Officer, Bank First
“Enlighten gives us a very good second set of eyes on our transactions. They're not afraid to challenge us on some of the work that we've done, which is what is needed. I don't need to pay somebody to tell me I'm good, I need to pay somebody to tell me where I've made mistakes.”
— Robert McPherson, VP of Risk Management, Peoples State Bank
“Enlighten provided industry best practices that weren’t going to show up in an audit report. They would say, ‘Hey, I noticed you do this. This is really unique, you do a really great job of it.’ And then they might add, ‘Some other clients that I have are doing something like this.’”
— Bill Beardsley, President, Michigan Business Connection
“By questioning some of our methodologies, Enlighten has helped us say, ‘Okay, this is where we need to train staff better and focus on so that they understand what they're doing better.”
— Robert McPherson, VP of Risk Management, Peoples State Bank
“The organization of the communication — before, during, and after the reporting process — was certainly better with Enlighten than what I've experienced with a lot of auditors.”
— Bill Beardsley, President, Michigan Business Connection
“The staff at Enlighten have been available for questions, in addition to the engaged work that they do. They've been very helpful as a resource beyond the major audit.”
— Meghann Kasper, Chief Credit Officer, Bank First
“Enlighten gives us a very good second set of eyes on our transactions. They're not afraid to challenge us on some of the work that we've done, which is what is needed. I don't need to pay somebody to tell me I'm good, I need to pay somebody to tell me where I've made mistakes.”
— Robert McPherson, VP of Risk Management, Peoples State Bank
“Enlighten provided industry best practices that weren’t going to show up in an audit report. They would say, ‘Hey, I noticed you do this. This is really unique, you do a really great job of it.’ And then they might add, ‘Some other clients that I have are doing something like this.’”
— Bill Beardsley, President, Michigan Business Connection
“By questioning some of our methodologies, Enlighten has helped us say, ‘Okay, this is where we need to train staff better and focus on so that they understand what they're doing better.”
— Robert McPherson, VP of Risk Management, Peoples State Bank
“The organization of the communication — before, during, and after the reporting process — was certainly better with Enlighten than what I've experienced with a lot of auditors."
— Bill Beardsley, President, Michigan Business Connection