Improving loan officer productivity

RMA Journal, The, June, 2002 by Terry W. Anderson, J. Kempton Shields, II, Kathryn E. Tusler

Another institution tackled the insurance issue from a different perspective. Its loans are graded on a scale of 1-7, the first four grades of which represent varying degrees of passing quality. A study of the loss history on their 1-4 graded loans revealed that it simply was not worth the time and expense to follow up on and obtain insurance coverage. Therefore, it is no longer required.

There are, of course, exceptions: Loans graded 5-7 and all real estate loans. Accordingly, all borrowers are required to have insurance initially. However, after the initial loan is made, risk-rated 1-4 borrowers are excluded from verifying insurance annually. Insurance is still required, but it is presumed to be in place unless the bank is notified by the insurance company that the policy has expired.

Another bank now encourages companies that borrow regularly for working capital purposes to apply for a specific line of credit based on a grid note. Once this line has been granted, borrowers have access to their lines by contacting the commercial note department directly rather than their lender. The resulting efficiency has been noticed by both the bank's lenders and customers.

Correcting Procedures/Misunderstandings

Account officers at one institution were notified that a financing statement had expired after the five-year statute of limitations date had passed. This, of course, posed irritating problems and occurred because the loan accounting system did not have the information set up correctly. By adjusting the information on the system, the tardy notification problem was resolved.

Lenders at a large regional bank structured with regional note centers were receiving reports from the loan accounting system almost a week late. The reports were printed on Wednesday night, sent to the regional center on Thursday, and distributed Friday. Because of internal mail service, many lenders did not receive this information until Monday. To solve the problem, printers were placed in the regional centers, enabling the reports to be run off at the centers. The distribution process was shortened by one day, thus providing lenders with current information on a more timely basis.

Improving Communications

Credit applications at one bank were not consistently taken from endorsers and guarantors of loans because the task was viewed as burdensome. On investigation, it was revealed that many lenders had not realized this task was required by Regulation B. By providing this background information, lenders and customers were less resistant to providing application data.

Staff Realignment/Restructure

Another common and often useful approach is to restructure the staff and its job descriptions. At one midwestern bank, each account officer has an administrative assistant. The officer makes customer service decisions, sells other products, and is backed up in these tasks by departments that provide analytical and review support. The administrative assistant handles the documentation and follow-up activities, as well as the follow-up chores related to insurance needs, past-due loan reports, past-due financial statements, etc. This person also helps put presentation sheets together for loans being shown to loan committees.