Carol H Tucker Passionate about knowledge management and organizational development, expert in loan servicing, virtual world denizen and community facilitator, and a DISNEY fan
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beladona Memorial Be warned:in this very rich environment where you can immerse yourself so completely, your emotions will become engaged -- and not everyone is cognizant of that. Among the many excellent features of SL, there is no auto-return on hearts, so be wary of where your's wanders...
Today in the Banc Investment Daily, this snippet caught my eye:
GAO Study: The Government Accounting Office reports its
analysis of the causes of community bank failures (<$1B in
assets) from 2008 to 2011 found failures were largely driven by:
credit losses on CRE loans, particularly loans secured by land
development and construction; aggressive growth strategies
supported by nontraditional, riskier funding sources; weak
underwriting; weak credit administration practices; and
accounting rules for loan loss reserves that did not allow banks
to use forward looking analysis (lead to inadequate allowances
to absorb losses). These are all “lessons learned” so bankers
should make sure to review each one and monitor things going
forward in these areas specifically, as regulatory exam teams
certainly will do so.
It is interesting to me that they specifically mention the areas of credit administration and the calculation for the Loan Loss reserves. Administration falls under Loan Servicing and is often taken to mean the analsysis of the financial information but it involves a lot more than that -- tracking convenants, managing document exceptions, reporting on portfolio concentrations to senior management, monitoring payments. Unfortunately, this vital position falls under what I call "housework" -- it is not a profit center but a cost and therefore most companies, especially the smaller ones, try and keep the resources allocated to that function at a bare minimum. The Loan Loss Reserves is a touchy subject as the regulators decided back in the 90's that banks were hiding taxable income by inflating their reserves and actually would levy penalities if they felt the reserves were too high, even if senior management felt that the risks in the portfolio needed it.
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