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Matured Loans: A Customer Service Failure

When you have a matured loan, what you have is a failure in customer service”

 

 When Richard Hamm said this during Barret’s Commercial Lending Academy, I was shocked. It was one of those moments in a class that hits you in between the eyes. Some people call them “ah-ha” moments or even “takeaways”. I prefer to channel my inner Homer Simpson and just say “d’oh!” Regardless, the statement at first hit me in a way that I didn’t believe him or thought it was extremely hyperbolic. However, as I thought more and more about it…

 He’s right.

 First, let me clarify that I was, by no means, a perfect lender. I have done plenty of 30-, 60-, 90- day extensions in my life to help even out the work load. So, I am not sitting in an ivory tower of piety and a perfect portfolio but that doesn’t make the point any less relevant to community banks. Regardless of our core systems or reporting mechanisms, we know when a loan is maturing. We know it enough ahead of time that we could go ahead and meet with the customer early and get the information. Even more than that, we could use that opportunity to build better relationships with the customer, introduce them to our senior management or even our support staff, or (best of all) show the customer that we are the ones on top of their relationship by being proactive and not running around with our hair on fire trying to get a tax return. (Again, I am the first to admit that I’ve been this lender…so, I get it!)

 Now, all of that is easy to say but very difficult to accomplish. Likely, you are a lender, the branch security officer, safe deposit manager, collateral vault manager, drive-through tube un-clogger (don’t you hate those things!), teller cash count supervisor, branch maintenance DIY, or some combination of all of it. This also does not cover the customers coming in to chat, drink your coffee, ask about an NSF fee, or just the regular walk-in traffic. However, (and this may take a whole 12 months to accomplish) we should probably take the time to look at our loan portfolio and organize our calendars for what makes the most sense for our customers…particularly our biggest customers!

 If your customer files a tax return extension, they are not going to have updated financials until after October 15. Why are we setting up renewals in May? The answer I would have given when I was in production was “Well we made the loan in May as a 12 month loan”. Ok, why did we set it up as a 12 month deal when it may make sense to do that when a 6 month deal makes more sense to get the relationship on a schedule that makes sense for everyone? Think about the quality of the conversation we would have in late September with that customer as they are putting together their financials and possibly uncovering additional needs?

 
Do we have to think conventionally about loan structure because that’s the way it’s always been done?!

 

For those that have followed me and my posts…you probably already know my answer here but I would say “absolutely not!”

 Another phrase I picked up from Commercial Lending Academy is “work hard by moving in a smarter direction”. I like that infinitely better than the standard “work smarter, not harder”. I will probably write another article about this new phrase, however, for this context it applies to this idea of being proactive in loan renewals. It is quite an undertaking to shift your portfolio towards this type of calendar. It might even take some unorthodox renewals or loan structures in order to accomplish. It might also cost you some fees on the front end in order to “right side” your loans.

 BUT…

 Look at what you get….better financial information, a better customer service experience, not being the banker that has to rush to get all the customer information you need at the last minute, not having to go to your customer and tell them you have to extend their loan another 60 or 90 days. All of these have the opportunity to gain the bank new business and deepen your already deep relationships.

 It’s a pretty good idea and one that I think might help most lenders start to distinguish themselves in the community, be better lenders, and grow their business.

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written by
Byron

Byron

Byron Earnheart is the Programming Director for the Barret School of Banking in Memphis, TN and the host of the “Main Street Banking” podcast…the only podcast solely devoted to community banks. He has over 15 years experience in the financial services industry; 11 of which have been in banking in various roles from teller work to branch management. He spends his time playing guitar and singing in Delta Heart (the “house band of the Mississippi Delta”), writing music, cooking, reading, and enduring the University of Tennessee Volunteers athletic seasons. He is married to his wife Kelly of 11 years and has two children, John Aubrey (11) and Mary Laura (7). If you'd like to hear Byron's music, check him out on Spotify:
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