Abstract: Self-assessment has never been more necessary for bankers. Our industry is awash with overcapacity and the landscape is littered with the wreckage of our mistakes. The industry is said to be in transition, seeking broader regulatory approvals, new markets, and new products. Fine - change is inevitable. But the basic, proven principles of credit will not change. The future belongs not to those who innovate, but to those who reflect and remember. NBC's way. My institution, National Bank of Commerce, is a $2 billion southern regional headquartered in Themphis, Tenn. We have been fortunate to have above-average profitability and asset quality. We also enjoy the tenure and experience of a team of seasoned commercial lenders assembled in the mid-1960s to 1970s. All of the bank's senior officers are heavily and regularly involved in the credit process. This effort begins, as it must, at the top, with the CEO. (Incidentally, he was my predecessor as senior loan officer.) Our bank's credit culture can be characterized as risk-averse. The first necessary focus in lending money must be to avoid losing it. This is communicated consistently through the cornerstone of the approval process, the loan committee. In committee, management's expectations are reinforced and thus provide our lenders with a sense of direction. The committee depends on the seven senior officers who head our key line divisions. They average 21 years of experience, and five of the seven have never worked anywhere else. Because of this, they have broad responsibility, and loan authority is fairly decentralized. Overall, lending is driven less by formal written policy at NBC than it is at most institutions. About 85% of our loans are made within the confines of Shelby County. To us, a foreign loan would be a credit in Mississippi or Arkansas. We have learned that the farther from home we lend, the less ably we can anticipate a problem, the slower we can react, and the more costly it is to correct a mistake. Our credit management philosophy is simple: To maximize loan profitability, minimize potential loan losses - particularly exposure to large credit loss. Avoidance of concentration is communicated consistently. Despite a legal limit of $25 million, our house limit is $5 million. We rarely exceed this self-imposed ceiling and then only with the unanimous concurrence of the chairman, president, and the senior loan officer, myself. Indeed, downward revision of the regulatory legal lending limit would be as beneficial to our industry as any single action I can imagine. Size and style help. In all fairness, our size, or lack of it, is an advantage. Our size still permits all of our senior managers to remain involved in both credit approval and administration. What we don't know, we can find out quickly. What we don't find out, we can only blame on ourselves. Experience has taught the necessity for attention to the smallest, most basic details. A recent occurrence is a good example. Our CEO asked for the files of the six most recently approved equity lines. He examined each to see if he concurred. (He did.) This level of involvement is a clear signal to the organization. It is also very typical of the day-to-day actions of our top managers. Economic advantage. If our size is an advantage, so too is the Themphis economy. It is distribution-based, with limited manufacturing, and, so far, has suffered few of the excesses that have devastated other areas. Because of our size and the nature of the Themphis economy, we generally do not manage or assign responsibility by industry type in our commercial lending effort. Instead, we are attracted to good managements, strong balance sheets, and predictable earnings. Several of our strengths are in traditionally high-risk areas, such as commercial lending, asset-based lending, and real estate construction. …
Publication Year: 1991
Publication Date: 1991-10-01
Language: en
Type: article
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Cited By Count: 1
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