Tag Archives: Silverstone

Post Mortem

By Don Reavis

strong>don reavisMy friend Gib Blackman has invited me to finally contribute something to the world of written comments on the subject of banking. I say finally because for several years I’ve considered writing about subjects that are interesting to me but was never sure that they would be interesting to others. Now I guess we’ll all find out together.

I’ve chosen Post Mortem as the name of my blog because that’s the name many of us associate with the process of determining what went wrong in a banking situation that turned brown on us. More often than I enjoy thinking about, during my years in banks I occasionally had to do a jaw-dropping, “Huh! How’d that happen?” In my experience in my bank consulting practice I’ve run across yet others. My hope is that this blog can be instructive for some of you in banking still unscarred by unfortunate acts of commission and omission.

A good part of our consulting practice consists of problem loan workouts. If Murphy’s Law was ever a bedrock tenet of a banking process it’s got to be in workouts. Some of us who regularly do workouts would swear over a cold adult beverage that Murphy was an optimist at best. My blogs will frequently be about lessons learned from actual unpleasant situations. Better my readers hear them from me than experience them firsthand. I’ll be certain to mix the facts up enough to protect privacy and confidential information.

As a general comment this initial issue is to beg those of you with loan portfolio management responsibility to stop shooting yourselves in the foot. The situation I’m talking about occurs when you do the first credit downgrade like you’re supposed to, but then you wait until there’s been tons of unpleasant discussion with your borrower to figure out if you’ve got a valid Plan B alternative. Plan B is typically foreclosure and liquidation and the time to figure out if there’s anything that needs to be fixed is when you and your borrower are still smiling at each other.

Oh, I know you’ve got strict policies and practices regarding loan closing procedures, attorney drawn real estate docs, exception tracking and all the rest of those things that keep mistakes from happening. Just keep in mind my earlier comment that Murphy was an optimist. You will find that the largest percentage losses on a loan typically occur when there was some kind of preventable mistake that slipped through all of those carefully crafted policies and procedures.

So before you take careful aim at your wingtip, boot, or open-toed pump you need to think Plan B all the way through.  It’s what we call a workout assessment, and that means through the sale of that collateral you may have to foreclose and what you do about the probable deficiency. Just about anything you’ll need to fix is going to require some cooperation from the borrower so do your workout assessment while you’ve still got a chance to fix the problem. Those problems are out there—trust this old battle-scarred veteran banker!

My readers are welcome to send me their favorite stories of unfortunate banking situations. Misery loves company and I’ll include the most interesting ones in future blogs.

Don Reavis is President/CEO of Silverstone Consultants located in Richardson. He can be reached at don.reavis@silverstoneconsultants.com.” alt=”don reavis” width=”172″ height=”172″ />My friend Gib Blackman has invited me to finally contribute something to the world of written comments on the subject of banking. I say finally because for several years I’ve considered writing about subjects that are interesting to me but was never sure that they would be interesting to others. Now I guess we’ll all find out together.

I’ve chosen Post Mortem as the name of my blog because that’s the name many of us associate with the process of determining what went wrong in a banking situation that turned brown on us. More often than I enjoy thinking about, during my years in banks I occasionally had to do a jaw-dropping, “Huh! How’d that happen?” In my experience in my bank consulting practice I’ve run across yet others. My hope is that this blog can be instructive for some of you in banking still unscarred by unfortunate acts of commission and omission.

A good part of our consulting practice consists of problem loan workouts. If Murphy’s Law was ever a bedrock tenet of a banking process it’s got to be in workouts. Some of us who regularly do workouts would swear over a cold adult beverage that Murphy was an optimist at best. My blogs will frequently be about lessons learned from actual unpleasant situations. Better my readers hear them from me than experience them firsthand. I’ll be certain to mix the facts up enough to protect privacy and confidential information.

As a general comment this initial issue is to beg those of you with loan portfolio management responsibility to stop shooting yourselves in the foot. The situation I’m talking about occurs when you do the first credit downgrade like you’re supposed to, but then you wait until there’s been tons of unpleasant discussion with your borrower to figure out if you’ve got a valid Plan B alternative. Plan B is typically foreclosure and liquidation and the time to figure out if there’s anything that needs to be fixed is when you and your borrower are still smiling at each other.

Oh, I know you’ve got strict policies and practices regarding loan closing procedures, attorney drawn real estate docs, exception tracking and all the rest of those things that keep mistakes from happening. Just keep in mind my earlier comment that Murphy was an optimist. You will find that the largest percentage losses on a loan typically occur when there was some kind of preventable mistake that slipped through all of those carefully crafted policies and procedures.

So before you take careful aim at your wingtip, boot, or open-toed pump you need to think Plan B all the way through.  It’s what we call a workout assessment, and that means through the sale of that collateral you may have to foreclose and what you do about the probable deficiency. Just about anything you’ll need to fix is going to require some cooperation from the borrower so do your workout assessment while you’ve still got a chance to fix the problem. Those problems are out there—trust this old battle-scarred veteran banker!

My readers are welcome to send me their favorite stories of unfortunate banking situations. Misery loves company and I’ll include the most interesting ones in future blogs.

Don Reavis is President/CEO of Silverstone Consultants located in Richardson. He can be reached at don.reavis@silverstoneconsultants.com.