Consulting-Lending
SCS helps family-owned Standard Bank grow into its own
Managing growth is a critical part of any institution’s strategic plan. But for family-owned Standard Bank and Trust, it meant letting go of some of the ways things had been done for generations.
The $2 billion Chicago/Indiana-area bank had evolved into a primarily commercial banking enterprise, but needed to revamp its loan approval process to enable front line officers to spend more time putting deals together.
“They were moving from being sort of a community bank to being a larger player, but hadn’t changed thresholds or processes,” said Bill Eavenson, Sheshunoff Consulting + Solutions Engagement Manager. “Officers were spending far too much time in committee to get loans approved.”
So they called on Sheshunoff Consulting + Solutions—a company with whom they’ve had a longstanding relationship.
“We have built a long-term relationship with SCS having contracted for the use of the company’s services in 1993,” said Lawrence Kelley, President and Chief Executive Officer. “Our bank has benefited from using both the firm’s professional consulting services and software product offerings. The most recent project focused exclusively on lending and credit processes, benchmarking and revenue enhancement.”
SCS took a look at the bank’s approval process for lending and credit, and discovered some organizational inefficiencies and a few antiquated policies that were slowing down the lending process, thereby limiting the bank’s potential for growth. Specifically, they needed to:
- Move support duties from line officers to support departments
- Increase efficiencies and consolidate the two existing Loan Servicing Departments
- Transfer responsibility for exception review and reporting, largely being handled by the line officers and their assistants
- Eliminate sub-committees and increase the thresholds for Loan Committee and Board approval
“What we tried to do was develop an organization where we looked at pushing support activities to the back office, so that front line people could focus on building relationships,” Eavenson said. “We looked at current loan policies, how loans were originated and approved, what the role of Credit Administration was, and how the bank serviced loans. We spent a lot of time looking at the hierarchy of the approval process as well as committee structures.”
In order to speed up loan closings and minimize exceptions, SCS recommended the creation of a Loan Closing Unit to handle all approved commercial loans from approval through closing. This new department would be responsible for all document preparation and due diligence. In addition, the responsibilities of the Credit Department were expanded to include credit file safekeeping and financial statement tracking and reporting. Finally, in order to reduce the number of loans that had to go through the approval committee, SCS recommended increasing the Loan Committee threshold to $1 million and the Board approval threshold to $2 million, and increasing loan officer lending authorities to support these higher limits.
“We freed up the loan officers from administrative tasks so they could focus on business development and client relationships,” Eavenson said. “Second, the changes allowed the bank to limit exceptions that typically come about once loans are booked on the system by allowing a Closing Unit to handle coordination. Through all this, we created a little more operational efficiency, allowing them to reduce head count if they chose to do so over time. Additionally, we provided them with staffing models that would allow them to more objectively determine needs, as the company grows, based on new procedures and roles.”
Throughout the process, SCS used its Action Team methodology to ensure all parties were kept in the loop and regular communications were set up to create buy-in.
“The bank personnel on the Action Team appreciated being part of the process. They helped shape recommendations and were involved in implementation planning and execution,” Eavenson said. “Sometimes the people not directly involved in the process get anxious. We developed a communication plan where we used the company’s intranet to keep others informed about what we were doing and when, and to communicate to people how their work would be affected. Through our efforts to keep people informed, there was a lot more buy-in for what we were doing.”
SCS also held weekly update sessions with management to review changes and ensure everyone was on-board with the recommendations.
“As a family-owned institution they felt very strongly about trying to maintain the way they had been doing things. But they ultimately understood the need for change,” Eavenson said. “The challenge was not so much in coming up with what they needed to do, but more importantly, how they could get from point A to point B without creating disruptions.”
And management was indeed happy with the results.
“The results of the three-month engagement identified over $900,000 in projected benefits,” Kelley said. “Our management team was pleased with the work provided, the professionalism of the consultants, and the ongoing support provided following the completion of the on-site effort. I would not hesitate to hire SCS for additional future projects.”