7:30 a.m. to 8:30 a.m.: I start my day by catching up on e-mails/issues from the previous day. I check local and national news headlines and review market data. Since I support the Houston market, much of the market information is focused on the oil/gas sector. I also view www.businessinsider.com, internal bank-produced market data, www.bizjournals.com/houston, www.chron.com/business, and www.houstonchronicle.com/business.
8:30 a.m. to 9:00 a.m.: I prepare for meetings by viewing my current underwriting queue, pipeline activity, etc. During the weekly pipeline meeting, I discuss with the sales team active deals in the pipeline and what stage they are at and the probability of closing the deal. Typically we have a credit meeting in which we update our manager about what we are working on for the week, any hot-button issues with underwriting, etc., workload adjustments, etc. I prioritize a “to-do” list for the next day or two. This list can include obtaining/reviewing financial statements, spreading, reviewing loan documents, underwriting a credit approval, preparing a deal screen to discuss with risk management, etc.
9:00 a.m. to 10:00 a.m.: I participate in weekly credit team meetings and sales team meetings to discuss the status of existing deals, prospective deals, or any issues with the credit process. There are many issues that affect the credit process, but the most common include delay in financial reporting, covenant violations (identifying what caused the violation, issuing a covenant waiver letter or reservation of rights letter), clarification of items contained in the financial statements, issues with documentation (taking too long, improperly worded covenants, mistakes in loan documents), issues with background investigations of the company and its management, etc.
10:00 a.m. to 12:00 p.m.: I analyze financial statements, research industry/company information, and evaluate collateral and cash flow for business loans. The financial statements are spread once we obtain the statements from the client. This allows you to view the categories, ratios, etc. What am I looking for? For the balance sheet, I am looking at key ratios like a liquidity ratio (current ratio), balance sheet leverage, and cash flow leverage. If we are going to provide a working capital line of credit, I’m looking at their borrowing history (do they pay back the line of credit or just leave the balance out there), accounts receivable turnover and inventory turnover. For the income statement, I’m looking at revenue, gross profit margin, and net profit margin (net income after tax) trends over the last three years. I identify any changes and determine why.
Other tasks include structuring facilities in line with credit policy, assigning a risk rating based upon risk profile and financial performance, determining pricing, and approving credit facilities via formal credit approval document and credit software system. The bank uses Internet-based software for our credit approvals, which contains all of the information in the underwriting process. We also use a Word document to provide the bulk of the underwriting and that focuses on what the company does, ownership/management, loan request, collateral, primary sources of repayment, secondary sources of repayment, guarantor support (if any), risk rating, and industry/market analysis.
12:00 p.m. to 1:00 p.m.: I take a break for lunch.
1:00 p.m. to 1:30 p.m.: After lunch, I catch up on e-mails, calls, etc.
1:30 p.m. to 2:30 p.m.: I participate in a portfolio monitoring meeting with the credit team and support staff. I discuss upcoming renewals/reviews of credits, past due financial statements, past due payments, high attention credits, etc. High attention credits are credits that are showing signs of distress (i.e., performance decline, primarily revenues, net income, cash flow, loss of a client, etc.). They are monitored more closely than standard credit relationships to identify additional signs of trouble/concern.
2:30 p.m. to 5:00 p.m.: I make calls to clients to discuss questions regarding a business model, loan request, financial performance, etc. and document details for the credit approval document. I also participate in conference calls with the risk department to present the deal if it falls above my authority or in a specific industry with risk. This includes a summary, structure, financial highlights, risks/mitigants, and recommendation. I perform lots of due diligence follow up on deals that have been approved [ordering/reviewing appraisals (both real estate and equipment)]. I also perform due diligence on environmental reports (phase I reports). Depending on the size of the real estate deal, the bank requires either a questionnaire or phase I report. An environmental questionnaire is a checklist of sorts which is completed by the borrower in order to identify any potential environmental issues with the property taken as collateral (underground storage tanks, etc.) A phase I is required for larger deals or if the borrower operates in an environmentally sensitive industry (e.g., gas station, etc.) and is performed by an independent third party to evaluate the environmental issues with the property along with recommended remediation prior to funding our loan. The environmental concerns noted could significantly impact the bank’s position in the collateral and our ability to resell the property if needed. Finally, I review field exams, which are like an appraisal of sorts. However, a field exam focuses on reviewing collateral such as accounts receivable and inventory, which often secure working capital lines of credit. It’s an in-depth analysis of the company’s customers, bookkeeping, collections, receipts, payments, etc. to make sure the collateral (accounts receivable and inventory) are good quality and sufficient to support repayment. Inventory could include categories like work in process, finished goods, or raw materials. The field exam is performed by the bank and will determine acceptable advance rates on the collateral and any reserves for inventory that is slow-moving, obsolete, etc.