Understanding mirror images

Don Quixote was destroyed when suddenly confronted with a mirror. Instead of seeing the daring hero he imagined himself to be, he saw a bedraggled old man. Lenders may see a deal (and themselves) as the best thing since sliced bread until the credit officer shows them what they didn't see. Rather than fear and resent this mirror, lenders are encouraged to use it to advantage.

A question for line lenders. Have you ever thought of your loan administrator as a mirror?

An examination of the relationship between line officer and credit administrator using the analogy of a mirror can be enlightening for both parties. When you take a loan request to your loan administrator for approval, imagine that you are holding the request, the client relationship, and yourself up to a mirror for inspection. You can avoid bad luck in lending if you reflect on six qualities of a mirror.

1. A mirror image is at once extremely accurate, yet somewhat different from your "normal" view.

The human face is not symmetrical. While it is sometimes difficult to remember, the image you see of yourself in a mirror is not quite the same as what someone else sees when viewing you face to face. If you have ever looked at yourself in the multiple images provided by the mirrors in the fitting area of a clothing store or watched yourself on videotape so that you see yourself as others do, it can be rather disconcerting. However, a true mirror, with no distortions, gives a brutally honest depiction of what is placed before it.

The loan administrator also should provide an excellent depiction of a deal. The good administrators are honest, objective, and reflect the details of your request in such a manner that you can see them more clearly. The serious golfer might spend a great deal of time in front of a mirror analyzing his swing, knowing that the objective visual feedback, no matter how unflattering initially, is vital to growth and improvement. The lender who is serious about improving underwriting skills, and thus, the ability to more effectively deal with both loan administrator and clients, should welcome opportunities to "stand in front of the mirror.

As the human face is reversed in the mirror, so too is the depiction of the "banker's trilogy." If a lender holds up the three key issues for a portfolio--growth, yield, and quality, which also happen to be the motivations of most bank incentive programs--the loan administration mirror often reflects the reverse image of quality, yield, and growth. All three pieces are present for both parties, just in reverse order of emphasis. It is important to remember that you are both looking at all three measurement aspects, not any one or two to the exclusion of another.

2. The image in the mirror is limited to what is placed in its direct view.

Nothing is accomplished by hiding something off to the side. An accurate, objective reflection is only achieved when all of the issues relating to a credit are brought into full view. The physical mirror doesn't know enough to ask for more images to be brought before it to complete a picture. The knowledgeable loan administrator mirror is pleased when it feels it has been presented with all appropriate imagery and, lacking that impression, will demand it.

3. It is usually more comfortable to check yourself in the mirror when no one else is looking.

Whether it is evaluating that golf swing or doing the dental check after the spinach salad at lunch, you don't really need someone looking over your shoulder. While you might be proud and anxious to show off your swing or best smile after the fact, it's easier and more appropriate when it's just you and the mirror at the time of examination. The best communication and learning environment for the discussion of a credit request is a one-on-one situation free of distractions and privacy concerns.

4. Mirrors perform a variety of safety functions.

Consider all of the instances when you depend on a mirror for your safety. You use the rearview mirrors on your vehicle to ensure safety when changing lanes, to assist when backing up, and to keep an eye out for the gendarmes (so as to avoid higher insurance premiums). You have probably seen those convex mirrors mounted at blind turns in parking garages or at the exits onto busy streets that allow you to see oncoming traffic that would otherwise not be visible. The image also comes to mind of the action hero in the battle scene on a city street using a handheld mirror to peer around the corner of a building to see if the bad guy is in sight.

The loan administration mirror can likewise help you stay out of trouble. The administrator's experienced and objective reflection will prevent you from swerving into traffic, keep you in good stead with examiners (the banking equivalent of the highway patrol), and possibly even help you look "around the corner" to see what dangers may be lurking there. It took some time for you to learn to trust that rear-view mirror when you were learning to drive. While it may also take some time for you to learn to trust the effectiveness and value of your loan administrator, the "drive" will be much simpler and safer if you do.

5. If the back of the mirror is scratched, it loses its effectiveness.

The effective loan administrator cannot be "bought" or allow a decision to be inappropriately influenced by the lender or the client. It is desirable for you and your mirror to have a civil or amicable relationship, and even disagreements over credit issues need nor be taken to a personal level, However, a certain level of distance and objectivity must be maintained. Don't be offended when your administrator asks you tough questions or appears to be permanently stuck in the role of devil's advocate.

On the subject of joint client visitation with your administrator mirror, there is a fine line between the value of "kicking the tires and getting a feel for the operations and the people involved and maintaining arm 's-length objectivity. Most administrators choose to stay far away from that line.

6. Breaking a mirror results in seven years of bad luck.

Depending on the level of superstition to which you subscribe, you may or may not buy into this adage. It is, however, difficult to deny that breaking a mirror certainly eliminates its effectiveness and makes a mess. A breach of trust with your credit administration mirror most assuredly will lead to similar results. To an extent, an administrator will forgive inexperience, honest mistakes, and even poor judgment. He or she will nor, however, tolerate even the perception of dishonesty. A lender's credibility is an extremely valuable commodity, difficult to attain but painfully easy to lose. Without the respect and trust of your loan administrator, you are dead in the water. Your effectiveness in garnering new relationships and expanding existing ones is severely diminished to the detriment of yourself, the loan administrator, the bank, and the client or prospect.

You, Too, Can Be a Mirror

The lessons you learn by peering closely into your credit administration mirror can provide effective feedback to your clients. Bank clients constantly tell us that they want a banker who will listen to them, take time to learn about their business, and give them advice and information that might allow them to improve their performance. You should strive to provide an accurate, honest, and objective reflection of your client's business. This view should be fact based and should stick to the properties described above for your credit mirror.

The management of a bank, like that of any other company, is ultimately charged with increasing shareholder value. It is the examination of financial results in shareholders' mirrors that provides the final feedback as to the success and effectiveness of the bank as a whole and each of its employees. An understanding and appreciation of the common goals of lenders and credit administrators should lead each of us to a desire to use all tools at our disposal. The credit administration mirror is only one of those tools, but used effectively, it is one of the more powerful.

Contact Scott at KScott@BBandT.com

Kenneth Scott is regional credit officer and VP at BB&T, Raleigh, North Carolina. This article received the third-place award in the RMA 2002 Paper Writing Competition.

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