MBFS Quick Hits: Latest in Credit With Kristina Paulson

Annual reviews of commercial lending take center stage as Mark Ritter hosts Kristina Paulson on Credit Union Conversations. This MBFS Quick Hits episode tackles year-end commercial loan annual reviews and the persistent debate over K-1 documentation. Kristina, AVP of Credit Services at MBFS, shares practical strategies for managing unresponsive borrowers and explains why tax return analysis alone isn't sufficient. The conversation explores improvements to the credit analysis process, portfolio risk assessment techniques, and how commercial loan policy updates can reduce low-value activities. Learn why cash flow calculation requires K-1 forms and discover relationship-building opportunities hidden within the annual review process.

WHAT YOU WILL LEARN IN THIS EPISODE:

✅ How to handle uncooperative borrowers during the annual review season, including escalation strategies like formal demand letters and default rate implementation when borrower financial statements aren't provided.

✅ Why K-1 forms are essential for accurate cash flow calculation and how they reveal distributions and contributions that standard tax returns cannot show, making them critical for proper credit analysis.

✅ How to update your commercial lending compliance policies to focus resources on high-risk loans rather than reviewing every small business loan in your portfolio, improving efficiency while maintaining regulatory standards.

✅ How annual reviews create sales opportunities to identify needs like lines of credit or refinancing options while monitoring portfolio health and strengthening business services relationships.

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TIMESTAMPS:

00:00 Kristina shares her commercial lending career path and role as AVP of Credit Services at MBFS

03:12 Year-end annual review challenges and common borrower communication issues discussed

05:15 Red flags when borrowers avoid providing financial statements and potential underlying problems

06:05 Enforcement strategies and why credit unions must establish consequences for non-compliance and sales opportunities within annual reviews, including lines of credit and refinancing options

09:01 Commercial loan policy updates to focus on high-risk loans versus low-value activities

10:54 K-1 documentation importance explained, and why tax returns alone are insufficient for cash flow analysis

KEY TAKEAWAYS:

✅ Unresponsive borrowers during annual review season often signal deeper financial problems—lack of cooperation after multiple attempts should trigger escalation, including formal demand letters and potential default rates to enforce loan agreement requirements.

✅ K-1 forms are non-negotiable for accurate commercial lending analysis because they reveal distributions and contributions that impact cash flow, information that standard tax returns simply cannot provide to lenders.

✅ Modern commercial loan policies should be risk-based rather than reviewing every loan—focus credit analyst resources on larger, higher-risk transactions. In contrast, smaller loans, such as vehicle financing, require minimal oversight for efficient portfolio management.

RESOURCES MENTIONED:

Mark Ritter - Website

Mark Ritter - LinkedIn

MBFS Website

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