At a Glance
- The unprofitable middle market relationship is almost never a credit problem. It pays as agreed, renews on schedule, and quietly absorbs a disproportionate share of underwriting time, documentation exceptions, servicing touches, and committee agenda.
- Most providers cannot identify these accounts because return is measured at the transaction level and cost is measured at the department level, so the two never meet on the same page.
- Relationship managers defend them for rational reasons: the account is a large number on a coverage list, the RM is paid on volume, and exiting a client is career-visible in a way that carrying one is not.
- Termination is rarely a phone call. It is repricing to the return the relationship should have carried from the start, and letting the client decide.
The Account That Never Shows Up in the Loss Column
A composite that will be recognizable to anyone who has run a middle market portfolio: a family-held metal fabricator, roughly $120 million in revenue, with $8 million of outstanding exposure across a master lease and four schedules covering press brakes, a fiber laser, and material handling. The company has never been late. It also requires a custom quarterly reporting package that operations builds by hand, negotiates every schedule off the master rather than executing under it, insists on a bespoke insurance endorsement that legal reviews each time, refuses to sign a standard EFA and requires a modified true lease with an early buyout it exercises inconsistently, and calls the relationship manager weekly. Its last three transactions priced 90 basis points inside the book because the CFO shops every deal to a bank revolver and a captive.
Nothing in that description triggers a review anywhere. The credit is clean, the balance is large, the RM lists it as a top-five relationship, and the account has been on the books for eleven years. It is also, on any honest accounting, losing money.
