South Canterbury Finance's trustee has told the High Court in Timaru he became concerned about the state of the business in 2008, two weeks before it was accepted into the Government's retail deposit guarantee.
The evidence came on day 11 of the trial of three directors who face fraud charges over the company's collapse in 2010.
This resulted in the Government paying $1.6 million to deposit holders.
On Wednesday, Yogesh Mody, a manager at Trustees Executors, SCF's trustee, said he adopted a high alert attitude from 2008 and began attending board meetings.
He said a major concern was the quality of its loan book and the increasing number of loans falling due without being paid.
Mr Mod, said their concerns continued to grow until 2010 when they called in the receivers.
The next witness due to appear is Andrew Borland, a director of the South Canterbury Finance parent company, Southbury Group.