Commercial Lending: Managing and Mitigating Portfolio Risk

  • July 9, 2010

What a difference time makes. Three years ago, most banks were enjoying low levels of past-due accounts, criticized/classified loans and losses in their small business portfolios. Then came the recession and the financial crisis, which led to record losses and the subsequent failure of many banks.

Surviving the Recovery: How to Obtain Financing in the Post-Financial Crisis World

  • May 19, 2010

It’s one of the great ironies of economic cycles: There will be some companies that scratch and claw their way through the downturn, managing to survive the worst of the recession, only to fail when the recovery starts to kick in. The primary culprit is usually a lack of access to capital.

Commercial Lending: Debt Forgiveness and Foreclosure Tax Consequences

  • May 3, 2010

Do you realize that forgiveness of debt as part of a loan workout plan may be a taxable event for borrowers? If not, your borrowers could be in for a very unwelcome surprise from the IRS. For example, suppose you accept $300,000 from a borrower as satisfaction of a $500,000 debt. The IRS takes the position that the $200,000 difference is ordinary taxable income to the borrower, and you are required to send the borrower a Form 1099 stating this.

Commercial Lending: How to Spot “The Living Dead”

  • April 30, 2010

Zombies have long been popular among a certain segment of moviegoers, but what does this have to do with commercial lending? The present state of the economy and the small business segment, in particular, is starting to resemble a modern-day zombieland. There are a number of businesses today that can best be described as “the living dead”: They managed to survive the recession by aggressively managing receivables and inventory and delaying replacement capital expenditures, but are destined to fail once the recovery starts kicking into gear.

Commercial Lending: Deferred Tax Assets. The Good and the Bad.

  • April 28, 2010

When examining potential borrowers’ financial statements, some lenders are beginning to see something that’s unfamiliar to many of them: deferred tax assets. These are created as a result of timing differences that occur between book and taxable income for things such as depreciation and investment gains and losses. With more companies experiencing losses the past couple of years due to the recession, many are setting up deferred tax assets associated with their operating loss carryforwards in their financial statements. And there are many others that aren’t recording these deferred tax assets, but should be.

Hot Points For Your Next IT Exam

  • February 26, 2010

Our IT Security Specialist Chris Griesemer’s recent presentation at the Lunch’Learn – Technical Audits, Security and Best Practices in Finance and Banking seminar covered important points for financial institutions.

Securing Your Customer Files And Information

  • February 5, 2010

We have been doing IT exams for more than ten years and one overriding area of concern we see constantly is customer privacy. This has become one of the hottest topics with examiners lately. The examiners have a tendency to tell you to do something without giving any guidance. You will not receive an explanation on how to achieve their goals and sometimes they don’t even explain why. Customer information is one example. Why does it need to be so secure? This question has a lot of answers, but this article will focus on the internal risks.

Did The Repeal Of Glass-Steagall Contribute To The Financial Meltdown?

  • December 17, 2009

As a consultant to community banks, I was excited when Glass-Steagall was repealed in 1999. I saw it as an opportunity for community banks to offer additional services to their current customers and to find additional revenue sources to build value for their owners. What I didn't see was how the large banks would be able to leverage FDIC insured deposits to make risky investments in CDO's and CMO's that would ultimately lead to the financial meltdown nine years later.

Deferred Tax Assets For Banks May Be Questioned By Regulators

  • December 7, 2009

Deferred tax assets on a bank's balance sheets have always been a problem for regulators. Most of the deferred tax assets are currently disallowed for capital purposes. And now with banks piling up losses and creating deferred tax assets due to net operating loss carryovers regulators are taking a harder look at these assets. Writedowns of these assets are expected and will more likely hurt regional and community banks.