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.

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.

Commercial Lending…More Lessons: Equity and Contingent Liabilities

  • October 26, 2009

In addition to those detailed in our article, Commercial Lending...After The Crisis: Back To Basics, here are two more hard lessons learned from the financial crisis:

Commercial Lending…After The Crisis: Back To Basics

  • October 1, 2009

Now that we have digested the fact that most banks' loan portfolios are weaker today than they were two years ago, it's a good time to review a few of the basics of commercial lending.

Options For Distressed Debt

  • December 15, 2008

One result at the credit crisis that has rocked this nation's financial system over the past year has been an abundance of distressed debt for sale in the commercial marketplace. Well, one man's trash may indeed be another man's treasure, since a growing number of firms are interested in purchasing this debt.

It’s Not What It Used To Be

  • December 15, 2008

The competitive landscape for community banks today looks very different than it did just a year or two ago. The fallout from the subprime mortgage collapse and ensuing credit crisis has claimed its share of nonbank credit providers, such as mortgage bankers and specialists, captive finance companies and monoline credit card companies. Many of these lenders arose because they could take their products to the secondary market, but the turmoil in securitization has dried up many of their funding sources, either putting them under severe constraints or out of business entirely.

Hiring Lenders in Today’s Environment

  • December 15, 2008

Hiring and retaining qualified commercial lenders remains one of the biggest challenges for many community banks. In the past, large commercial banks served as the “farm system” for training and developing new lenders, and community banks were often able to recruit well-trained lenders from them. But with fewer big banks now providing this kind of training, there are fewer qualified lenders - who possess both sales/relationship and technical credit and underwriting skills - for community banks to choose from.