Consumer Lending School

August 27-28, 2008  November 4-5, 2008   (click class date at left for details and pricing)

Consumer lending at banks has increased 40% nation-wide since 2000, yet most community banks still avoid empirical credit scoring methods, preferring to use judgment-based decisioning.Credit Risk Management, L.L.C. also favors this approach and many of our clients use an exception-oriented risk grading worksheet to objectively underwrite consumer loans. Learn how to use the worksheet as well as key techniques, such as calculating debt ratios, reading credit bureau reports, evaluating personal financial statements, and meeting minimum unsecured lending standards.

Who Should Attend: New or experienced lenders who want to improve their underwriting techniques and increase their utilization of Credit Risk Management's spreadsheet tools and the online credit manual.

Course Outline:

• Day 1 - Secured Underwriting
• Day 2 - Unsecured Underwriting

Course Content:

• Calculating loan-to-value and the debt ratio
• Review, analysis and comparison of credit reports and Personal Financial Statements
• Determining a borrower's actual net worth
• Determining when and what mitigating factors to use for exceptions
• Making use of the three methods (Adjusted Net Worth, Gross Annual Income and Stable Liquid Assets calculations) to analyze unsecured loans

Credit Underwriting with CRM Toolbar Applications

September 9-11, 2008  December 9-11, 2008   (click class date at left for details and pricing)

Valued Credit Risk Management, L.L.C. clients have multiple spreadsheet tools provided to assist in proper underwriting and structuring of consumer, commercial and real estate credits. In response to growing demand, we are offering a unique training course, dedicated to maximizing your investment in the most commonly used spreadsheet underwriting tools.

Who Should Attend: Any lender, underwriter, manager, credit officer or executive who wants to sharpen specific consumer, commercial and real estate underwriting abilities, tax analysis skills or expand their general knowledge of current market risks and opportunities.

Course Outline:This fast-paced, three day course is spreadsheet intensive and will cover:

• Day 1 - Tax Analysis, Business Operating Cash Flow and Global Cash Flow
• Day 2 - Construction Lending, Residential Builders and Developers and Income Properties
• Day 3 - Full Financial Statement Spreadsheets and Projections and Lines of Credit, Secured and Unsecured Consumer Lending

Course Content:

• Determining personal cash flow via tax return analysis for individuals with multiple sources of income
• Analyzing historical cash flow of operating businesses
• Calculating the overall or "global" cash flow of a group of related businesses
• Understanding the hidden cash needs of operating businesses through balance sheet analysis
• Key financial statement ratio analysis
• Running financial projections
• Setting appropriate advance rates for lending against Inventory or Accounts Receivable
• Evaluating debt service capacity of commercial investment real estate ("income properties")
• Sensitivity testing
• Servicing real estate development credits
• Calculating loan-to-value, debt ratios and a borrower's actual net worth
• Determining when and what mitigating factors to use for exceptions
• Making use of the three methods (Adjusted Net Worth, Gross Annual Income and Stable Liquid Assets calculations) to analyze unsecured loans

Commercial Real Estate Lending School

September 16-18, 2008         (click class date at left for details and pricing)

No loan type has seen more growth at community banks over the past few years than commercial purpose real estate. No other loan type is currently receiving the adverse market and regulatory attention in today's lending environment either. As a result, the following are becoming increasingly important:

• Understanding real estate lending risks and how to mitigate those risks.
• Demonstrating to regulators an understanding of risk at both the loan portfolio level and the individual loan level.
• Understanding how existing commercial real estate loans can weather adverse changes to the market, and then identifying strategies to lower the risk of loss on those weak loans.
• Realizing that many lenders have never faced the down cycle in a real estate market and do not have the skills to address these issues.

This lending school involves three specific one day sessions (click on specific class for detail):

• Day 1 –Residential Construction and Development Lending
• Day 2 –Income Property Lending
• Day 3 –Construction and Development Risk Analysis

Each class can be individually taken, but the combination of the three classes add synergy and gives the student a thorough understanding of the similarities and differences in commercial versus residential properties as well as for sale versus rental income repayment plans. When the Understanding Real Estate Appraisals class is added, the student becomes well rounded in real estate repayment analysis - both the primary prepayment source and the collateral analysis.

Residential Construction and Development Lending

September 16, 2008         (click class date at left for details and pricing)

No loan type has seen more growth at community banks over the past few years than residential construction and development loans. Residential markets are softening and product inventories are increasing. This environment is accompanied by additional regulatory attention and scrutiny. Understanding the risks with this type of lending and the mitigation of those risks have become increasingly vital. Banks have to demonstrate the ability to react to slower markets and higher inventories as it relates to its existing loan portfolio. This course focuses on the underwriting tools needed to originate these loans and lower the credit risks of slow-selling product as well as the risk of loss on unsold product.

Who Should Attend: Any lender, underwriter, manager, credit officer or executive who wants to sharpen their skills in managing and underwriting residential construction and development loans specifically tied to "for sale" products (speculative and pre-sold residences and subdivisions).

Course Outline:

• Real Estate Lending and Residential Builders
• Real Estate Lending and Residential Developers

Course Content:

• Analysis of the construction of an individual home
• Analysis of a Builder's Line of Credit Risk Management
• Explanation of risk associated with spec construction, pre-sold construction and self-built construction
• Underwriting builder spec limits
• Identifying the key factors associated with residential development
• Location and market analysis
• Feasibility
• Accelerated lot release and "dog lot" analysis
• Introduction to development loan funding management (a more detailed review of this process will be covered in the Construction and Development Risk Analysis class). Residential Construction and Development

Income Property Lending

September 17, 2008         (click class date at left for details and pricing)

No loan type has seen more growth at community banks over the past few years than commercial-purpose real estate. Industry analysts and regulators have begun to caution that such growth needs to be supported by appropriate levels of underwriting and servicing. While regulatory attention seems to be focused on residential real estate lending, weakness in the residential market is adversely affecting the income property sector. This course focuses on the underwriting tools needed to document repayment capacity for income properties (rentals and leased space). In addition, sensitivity analysis and specific loan servicing risks will be addressed to help manage those income property loans already on the books.

While identifying loan opportunities is important, in the current lending environment accurately assessing the risk in the loans already made may be just as important. In many markets, commercial vacancy rates have just reversed their improvements and are now slipping. This class will give you the tools to test the loan's quality by:

• Simply understanding if the project's cash flow is sufficient to meet debt service or if the guarantors are supplementing the debt service is a key risk factor.
• Understanding how existing cash flows and current CAP rates determine a property's current value which can be used to test the appraised value in changing market conditions.
• Testing how vacancy rates, amortizations periods, and rent rates can affect cash flows. This in turn helps determine how tight the cash flow really is and whether various loan modification strategies are going to help repayment or increase risk.
• Introduce the discounted cash flow analysis tool as another way to analyze rental cash flow and debt service coverage.

Who Should Attend: Any lender, underwriter, manager, credit officer or executive who wants to sharpen specific Commercial Real Estate underwriting abilities or expand their general knowledge of current Commercial Real Estate market risks and opportunities.

Course Outline:

• Identifying the inherent income property risk factors and addressing them
• Understanding lease terms and structures
• Underwriting cash flows based on market conditions and existing leases.
• Testing the cash flow and existing appraised values to identify where the repayment risk is and then addressing that risk.

Course Content:

• The examination of vacancy rates, expense factors and sensitivity testing assumptions for income properties
• Define the difference between property types such as:
  
  • Apartments
  • Retail Space
  • Office Buildings
  • Industrial Buildings
• Introduce the Direct CAP method and discounted cash flow methods of underwriting and the discounted cash flow underwriting methods
• Hone underwriting skills with the use of case studies

Construction and Development Risk Analysis

September 18, 2008         (click class date at left for details and pricing)

The construction process involves specialized risk analysis and underwriting skills whether the job involves constructing a commercial building or developing land for further construction. The completion of this process determines the viability of both primary and secondary repayment sources. Management of loan disbursements on construction and development loans is the bank's only tool to address completion risk. Furthermore, the bank must now demonstrate its ability to manage specific projects and its entire portfolio of real estate loans to examiners.

Specifically, understanding the construction/development process, as well as the bank's role in that process, allows banks to identify and resolve risks that arise. Common issues that arise during construction include:

• The construction budget was wrong and costs have risen. Identifying and resolving this issue before a crisis arises will materially improve the chances of finishing the project on time.
• Borrower equity injections have been tougher to require and tracking those injections, if they are not funded up front, can make or break the budget and the loan funding.
• The borrower and the builder disagree with the project's progress. Understanding the construction contract, the loan agreement, and the bank's role will be important to addressing the risk and completing the project.

Who Should Attend: Any lender, underwriter, manager, credit officer or executive who wants to sharpen specific Commercial Real Estate underwriting abilities or expand their general knowledge of current Commercial Real Estate market risks and opportunities. All attendees should have a sound understanding of real estate lending and repayment analysis.

Course Outline:

• Understanding the roles of the bank, the borrower and the builder.
• Identifying the construction contract types and the role of the loan agreement
• Understanding the cost budget and designing the draw process to work with it.
• Tracking draws, performing inspections, and dealing with changes in the process.
• Understanding risk enhancements such as bonding, third party plan and spec reviews and independent draw management programs.

Course Content:

• General risks and mitigation techniques for Commercial Construction Lending
  
  • Construction contract types
  • Cost/Budget analysis
  • Inspections/disbursements
  • Funding and project completion tracking

Understanding RE Appraisals

September 23-24, 2008          (click class date at left for details and pricing)

One of our most in-demand courses! It takes only two days to learn the basics needed to perform internal real estate valuations where appropriate and to adequately review outside appraisals. We cover the full range of common valuation methods for loans related to Construction, Development, Residential properties, Commercial projects, etc. Learn from the area's leading authorities on the subject.

Who should attend: Any lender, manager or underwriter that is or will be involved in real estate lending and wants to sharpen their skills on ordering, reviewing and understanding real estate appraisals. Also, any party wanting to learn how to prepare real estate evaluations, instead of appraisals.

Course Outline:

• Day 1 - Real Estate appraisals and Evaluations, Residential Appraisal Compliance
• Day 2 - Commercial RE Appraisals, Appraisal Methodology and Key Concepts

Course Content: This is a fast-paced, two-day course

• Understanding RE Appraisals and Evaluations
  
  • Policy Requirements
  • Independence
  • List of Approved Appraisers
  • The Engagement Process
• Residential Appraisal Compliance Review
• Real Estate Evaluations
• Reading Commercial Real Estate Appraisals
  
  • Income Properties
  • Land Development
  • Commercial Construction
  • Special Use/Purpose
• Understanding Appraisal Methodology and Key Concepts
  
  • Highest and Best Use
  • Valuation Approaches
  • Direct Cap and Discount Cash Flow Analysis
  • Absorption and Discounting
• Case Studies

Lending Compliance Solutions

October 1, 2008         (click class date at left for details and pricing)

In these turbulent market conditions, the need for expense control is an absolute necessity. One of the best ways to ensure expense control is to be proactive, not reactive. Compliance errors are expensive - identification, corrective action, and internal controls hit the bottom line directly. This course will help banks change their culture from a reactive stance on errors to a proactive solutions provider. We will address regulatory hot topics and lessons learned with basic compliance technical requirements and a "no more, no less " philosophy towards compliance.

Who Should Attend: Any lender, underwriter, administrator, manager, credit officer or executive who wants to learn how to address current lending compliance issues and provide practical solutions to compliance management.

Course Content:

• Current compliance hot topics like unfair and deceptive practices in conjunction with borrowers, bank documents, and operating procedures
• Significant federal regulations to include spousal signature prohibitions, John Warner Defense Act requirement, and FACT Act
• New guidance on compliance basics - HMDA, Flood, etc.
• Methods of monitoring compliance out in the field or in the office with proactive solutions

Loan Documentation

October 2, 2008         (click class date at left for details and pricing)

As doc prep systems and big bank centralized delivery systems have evolved, documentation and lending regulatory knowledge by lending personnel have become a lost art. However, loss prevention and compliance mandates require community bankers, with their preferences for the "high touch" approach, to keep a working knowledge of documentation and compliance concepts. This course focuses on the key risk issues of both disciplines facing the community banker.

Who Should Attend: Any lender, underwriter, administrator, manager, credit officer or executive who wants to expand their general knowledge of current legal documentation.

Course Outline:

• Legal Documentation Overview - Organizational Documents, UCCs, Titles and Real Estate Documentation

Course Content:

• Determining the documentation requirements for secured and unsecured consumer, commercial and real estate loans
• Managing the documentation and closing process
• Perfecting security interests in collateral with regard to UCC, titled personal property and real estate
• Collateral issues, including: Title Opinions/Insurance, Surveys, mechanics liens, etc.

Commercial and Industrial "C&I" Lending

October 21-23, 2008         (click class date at left for details and pricing)

Commercial lending at community banks is relationship-based, often requiring understanding of both the borrowing entity's and the owner's repayment capacities. To be successful, and add value to borrowers, Credit Risk Management, L.L.C. believes the lender must use a blend of both marketing and underwriting skills. This school focuses on understanding the business entity, and using our basic analytical tools such as tax, business operating, and global cash flow worksheets. In addition, we will cover a more in-depth analysis of cash flow sources and uses of funds, working with spreads and projection, proper loan structuring - such as appropriateness of lines of credit - and credit memo writing.

Who Should Attend: Any lender, underwriter, manager, credit officer or executive who wants to sharpen specific commercial underwriting abilities, tax analysis skills or expand their general knowledge of current commercial market risks and opportunities.

Course Outline:

• Day 1 - Tax Cash Flow, Global Cash Flow
• Day 2 - Financial Statement Analysis, Projections and Credit Memos
• Day 3 - Lines of Credit

Course Content:

• Learning to identify the different, possible legal entity organizations of a business
• Calculating cash flow and debt ratio, utilizing the following tax forms:
  
  • Form 1040, Schedules A, B, C, E and F
  • Schedule K-1, Form 1065
  • Form 1065
  • Schedule K-1, Form 1120
  • Form 1120
• Calculating an individual's global cash flow from multiple sources and entities, based on their tax returns
• Understanding actual cash paid to an individual by each closely held entity and the potential impact of the entity's operating performance
• Analyzing Income Statements and Balance Sheets
• Calculating Business Operating Gross Cash Flow and Operating Net Cash Flow Ratios
• Credit Memo writing tips
• Determining general sources and uses of cash for a business
• Determining A/R, A/P and INV days
• Borrowing Base Calculations
• Projections
• When and how to use lines of credit

Problem Loan Management

     

The credit cycle has turned - abruptly! Regardless of size, portfolio structure or geographic footprint, almost every Community Bank is now challenged by the worst combination of credit and economic fundamentals in two decades. Effective management and resolution of emerging problem credits is critical to protecting a Bank's long term earnings and independence

This is a fast-paced one-day course is designed for anyone with problem loan management duties -- whether the responsibilities are full-time or occasional, significant or cursory. The course is geared toward Commercial credits, but will touch on some critical points related to Consumer problem loans as well.

The training would benefit any institution concerned with the risk of significant deterioration in credit quality, whether that issue is:

• Already at hand and must be dealt with immediately and aggressively, or
• Visible in the foreseeable future, but still largely avoidable with appropriate modification to Bank strategy, practice and priority.

Who would specifically benefit most from this training?

• Lending Officers - Bank's first line of defense against problem loans.
  
  • In the best position to identify potential problems.
  • Frequently tasked to investigate and devise early stage resolution proposals.
  • Usually responsible for additional reporting and documentation associated with problem loans.
  • Often completely responsible for cradle to grave management of all resolution efforts.
  • The face of the Bank on a day to day basis for both problem loan borrowers and the remainder of the community.
• Internal Loan Review personnel - Tasked with maintaining underwriting consistency and policy adherence to limit future problem loans. May also be tasked with initial identification of potential problem loans.
• Management/Executive Officers - Responsible for overall portfolio management and performance. Involved in resolution of individual problem loans or indirectly managing efforts of subordinate personnel. In the best position to fully appreciate the impact of:
  
  • Direct problem loan costs - impact on Bank earnings from charge offs, increased administrative expenses, etc.
  • Indirect, but tangible problem loan costs - increased reserve requirements, potential increase in Bank administrative overhead, etc.
  • Intangible problem loan costs - loss of productive time, impact on employee morale, potentially diminished community standing, increased regulatory scrutiny, etc.

What will participants acquire in this course? -- Critical, practical tools in the following areas:

• Potential impact of problem loans on the Bank's portfolio, reputation, and customer base.
• How to identify potential problem loans as far in advance of default as possible.
• Practical, tactical steps to mitigate risk and maximize collection for a wide variety of individual loan types once they are correctly identified as potential problems.
• General issues related to litigation, bankruptcy and lender liability.
• Understanding which commonly overlooked underwriting issues can significantly increase or decrease future problem loans.
• Overall recommendation for organizational structure and high level problem loan portfolio management strategies.
• Understand exactly what does (and does not) make a loan "Impaired" and the corresponding regulatory requirements related to Allowance for Loan and Lease Losses (ALLL).

Lending to Non-Profit and Religious Organizations

        

Defining and then resolving unique underwriting challenges associated with lending to Non-Profit Entities and more specifically, Religious Organizations

By their very nature, non-profit organizations create underwriting challenges for cash flow based lenders. Having an active volunteer based Board of Directors can wreak havoc with any continuity of management analysis. The idea that the organization spends everything it brings in as revenues makes the traditional "Net Income plus Depreciation and Interest Expense" cash flow analysis difficult. When you add to this weak secondary repayment sources like specialized real estate and non-recourse terms, then repayment becomes difficult to support.

This class will present an underwriting framework and tools to enable you to underwrite non-profit entities using cash flow based and ratio analysis. Key concepts will include:

• Understanding the financial differences between non-profit and for-profit entities
• Understanding the various entity types by looking at revenues; giving-based organizations versus program-based organizations
• Adjusting the non-profit's cash flow statements to determine where debt repayment fits
• Testing budgets and projections to determine if they are reasonable and determine how much repayment depends on them
• Determining management's and member's ability to meet these projections and budgets

The class will also discuss key non-financial underwriting issues, like:

• Identifying the entity's decision makers and ensuring that they support the loan
• The importance of having the membership support the loan request and how to identify that support, or lack of it
• When guarantees make sense and when they add risk
• Whether the bank can and should liquidate its collateral for these loans

A significant amount of the class involves lending to Religious Organizations. Many of the general topics are applicable to these groups. More specifically, the class will tailor these concepts for Religious Organizations by:

• Presenting a financial underwriting tool that allows the bank to underwrite historic cash flows, adjust those cash flows for discretionary spending and also test projections
• Results will include traditional debt coverage ratios but also giving and debt service by Giving Unit and by Total Revenues

Bonus – You will receive a CD with an outline of the underwriting concepts in a draft underwriting guideline discussion that can be added to the bank's lending manual, along with a copy of the Excel based underwriting tool.

Loan Portfolio Concentrations & Stress Testing Seminar

        

Loan concentrations! Stress Testing! Hot topics for community banks and the regulators in today's banking environment.

CRM's one day seminar will provide guidance on how to address both issues in your bank and provide sample reports and policies as take a ways from the seminar.

Over recent years, Commercial Real Estate loan growth has been at unprecedented levels at community banks, which has caught the attention of regulators. Regulators' concerns are further exacerbated with the recent examinations showing relaxed underwriting standards due to increased competition for CRE loans. In response, the regulators issued their interagency guidance entitled Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices.

Has your bank moved to adapt its policies and procedures, produced detailed reports via a robust Management Information System, developed contingency plans to reduce any concentration risks, developed market and industry analyses, performed rudimentary stress tests, and adjusted underwriting standards to meet all the detailed requirements as specified within the interagency guidance?

CRM understands the need to be reactive in banking today, and is proactive in assisting our clients in updating their policies and procedures. Banks must start to comply with more stringent regulatory guidance regarding any loan portfolio concentration.

This seminar provides assistance for determining if your Bank has concentrations within the loan portfolio. Customized policies and supporting worksheets will be provided to address concentrations. Areas to be discussed in the seminar are:

• Board and management oversight
• Determining concentration limits based on loan and product type
• Identifying, managing, and reporting of concentrations
• Developing contingency plans to reduce concentration risks
• Market and industry analysis
• Credit underwriting standards
• Stress testing
• Maintaining capital adequacy

BONUS – In addition to the program presentation and reference materials, you will be provided with an electronic file containing a sample of Loan Concentration Management policy and sample reports that can be utilized to detect and monitor loan concentrations within your portfolio.

"UN"Fair Lending Seminar

        

Have you heard about HUD's new Fair Lending Division created July 2007? HUD launched a record number of investigations this year with several major fair lending settlements.

Don't be on the Regulator's Radar – Fair Lending is where it is happening! The regulatory agencies continue heated enforcement of fair lending issues. Fair lending compliance continues to be a key component to the success of all lenders.

• Learn how Barney Frank, House Financial Services Committee Chairman's new chant "Use it or lose it" will effect you. This refers to the Federal Reserve's handling of writing specific criteria for unfair and deceptive practices. He wants tougher enforcement whenever it is determined that borrowers did not receive disclosures, they were not timely, they were inaccurate or the terms and conditions of the loan were not adequately explained prior to closing i.e. Unfair and Deceptive Practices.
• Will your Spousal Signature practices end up on the front page of the newspaper with your name associated with conduct described as "immoral", "unethical", "unscrupulous" and "offensive to public policy"? Spousal Signatures continue to be a priority for the regulators. In the Attorney General's 2006 Report to Congress a significant number of referrals involved allegations of marital status discrimination, where the lender improperly required spousal signatures on loan documents.

These are just a few of the fair lending issues on the horizon. No matter how good the program, continued vigilance is essential. It is time to revisit the basics and understand the current regulatory environment. Specifically the class will focus on:

• Brief history of fair lending and equal credit laws
• Recent fair lending enforcement litigation and lessons learned
• Unfair and Deceptive Credit Practices – what is it?
• Identifying level of assistance provided to applicants and regulatory expectations
• Discuss the relationship between unfair treatment and illegal discrimination
• Identifying lending practices that give the appearance of discrimination
• Mystery shoppers and what testers are trained to report
• Managing a fair lending investigation
• Identify the best practices to ensure compliance with fair-lending laws