Recent Issues

September 2009

International Financial Reporting Standards: Impact on Professional Financial Statement Users
By Stephen G. Kerr, John Gillett, Nathan Sandoz and William E. Wilcox
How IFRS will change financial ratios and other measures used to compare one borrower to another to another.
Significant Changes in Lease Accounting on the Way
Mark P. Bauman and Rick Francis
The proposed lease accounting model will change financial-statement-based measures, especially for firms in the restaurants/hotel/motel, retail, apparel, personal services, business services and health-care industries.
The Bank Liquidity Crisis and Aircraft Finance: A Sector Review
By Ronald Scheinberg
Retrenchment by lenders creates a dramatic shift in bargaining power from the airlines and lessors to the banks.
Understanding the Limitations of Accountants' Reports
By Denise Dickins, Julia L. Higgs and John T. Reisch
Commercial lenders would be wise to consider the cost/benefit of the different levels of audit assurance.
CREDIT ANALYSIS
Internal Control Assessments Improve Transparency of Private Company Reporting
By Tom Gavin
Auditors' assessments of internal controls of privately held companies can provide important insights to lenders.
ACCOUNTING
FASB Proposes Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses
By Patrick Colabella, Adrian P. Fitzsimons Victoria Shoaf
Proposed disclosures would help financial statement users to see how creditors analyze risk in order to determine the allowance for credit losses.
TURNAROUNDS
Leadership in the Distressed Organization
By Tommy M. Onich
Stable organizations need managers; organizations in crisis need leaders.
BOOKS
Is the Federal Government Responsible for the Current Economic Mess?
By David J. Ginzl
Two books cite interest-rate policy among the causes of the financial meltdown.

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July 2009

Contingent Liquidity Pricing
By Emil Matsakh, Yigit Altintas, and Will Callender
Many commercial loans being made under existing long-term commitments are hundreds of basis points underwater.
Analytical Pricing for Commercial Loans
By Jens Baumgarten, David Vidal and Georg Wuebker
Too many commercial lenders lack structured guidelines to consistently optimize the pricing to exploit customers' willingness to pay and adjust to changing market conditions.
Acquisitions and Their Effect on Loan Covenants
By Mark Campbell
Postacquisition, covenants must sometimes be adjusted to accurately reflect their original economic intent.
ASSET-BASED MARKET REVIEW
Asset-Based Lending Cautiously Gains Ground
Maria Christina Dikeos
First-quarter 2009 asset-based lending accounted for 38 percent of total leveraged lending. For 2008, asset-backed deals represented just 14 percent of total leveraged volume.
LOAN DOCUMENTATION
Monitor Covenants to Improve Loan Performance
By V. Rick Nishanian and Darin Wallace
Lenders can soften the landing for themselves and their borrowers by paying attention to the covenants in their loan documents.
REAL ESTATE WORKOUTS
Residential Land and Construction Loan Assets: A Solvent Developer Comments
By Doug Buzbee and J Carter Witt III
A prospective purchaser of OREO observes that many banks are not managing real estate assets to preserve value.
ACCOUNTING
FASB Proposes to Adopt Its Codification as U.S. GAAP
By Patrick Colabella, Adrian P. Fitzsimons and Victoria Shoaf
FASB aims to simplify user access to all authoritative GAAP by reorganizing U.S. GAAP pronouncements into roughly 90 accounting topics within a consistent structure.
SECURED LENDING
Article 9 Collateral Insurance Shifts Risk for Lenders
By Theodore H. Sprink
Analogous to real estate title insurance, UCC insurance insures title to personal property.

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May 2009

Commercial Loan Recovery 101: How to Obtain Maximum Returns
By William Hoffman, Joseph Foster and James Cochran
For defaulted commercial loans, workouts, deeds in lieu, receiverships, foreclosures and note sales are all viable.
Workouts of Condominium Construction Loans
By Stuart Saft
The decisions that lenders must make when a condominium project runs into trouble are not as simple or straightforward as the loan documents might make it appear.
Reading the Statement of Cash Flows
By R. David Mautz Jr. and Robert J. Angell
When reading the statement of cash flows, lenders should focus liquidity analysis on cash and cash equivalents and connect investing and financing activities to business strategy.
Lessons From Enron-And Why We Don't Learn From Them
Nancy B. Rapoport
How can human nature subvert even the best of financial structures and controls?
WORKOUTS
Interpersonal Skills Can Make or Break A Workout
By Gerald M. Sherman
To produce strong results, the workout consultant needs the soft skills required to work effectively with the people affiliated with a troubled business.
PORTFOLIO MANAGEMENT
Time to Take a Fresh Look at the Allowance for Loan Losses
By William Byrnes
Some components of an effective ALLL process: a strong method, disciplined implementation, cross-functional dialogue, comparative analysis.
BANKING STRATEGIES
Case Study: Product Innovation at Bank of America
By Cindy Murray
How Bank of America uses strategies traditionally employed with consumers to drive innovation for business products and services.
ACCOUNTING
Revised Exposure Draft Adjusts EPS to Match International Accounting
By Adrian P. Fitzsimons, Gerard A. Lange and Srinivasa Ramanujam
Calculation of shares outstanding would be adjusted to reflect international accounting standards.

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March 2009

Financial Crisis: A Time to Reevaluate Risk Management
By Paul Chaney, Debra Jeter and Kirk Philipich
A four-step framework for examining the commercial portfolio: risk responsibility, governance, modeling and response.
Economic Downturn and Standard Contracts: Time for Another Look?
By Linda DeBene
In this time of economic upheaval and heightened distrust of banks and lenders, adopting proven alternatives to litigation in revised lending documents can result in monetary savings and fairness.
Discount Rates, Market Sources of Information and Loan Workouts
By William C. Handorf
Bankers comparing a settlement offer with a workout or a legal resolution must choose an appropriate discount rate for evaluating expected cash flows.
Mistakes Banks Make When Serving Small Businesses
By Christine Barry
Banks must strive to exceed the expectations of small businesses, which increasingly expect financial institutions to know their specific needs and to recommend products based on those needs.
Floor Plan Financing in the Auto Industry
By Ramesh C. Garg
Financing of auto inventory by a third-party lender is vital for the 21,000 U.S. auto dealers.
FINANCIAL REPORTING PUZZLER
Interpreting Firms' Gross Profit Amounts and Trends
By Martin Gosman
Avoid conducting analyses and reaching conclusions that are based on comparisons of noncomparable data.
SMALL BUSINESS
Building Business with Small-Business Credit Cards
By Greg Howes and Michael Carbone
Small-business owners are relatively unaware of the special features and benefits built into small-business credit cards; banks can drive loyalty and revenue by building business with these small-business owners.
ACCOUNTING
FASB Proposes Statements to Address Subsequent Events and Going Concern
By Adrian P. Fitzsimons, Anthony Pappas and Srinivasa Ramanujam
FASB proposal would require clear disclosure of whether or not subsequent events had been evaluated.
BOOKS
Searching for Solutions to the Subprime Mortgage Crisis
By David J. Ginzl
An economist's thoughtful proposals for fixing a broken system.

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January 2009

Mark to Market or Mark to Expectation?
By Kang Cheng
FASB Staff Position (FSP) FAS 157-3, amends Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS-157).
U.S. Adoption of International Accounting Standards: Why Now?
By Cal Christian and James M. Kohlmeyer III
The SEC has proposed a road map to U.S. adoption of International Financial Reporting Standards.
Intercorporate Guaranties: Best Practices for Turbulent Times
By James C. Hale and Brandy M. Rapp
The current financial environment requires that intercorporate guaranties receive close evaluation and scrutiny.
Switching Sales Focus to Deposits and Cash Management
By Nicholas T. Miller
Sales leaders in banks of all sizes struggle to convert relationship managers who focus on loans to relationship managers who focus on client cash flow management.
District Court Overturns 2006 Adelphia Decision
By Josh Thompson, Martin Zohn and Neil Cummings
District court overturns 2006 Adelphia bankruptcy court decision that denied lenders the right to recover corrected and increased "grid interest" after borrower's original certified financial information was discovered to be false.
The Credit Crunch and European LCDS
By Angus Duncan
What has been the impact of the credit crunch on the future of European LCDS?
LOAN DOCUMENTATION
Guaranty Agreements: Recent Cases Illustrate Common Risks
George A. Nation III
Common problems occur time and again with commercial loan guaranty agreements.
SECURED LENDING
Extra Precautions Help Lenders Weather a Volatile Economic Climate
By Gene Lasky
Financial services and leasing companies can engage in proactive due diligence to manage their loan portfolios and protect against debtor insolvency.
LOAN ADMINISTRATION
New Urgency for Credit Checkups
Jim Neckopulos
In today's environment, good loan administration can mean the difference between full or partial recoveries and nothing.

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November 2008

Rethinking Risk Management--Again
By J. Rizzi
It's time for risk management to move away from a hypertechnical, specialist control function with limited linkage to shareholder value creation.
BAPCPA Turns Three
By Stephen Selbst
Changes to the Bankruptcy Code, enacted in 2005, have so far had a minimal effect on business bankruptcy cases.
Credit Default Swaps: Not Ready for Prime Time
By Joseph R. Mason
Financial innovations inexorably create conditions of asymmetric information that can lead to financial crises and panics.
Crunch Mode: Centering on Strengths in Corporate and Institutional Banking
By Michael Rice and Steve Turner
Precision management approaches are needed at a time when commercial bankers are looking for practical ways to improve results with the same or fewer resources.
Setting Industry Limits
By Brian Ranson
Banks must measure and understand risks so new risks can be considered and old risks managed successfully.
BUDGETING AND STRATEGIC PLANNING
Five Success Strategies for Turbulent Markets
By Mary Beth Sullivan
Even bad times present opportunities for those who think and act strategically.
BEYOND THE NUMBERS
Business Understanding Makes Better Lenders
By Gerald M. Sherman
Better understanding of borrowers' business issues could lead to customer satisfaction.
ACCOUNTING
The FASB Proposes Revisions to Accounting for Contingencies
By John P. Clarke, Adrian P. Fitzsimons and Deborah Kleiner
Proposed rule would improve disclosure of loss contingencies but raises questions about revealing too much information in pending litigation.
BOOKS
The Subprime Mortgage Meltdown: Two Perspectives, Same Conclusion
By David J. Ginzl
In two new books, an industry insider and two reporters diagnose some of the factors leading to the subprime crisis.

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September 2008

Selling in Tough Times, Preparing for Good
By Nicholas T. Miller and Lynn Harton
How should relationship managers change sales strategies when the economy is contracting?
How Loan Sales Can Help Lenders Manage Distressed Debt
By Kingsley Greenland
Workouts and loan sales, used in conjunction, allow institutions to aggressively and effectively minimize portfolios of underperforming debt.
Minority Interest and the Effect on Financial Leverage under FAS-160
By Frank R. Urbancic
FAS-160 will change the measurement of financial leverage as a result of reporting minority interest as equity.
Inventory Accounting after LIFO
By Frances L. Ayres, Christine C. Bauman, Mark P. Bauman and Yun Fan
The imminent repeal of the last-in, first-out accounting method will affect financial ratios and future tax liabilities, particularly for companies in heavy industries.
Analyzing Financial Statements Using Data Envelopment Analysis
By D. K. Malhotra and Rashmi Malhotra
Data envelopment analysis offers benefits over traditional financial statement analysis.
CREDIT RISK MANAGEMENT
Best Practices of Data-Driven Risk Management
By Carolyn Nobles
Banks must focus on what data they need, not merely what data is available.
CREDIT ANALYSIS
Understanding and Using Benchmark Information
By Scott Ogle
Compare prospective borrowers to peer groups to assess the quality of management.
SMALL-BUSINESS LENDING
Credit Availability and Lending Risk: A Review of Recent Research
By Andreas Rauterkus
What is the role of government programs in overcoming resistance to lending to smaller businesses?
TURNAROUNDS
Action Steps for Distressed Organizations: A Turnaround Manager's View
By Tommy M. Onich
The distressed environment is harsh, unforgiving, ambiguous and urgent.
BOOKS
Rescuing Companies in Crisis: The Saga of "The Turnaround Kid"
By David J. Ginzl
Chrysler, Olympia & York and Waste Management figure in this recap of a life in corporate crisis management.

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July 2008

Commercial Deposit Pricing: Optimizing Through Analytics
By Stephen Baird
Progressive commercial banks are fine-tuning their pricing methodologies to strike the best balance between deposit growth and account profitability.
Fair Value Accounting with FAS-159: Potential Impact on Earnings
By Douglas K. Schneider, Mark G. McCarthy and Dennis M. O'Reilly
Three possible areas of earnings impact of FAS-159: the "free pass" during transition, the application of FAS-159 to liabilities and the use of unobservable inputs.
Preserving Net Operating Losses for a Reorganized Corporation Postbankruptcy
By Annette M. Ahlers
When comparing options for dealing with distressed debtors, lenders should pay close attention to the implications for preserving the tax benefits of net operating losses.
Stress Testing CRE Concentration: What Methods Are Practical?
By John Hall and Timothy J. Yeager
Regulators want banks to manage their CRE concentrations more carefully, but where should community banks begin?
INVENTORY VALUATION
RFID Technology Drives Shift in Inventory Valuation to Specific Identification
By Paula Diane Parker, John S. (Sammy) Bishop Jr. and Jeanne Sylvestre
Bankers must understand new and emerging inventory control processes and accounting methods that affect their clients' financial reporting.
INVENTORY ACCOUNTING FRAMEWORK
Classification, Cost Basis, Write-Downs and Disclosures
By Adrian P. Fitzsimons and Gerard A. Lange
The complexity of the financial accounting for inventory arises because of its classification, its high volume of activity and turnover, its various cost flow assumptions and the determination of its market value.
LENDER LIABILITY
Why Loan Documentation Must Control Lender Behavior
By Jay Kim and Gregory Ward
Lenders that act outside loan documents can be vulnerable under contract theory, state laws and tort theory.

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May 2008

Rethinking Concentration Management
James V. Lentino
Stronger governance and more active management of portfolio rebalancing positions makes for smarter concentration risk management.
The Continuing Evolution of Nonbank Commercial Lending
By Gerald M. Sherman
Is the expanding use of secured debt financing from non-institutional sources a permanent shift or a fad?
Physical and Financial Supply Chains Meet
By Calvin Blount
Increasingly complex supply chains require increasingly flexible supply chain financing.
Foreign Subsidiaries: Potential Sources of Cash for Distressed Companies
Lisa E. Herrington and Mark Podgainy
Foreign subsidiaries can be valuable to a US-based parent in a liquidity crisis, but it must employ creative solutions to overcome potential difficulties in repatriating cash.
Best Practices in Addressing Online Cash Management Security
By Sonya Crites
Most importantly, institutions must train employees to recognize and report fraud.
Window Dressing in Reported Earnings
By Liming Guan, Steven Daoping He and John Mc Eldowney
Many firms across different industries round the financial totals in their statements to enable them to end in zeros.
SMALL BUSINESS
Keys to Successful Small-Business Banking
By Alenka Grealish
Organizational structure, culture and staff, product development, performance measurement and incentives systems all must come together to create customer-focused and profitable small-business banking.
DUE DILIGENCE
Liability of Private Equity Fund Portfolio Company for ERISA Liabilities of Other Portfolio Companies
William E. Hiller, David E. Rubinsky and Jordan A. Messinger
A Pension Benefit Guaranty Corporation opinion may affect the way in which lenders conduct due diligence of ERISA liabilities of their potential borrowers.
LENDER LIABILITY
Why Loan Documentation Must Control Lender Behavior
By Jay Kim and and Gregory Ward
Lenders that act outside loan documents can be vulnerable under contract theory, state laws and tort theory.
ACCOUNTING
FASB Clarifies the Reporting of Noncontrolling Interests in Business Combinations
By Benjamin R. Silliman
Noncontrolling interests will be reported as a separate component of equity.

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March 2008

Financing Renewable Energy
By Paul Astolfi, Scott Baron and Michael Small
Demand is growing for power generated from renewable sources. An overview of financial, regulatory, technical, geographic and tax issues related to financing green power projects
An Early Warning System for Small-Business Credit Trouble
By Dan Meder
Blended small-business and consumer credit scores make it possible to reject more bad accounts while not increasing the rejection rate of accounts that actually would be good.
Financial Statement Fraud and the Lending Decision
By James P. Martin and Harry Cendrowski
Loan officers and financial institutions must consider the risk of fraud when evaluating financial statements and organizational operations.
Cash Flow Contradistinctions
By Harlan D. Platt
Four concepts of cash flow and what they mean for lenders.
CREDIT ANALYSIS
Accounting Profit and Business Profit
By Rex Beach
Accounting profit, properly prepared by highly competent and respected accountants for these types of business organizations, can be disturbingly misleading.
INTERNAL CONTROL
The Changing Components of the Corporate Annual Report: An Update
By Deborah Archambeault, John G. Fulmer Jr. and Richard A. Turpin
New guidelines aim to streamline requirements for smaller businesses.
FINANCIAL REPORTING PUZZLER
Making Sense of Firms' Quarterly Sales Trends
By Martin Gosman
Sometimes, quarterly sales trends reflect real economic events. Sometimes, the measures reflect the manner in which the data was reported.
ACCOUNTING
FASB Revises Rules for Business Combinations: Adoption of Acquisition Method Improves Fair-Value Reporting
By Benjamin R. Silliman
Revisions aim to make it easier to assess the performance of acquisitions and make reporting more comparable.
WORKOUTS
The Role of the Chief Restructuring Officer
By Tommy M. Onich
A chief restructuring officer can give a troubled borrower access to the specific skills necessary for recovery.
BOOKS
The Financial Panics of 1907 and 2007
By David J. Ginzl
A thought-provoking and sober analysis that makes the financial tribulations of a century ago relevant for today.

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January 2008

Marketing Science: The New Chemistry in Middle-Market Commercial Banking
By Michael Rice, Stephen Baird and William Clarkin
The core marketing principles used in other industries and areas of financial services are becoming critical to commercial banking success as well.
Suppliers' Vulnerability from Extensions of Credit to Retailer Major Customers
By Martin Gosman and Janice Ammons
Lenders should evaluate the data provided about receivables owed by major customers and consider the possible reasons the supplier may have limited the extent of its disclosures.
Asset-Based Lending at the End of the Era of Easy Credit
By Stan Scott
What led to the market for easy credit and how can lenders begin a return to fundamentals?
Credit Offers to Small and Medium-Size Businesses
By Sébastien Deschênes
A summary of research on commercial credit offers, approaches to businesses in financial difficulty and the entrepreneur's choice between bank loans or supplier credit.
COMMUNITY BANKING
Potential Impact of the Subprime Lending Crisis on Community Banks
By Nancy T. Romaine
While the subprime mortgage crisis may not directly affect your community bank, keep a careful watch for indirect effects.
RELATIONSHIP MANAGEMENT
Lending to Pet Stores
By Bobby Martin
By understanding the myriad issues facing the pet and pet supply stores, calling officers can more appropriately market and structure credit and noncredit offerings.
WORKOUTS
The Role of the Chief Restructuring Officer
By Tommy M. Onich
A chief restructuring officer can give a troubled borrower access to the specific skills necessary for recovery.
CREDIT ANALYSIS
Protect Your Assets with Due Diligence
By Howard A. Rein and Harvey Nachman
New loan? Existing loan? Troubled credit? Due diligence in various situations.
Drop head: The most successful deals are those that have a predetermined exit strategy in place before closing.
BOOKS
Thomas Edison: Genius Inventor or Clueless Businessman?
By David J. Ginzl
Inventors may have neither the disciplined work habits nor the entrepreneurial skill set needed to make a new venture successful and profitable.

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November 2007

Bankruptcy Trends: What's Next in the Restructuring World?
By Ingrid Bagby and Sheryl Saleeby
The upcoming wave of restructurings will include test cases for the new issues created by second-lien financings and the increased use of credit insurance.
Small-Business Loan Origination: Spanning the Continuum
By Patricia Hines
What are the elements of robust small-business loan origination systems?
Loan Documents Can Be Compromised By Poor Loan Administration
By George A. Nation III
Three recent cases provide useful lessons concerning proper loan administration.
The Small-Business Disconnect
By Christine Barry
Despite bank efforts to win the hearts and wallets of small-business customers, a major disconnect continues to exist between bank offerings and customer needs.
Tapping the Loan-Review Process to Determine Loan-Loss Exposure
By Thomas O. Stanley, John Lajaunie and Cori Lynn Stanley
Bank managers should evaluate changes in factors that affect loan value in order to address concerns about inadequate reserving and income smoothing.
PORTFOLIO MANAGEMENT
Secondary Market Offers Another Option to Manage Loan Portfolios
By Kingsley Greenland and Bill Looney
Electronic trading has driven exponential growth and liquidity in the secondary market for commercial loans.
ACCOUNTING
FASB Amends FIN-48: Measurement, Reporting and Disclosure of Income Tax Positions in Financial Reporting
By Benjamin R. Silliman and Adrian P. Fitzsimons
FIN-48 aims to reduce diversity of treatment with respect to recognition and measurement of tax positions in financial statements.

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September 2007

A New Approach to Pension Accounting: Recognizing a Pension Plan's Funded Status on the Balance Sheet
Jeanne Sylvestre, Gregory L. Prescott and Ellen Madden
FAS-158 clarifies the true financial position of a company related to pension liabilities and assets.
Market Liquidity Can Mask Fraud Threats
By Margaret M. Good and David R. Heilman
Pressures to grow the portfolio and relax terms and standards continue to expose lenders to increased risks of fraud perpetrated by borrowers.
Continuous Monitoring: Improving Credit Risk Management Effectiveness
By Carolyn Nobles
By reviewing specific credits regularly, institutions can increase their responsiveness to events that can affect credit quality.
The Relationship Between Wal-Mart's Inventory Cutbacks in 2006 and Suppliers' Sales Trends
By Martin Gosman and Mark Kohlbeck
Increased concentration within the retail sector has led to greater vulnerability for the manufacturers that supply these retailers.
SMALL BUSINESS
SBA Survey Examines Credit Scoring for Small Business
Adrian M. Cowan and Charles D. Cowan
The importance of credit scoring extends beyond underwriting to encompass pricing and monitoring.
BANKRUPTCY LAW
AMPAD Decision Affects Trustee's Ability to Avoid Preferences
By Joshua T. Klein
The United States Court of Appeals for the Third Circuit issued a decision on a statute of limitations period that may have significant a impact on bankruptcy estates and their creditors.
ACCOUNTING
Guidance on Changes and Misstatements Proposed for Private Companies and Nonprofits
By Adrian P. Fitzsimons and James W. Thompson
Rules for determining the materiality of misstatements would be extended to private companies and nonprofits.
ENVIRONMENTAL LIABILITY
What Level of Due Diligence Is Enough?
By Samuel W. Butcher, L.S.P., and Susan A. Bernstein
A new federal standard is changing ideas about appropriate levels of environmental due diligence.

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July 2007

The Past Is No Precedent for US Banks
By Andrew McGee and Stacey Mullin Outhwaite
Banks have enjoyed relatively steady growth and strong profitability over the past few years. Now the turning of the credit cycle and compression of net-interest margins is poised to weaken their income statements.
Commercial Loan Origination: Ripe for Improvement
Patricia Hines
Shrinking margins, increasing regulatory requirements and operational inefficiencies: how technology can help.
How Much Debt Is Right for Your Deal?
By J.V. Rizzi
Market and structuring changes are creating a favorable market for buyout debt.
Maximizing Recovery of Distressed Debt
By Scott A. Lessne and Vincenzo Paparo
In a restructuring, the lender must consider all the options available to maximize recovery and must be prepared to act.
ACCOUNTING
Fair Value Accounting Broadened with FAS-159
Douglas K. Schneider and Mark G. McCarthy
Under FAS-159, companies may elect to report individual securities at fair value, perhaps introducing more accuracy but less comparability to financial statements.
LOAN DOCUMENTATION
Documentation Insights from the Auditing Profession
By Lizabeth A. Austen and John T. Reisch
Lenders can look at best practices in the auditing profession for guidance on creating, managing and maintaining documentation that contributes to the quality of a commercial loan portfolio.
CREDIT ANALYSIS
Financial Statement Effects of Accounting for Options
Tom Gavin
Lenders should understand the potential impact on covenants of the measurement and classification of share-based payment plans.

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May 2007

Examining Corporate Governance Policies as a Routine Part of Financial Analysis
By Larry N. Bitner and Angie Dasher
Can a firm's corporate governance policies give lenders insights into creditworthiness and viability?
How Context Can Affect Loan Classification Decisions
By Lizabeth A. Austen and John T. Reisch
Understanding the context in which loans are reviewed can prevent under- or overrating and increase consistency of classifications.
Beyond Volume: Tying Management Information to the Front Line
By Jeffrey P. Marsico
Management information is critical to managing the lending function for increased profitability by tying performance and incentives to bottom-line results.
Automation and Integration in Small-Business Lending
By Jacob Jegher
Case studies show how two banks are automating the small-business lending process.
BEYOND THE NUMBERS
Performing to Industry Norms: Easier Said than Done
By Gerald M. Sherman
When financial measures are weak, how can a lender gain insights into operational changes that may make a difference?
RELATIONSHIP MANAGEMENT
Engaging Executive-Level Decision Makers in the Engineering Industry
By Bobby Martin
By understanding the myriad issues facing the engineering industry, calling officers can more appropriately market and structure credit and noncredit offerings.
ACCOUNTING
FASB Issues Fair Value Measurement Option for Financial Assets and Financial Liabilities
By Adrian P. Fitzsimons and Benjamin R. Silliman
The presentation and disclosure requirements of FAS-159 are designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and
LOAN PRICING
Fairness of Bank Rules for Compensating Balances
B. Brian Barrett, Ricardo J. Rodriguez and Thomas B. Sanders
Banks that look at customers' cash flows when determining compensating balance requirements can arrive at a more equitable fee structure.

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March 2007

Are Your Borrower's Operating Cash Flows Real?
By Noah P. Barsky and Anthony H. Catanach Jr.
Lenders must be aware of strategies for manipulating cash and methods to discover them.
Business Reorganizations after One Year of BAPCPA
By Michael P. Richman and Lori V. Vaughan
In some aspects, changes to business reorganizations practice as a result of the Bankruptcy Abuse Prevention and Consumer Protection Act have not, so far, worked out quite the way Congress planned.
Small-Business Lending: Maintaining Equilibrium
By John O'Connor and Marc Carbonetta
Because small-business lending is a hybrid, its success depends upon continually bridging the retail and commercial worlds.
COMMERCIAL BANKING TRENDS
The More Things Change, the More They Stay the Same
By James G. Connolly
Despite new competitive pressures and new technology, commercial banking success factors are remarkably constant.
COMMERCIAL LENDING STRATEGIES
How Commercial Lenders Can Succeed in 2007
By Mary Beth Sullivan
Business bankers should focus on deposits and cross-selling.
TECHNOLOGY
B2Bank Integration: Opportunities for Enhancing Client Loyalty and Satisfaction
By Susan Feinberg
The very flexibility that banks have shown as a result of competitive pressures has resulted in a costly and labor-intensive process to both sell and implement services that require B2Bank integration.
CREDIT ANALYSIS
The Importance of Cash Flow Analysis for Small Businesses
Stan Scott
Industry trends, stage of the business life cycle and cash flow analysis are key to evaluating the creditworthiness of small-business borrowers.
LOAN PRICING
Fairness of Bank Rules for Compensating Balances
B. Brian Barrett, Ricardo J. Rodriguez and Thomas B. Sanders
Banks that look at customers' cash flows when determining compensating balance requirements can arrive at a more equitable fee structure.
BOOKS
Rise and Fall of a Superstar
David J. Ginzl
Carly Fiorina on leadership, corporate culture, change and her controversial tenure at HP.

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January 2007

Maximizing Relationship Value with CRM Systems
By Jason Rushforth
As commercial banks look for new ways to differentiate themselves in the marketplace, the customer experience offers an attractive focus for improvement.
What Private Equity Firms Want in a Lender
By Patrick Lawler
An attorney who has negotiated both for lenders and for private equity firms elaborates on the key interests of private equity firms
Preparation: The Key to Enhancing Distressed Debt Recovery Opportunities
By Scott A. Lessne and Vincenzo Paparo
A legal and business review of the borrower and the loan can lay the groundwork for a successful workout.
Financing Growth in Small Companies
Robert J. Angell and R. David Mautz, Jr.
Commercial lenders can build relationships and reduce risk by helping small-company clients manage the financial aspects of growth.
Fair-Value Option for Financial Assets: An Opportunity for Earnings Management?
By Kang Cheng
The proposed fair-value option could require loan officers to more carefully interpret the components of income.
CREDIT ANALYSIS
Lending to Start-ups: The Role of Competitive Strategy
Nancy Beneda and Steve Moser
A survey of commercial lenders revealed that a competitive strategy, as part of a well-written business plan, may be the deciding factor in the commercial loan accept/reject decision for start-up firms.
WORKOUTS
The Warning Signs of Financial Distress
By Tommy M. Onich
Lenders can employ three types of warning signs: mathematical forecasting methods, negative trend signals and negative behavioral signals.

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November 2006

Reviving the Branch Role in Small-Business Banking
By Leo D'Acierno
Dedicated reps are in sync with small businesses-but disconnected from the branch. Integrating the two is the path to maximum growth.
Assessing the Risks of Accounting Fraud
By Robert Sidorsky
What are the common patterns and telltale signs of accounting fraud?
Commercial Loan Premium for Firms Prior to Bankruptcy
By Maretno A. Harjoto
Loan concentration in the hands of a few lenders increases the premiums to borrowers.
Recent Bankruptcy Trends: What Is on the Horizon?
By Ingrid Bagby and Sheryl Saleeby
At the same time, the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is fundamentally changing certain aspects of the Chapter 11 process.
BEYOND THE NUMBERS
Identifying Management Weakness in a Prospective Borrower
By Gerald M. Sherman, David Brown and Eric Sweeney
Four factors strongly correlated with business failure are planning, professional advisors, education and staff-areas clearly driven by management.
FINANCIAL REPORTING PUZZLER
Detecting Warning Signs in Coleco's Interim Report
By Martin Gosman
Seemingly positive results lead to a 10 percent decline in stock price. Why?
SMALL-BUSINESS LENDING
SBA Resources for Small-Business Bankers
By Michael T. Hull and Robert J. Blaney
Nonlending resources of the SBA can help banks increase their portfolios and improve risk management.
ACCOUNTING
Enhancing the Standard-Setting Process for Private Companies
By Adrian P. Fitzsimons and I. Hilmi Elifoglu
The AICPA and the FASB have proposed a joint committee to review the processes for establishing accounting standards for private companies.
BOOKS
Job Layoffs: "A Festering National Crisis"?
By David J. Ginzl
Despite wrenching stories of layoffs, labor issues can't be analyzed in isolation from the global economy.

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September 2006

Deconstructing DACA: An Analysis of the Model Deposit Account Control Agreement
By Joel F. Brown
A summary, analysis and critique of an ABA task force model agreement, with recommendations for secured creditors.
Rethinking the Commercial Loan Process
By James R. Pinckney
Integrated lending systems can improve risk management, regulatory compliance and speed of delivery and control costs.
Loan-only Credit Default Swaps: The March to Liquidity
By Angus Duncan
The ability to trade loans synthetically could be appealing given Basel II proposals that tie capital requirements to creditworthiness.
Profitability Information to Manage Commercial Relationships
Kim Sutherland
Distinguishing customer groups, assigning costs and assessing risks are among the steps to understanding commercial relationship profitability.
Understanding the Basics of Financial Statement Analysis
R. David Mautz Jr. and Robert J. Angell
Financial statement analysis examines profitability and market performance, liquidity, efficiency and capital structure.
LOAN PRICING
Credit Agreement Pricing Grids: Dealing with Borrower Computation Errors
William E. Hiller, Brian O'Connor and Jeni S. Pepper
A recent bankruptcy court decision sounds an alert to lenders to revisit the actual text of these provisions that specify the interest rate on loans.
BOOKS
Industrialist and Idealist: Milton S. Hershey, the Chocolate King
By David J. Ginzl
Hershey's legacy: a best-known brand and profitable company, a city that began as a utopian company town and a love for children that prompted an enduring commitment to charity.

Top  

July 2006

Sustaining Client Relationships: Commercial Lender as Trusted Advisor
By Charles H. Green and Howard M. Schwartz
A bank that succeeds in establishing trust with its customers can dramatically outperform its competitors.
Net Operating Losses: How Much Are These "Assets" Really Worth?
By Anthony H. Catanach Jr. and Shelley C. Rhoades-Catanach
Deferred tax assets represent potential future tax savings, but realization of their value is subject to considerable uncertainty.
Creating Enforceable Prepayment Provisions in Commercial Promissory Notes
George A. Nation III
When the prepayment is considered not to be the voluntary act of the borrower, courts are more likely to find the prepayment fee unenforceable. Drafting suggestions to protect the lender in the case of acceleration.
Copyrights as Collateral: Addressing the Reversion Risk
Michael S. Poster
Termination and reversion rights under the US Copyright Act could cause a significant piece of collateral to disappear, leaving lenders undercollateralized and causing borrowers to possibly be in default of loan covenants.
Present-Value Analysis of Collateral-Dependent Loans
John P. Lajaunie, Thomas O. Stanley and Craig A. Roger
A procedure for comparing a loan's contractual cash flows to the potential to recover those cash flows through the liquidation of the collateral in the event of a loan default.
Accounting
Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans
I. Hilmi Elifoglu and Adrian P. Fitzsimons
Proposed statement on postretirement plans would require employers to report their current economic status.
Loan Pricing
Compensating Balances: A New Look
Tom Sanders
What should be the interest-rate concession on a loan in exchange for generous compensating balances?

Top  

May 2006

Designing an Effective and Valuable Credit-Risk-Rating System
Brian J. Ranson
Long-run statistical validity and utility for strategic planning are among the goals for a credit-risk-rating system.
New Health Care Amendments to the Bankruptcy Code
By Stephen B. Selbst
The new health care amendments to the Bankruptcy Code present debtors and other participants in health care cases with new duties and obligations whose contours are largely unmapped.
Commercial Lending and Bankruptcies of New Public Companies
By Nancy Beneda
What factors distinguish IPO firms that have a higher probability of bankruptcy or firm distress?
Correlation of Default and Recovery Rates on Corporate Debt
By Bruce G. Stevenson
Correlation between default rates and recovery rates is the result of supply and demand of traded defaulted debt, determining its price.
BEYOND THE NUMBERS
Structural Inefficiencies Can Cripple Your Borrower
By Gerald M. Sherman
For some operating challenges, a lender has to go beyond the numbers to develop a solid understanding of a borrower or prospect.
CREDIT ANALYSIS
How to Use the Changing Components of the Corporate Annual Report
By Deborah Archambeault, John G. Fulmer Jr. and Richard A. Turpin
New reporting post-Enron and how the lender can use it.
ACCOUNTING
FASB Clarifies an Accounting Alternative for a Financial Instrument with an Embedded Derivative
By Adrian P. Fitzsimons and Laura Lee Mannino
The new statement is expected to lead to increased use of fair-value measurement and increased comparability among financial instruments.
WORKOUTS
Patience and Communication as Workout Strategies
By Bill Lawrence
Consistent exchange of information can encourage owners and managers to assess the state of the business realistically and take timely action.
BOOKS
Jay Gould: Ruthless Scoundrel or Misunderstood Genius
By David J. Ginzl
One can see a lot of Jay Gould-from his pursuit of personal financial gain by manipulating stocks and misleading investors to his duplicity and ethical lapses-in the Enron, WorldCom and Tyco debacles.

Top

March 2006

The Family Business Borrower: How to Gain Critical Insights
By Gerald M. Sherman
Lenders can find themselves in the middle of family dysfunction that compromises underlying creditworthiness.
What Operating Leases Don't Show on the Balance Sheet
By Debra Jeter
Lenders must be aware of the implications of operating leases for a firm's future cash flows.
Trusted Advisors in the Small-Business World
Nicholas T. Miller
Given the relatively small wallet size and the relatively large number of small businesses, among other factors, what's an appropriate "trusted advisor" differentiation model for the small-business market?
Detecting and Preventing the Financing of Terror: A Guide for Financial Institution Personnel
By Richard C. Brooks, Richard A. Riley Jr. and Paul Speaker
How lenders, risk managers, directors and customer service representatives can work together to reduce the likelihood that the institution will be used by terrorists.
The Effect of Volatility on Commercial Lending Pricing
Norris L. Larrymore and Irvin W. Morgan Jr.
Commercial lenders using a variable-rate formula to price loans may not factor changes in loan supply elasticity through more depressed periods of the economic cycle.
INDUSTRY OUTLOOK
Reducing Uncertainty in Converging Markets: Media and Communications
By Robert Raciti
Emerging technology and convergence are among the challenges facing lenders to media and communications companies.
FINANCIAL REPORTING PUZZLER
Making Sense of Dollar General's Accounting Restatements
By Martin Gosman
For its fiscal year 2000, Dollar General restated every major balance-sheet account, with the exception of the total par value of its common stock.
BOOKS
Wall Street: Symbol of Good or Evil?
By David J. Ginzl
From Alexander Hamilton and Thomas Jefferson to today's mutual fund shareholder, the story of shifting attitudes toward Wall Street.

Top

January 2006

Managing the Credit Cycle: A Behavioral Risk Interpretation
J. V. Rizzi
As we enter the higher-risk portion of the credit cycle, lenders and risk managers must focus on the middle ground between doomsayers and cheerleaders.
FIN-46 Consolidation: Impact on Lending Decisions
James R. Duncan and James Schmutte
A new accounting standard may require bankers to rework loan agreements or covenants.
An Effective Records Management Program
Craig Landrum
A properly implemented records management program offers significant protection from reputational, compliance and litigation risks.
Solving Environmental Risk in Commercial Real Estate Transactions
By Edmund A. Greene
An overview of the law and strategies for commercial lenders.
Lending to the Emerging Debtor in the Face of an Appeal
Steven B. Levine and Gopal Balachandran
Can a lender ever extend exit financing in the face of an almost certain appeal?
INDUSTRY OUTLOOK
Forward-Looking Financing Strategies for Hospitals and Healthcare Systems
William Roberson
To help healthcare system clients compete, financial services companies must not only provide financing but also look at all client assets to find new ways to generate capital.
CREDIT ANALYSIS The Changing Information Content of Auditor Going-Concern Opinions
George E. Nogler The going-concern opinion should not be viewed as an immutable and unchanging benchmark. BOOKS
Donald Trump, You're Fired
David J. Ginzl What is Trump really like, and how has his personality influenced his business strategy?
 

Top

November 2005

Relationship Pricing for Profitability
By Ben Helps and Kirk Saari
Comprehensive information and top-management commitment are the foundation for an effective pricing strategy.
Converging Markets: Leveraged Syndicated Loans and High-Yield Bonds
By Gary D. Chamblee and Jolie Amie Tenholder
With the growth of an active secondary market for leveraged syndicated loans, they and high-yield bonds look more and more alike.
The Path to Profitable Growth in Corporate Banking
By Juergen E. Schwarz
Segmentation, specialization and improved performance measurements are ways to create value in corporate banking.
LENDING MANAGEMENT
Core Values: Overlooked and Under Pressure
By Gerald M. Sherman and Sam Gurwitz
A commitment to traditional lending values can create new opportunities.
LOAN OPERATIONS
How Technology Is Transforming the Business of Commercial Lending
By Dan Welbaum
Technology is changing the methods lenders have traditionally used to control costs, gather information, process loans and manage risk.
ACCOUNTING
FASB Issues a Proposed Interpretation on Accounting for Uncertain Tax Positions
By Adrian P. Fitzsimons and Laura Lee Mannino
Financial statements would be more comparable with the probable recognition threshold applied to tax positions.
BOOKS
Reflections on the Erie Canal and Globalization
David J. Ginzl
What responsibility do state governments, or the federal government, have in promoting economic development?

Top

September 2005

Balancing Credit Management and Relationship Building
Robert L. Keene
Lenders need to analyze the trade-offs between time spent developing new business and time spent managing credit quality.
Building a Better Understanding of Financial Reports
David Mautz
A discussion of the basic principles underlying financial reports, along with a case study illustrating accrual accounting.
What Every Ratio User Should Know about Assets
Dianna Ross
An examination of assets shows ways in which ratios may not reflect actual performance and financial soundness.
Earnings Management: How to Identify Contributing Factors
Larry N. Bitner
Corporate culture and opportunity for manipulation can both play a role in earnings management.
SMALL-BUSINESS BANKING
Lessons from Microlending for U.S. Banks
Richard Borgman
Aspects of the microlending success story in the developing world are less applicable to U.S. society.
ACCOUNTING
FASB Issues New Statement on Reporting Accounting Changes and Error Corrections
Adrian P. Fitzsimons and Laura Lee Mannino
The new rules require retrospective application of voluntary changes in accounting principle.
BOOKS
Jack Welch's "Road Map" to Winning
David J. Ginzl
Advice that applies to corporate executives and CEOs, small-business owners and middle managers, workers considering new careers and college graduates looking for that first job.

Top

July 2005

Using the Statement of Cash Flows
Debra Jeter
The statement of cash flows provides valuable information about a firm's ability to meet current and future debt obligations.
Winning Small-Business Wallets Requires Restructuring
Christine Barry
Technology enables banks to more cost-effectively service and understand the needs of small businesses.
Improving Online Banking for Small Business
Neil St. Germain
While banks are making progress, small-business online banking services need to be less confusing and more convenient.
Best Practices for Middle-Market Lending
John A. O'Connor
A recent benchmarking survey of top financial institutions reveals the continued trends toward more disciplined pricing, increased automation and more centralized processing.
WORKOUTS
How to Lose $20 Million on a $30 Million Secured Loan
Gerald M. Sherman
Aggressive lending practices and weaknesses in the borrower's businesses create a huge loss.
RELATIONSHIP BUILDING
Your Job Is to Make Them Thirsty
Jack Hubbard
Relationship managers spend too much time planning what they will say and not enough planning what they will ask.
LENDER'S TOOLKIT
Incremental Sales Finance: A Vehicle for Small-Business Growth
Joseph Ingrassia
When bank financing is inappropriate, commercial lenders should consider referring their client to a merchant bank that specializes in trade finance.
SMALL-BUSINESS BANKING
The Power and Efficiency of Centralized Lending
John M. Floyd
examining assumptions underlying lending operations, small-business lenders can make changes that lower costs and increase control.
ACCOUNTING
The Hierarchy of Generally Accepted Accounting Principles
Adrian P. Fitzsimons and James W. Thompson
Improving the GAAP hierarchy is an important element of improving the quality of accounting standards.
BOOKS
Risk Management and the Money Laundering Challenge
David J. Ginzl
A retired undercover officer's stories show the scope of the problem.

Top

May 2005

Evaluating Business Risks in the Commercial Lending Decision
Noah P. Barsky and Anthony H. Catanach Jr.
Commercial lenders should supplement traditional credit underwriting practices with a critical review of the business risks borne by their loan customers.
Negotiating and Documenting Permitted Acquisitions Facilities
Joel F. Brown and Timothy P. Davitt
Corporate borrowers want the right to make strategic acquisitions; lenders seek to constrain acquisitions without specific consent.
Agency Law and Commercial Lending: Creating an Enforceable Security Interest
George A. Nation III
Agency law principles often play an important part in the creation of enforceable commercial loan documents.
NOLs: The Policy Conflicts Created by Trading Orders
Mark A. Speiser, Micah W. Bloomfield, Mark N. Rae, Harold A. Olsen and Yehuda Y. Halpert
Increasingly, bankruptcy courts are enjoining the trading of claims against, or equity interests in, the debtor and its affiliates early in Chapter 11 cases, absent compliance with court-ordered notification and objection procedures.
TECHNOLOGY TRENDS
Technology Initiatives to Support Middle-Market Lending
Mike Pennell
Middle-market lenders are integrating and automating to better understand the customer, improve relationship profitability, enforce consistency and better manage risk.
CREDIT OUTLOOK
What Drives C&I Credit Quality?
By Stephen C. Gabriel
Underwriting standards and the overall economic climate are key indicators.
CREDIT MANAGEMENT
Looking for Trouble Before It's Too Late
By Peter Fitzsimmons
Outcomes could often be improved if the company and its key constituents confronted problems sooner.
PAYMENTS
Making the Business Case for the E-Financial Supply Chain
Alenka Grealish
Companies that implement an e-financial supply chain can gain operational and financial efficiency.

Top

March 2005

New Tabular Disclosures of Commercial Commitments
Mark P. Holtzman
New disclosures for purchase obligations should help analysts to predict the amounts and timing of future cash flows.
CFO Resignation and Earnings Management
Liming Guan, Meihua Koo and Jenny Teruya
Is CFO resignation a red flag for earnings management?
Best Practices for Protecting Corporate Electronic Banking Customers
Susan Feinberg
Tokens, digital certificates or smart cards help protect corporate account holders from the continuing threat of Internet financial crimes.
Check 21: Opportunities to Strengthen Banking Relationships
Geoffrey Griffin
Check 21 product strategies can help financial institutions create new revenue, retain customers and attract new customers.
Factors Determining Commercial Banks’ Allowance for Loan Losses
Grace T. Chen, Kwang-Hyun Chung and Samir El-Gazzar
A five-year study of loan-loss allowances shows significant relationships between a bank’s ALL and the bank’s experience with loan losses and loan recoveries, among other factors.
RISK MANAGEMENT
Best Practices for Appraisal Review
Ronald J. Wolpert
An overview of regulatory requirements for appraisal review shows how a disciplined review program can be an important component of risk management.
CASH MANAGEMENT
In Cash Management, Banks and Companies Concentrate on Key Relationships
David Fox, Pete Garrison, Bob Neuhaus and Don Raftery
Banks are investing in high-value-added services.
ACCOUNTING
FASB Proposes Interpretation on Accounting for Asset Retirement Obligations
Adrian P. Fitzsimons and Craig A. Latshaw
Proposed standard on asset retirement would make financial statements more comparable.
BOOKS
Fooled by Randomness?
Brian J. Ranson
Fooled By Randomness argues that chance dominates outcomes rather than merely playing a role.

Top

January 2005

Setting the Sticker Price for Credit
By Sherief Meleis and Peter C. Davis
Pricing according to risk metrics helps protect commercial lending profi ts. Pricing according to sensitivity of customer demand helps maximize them.
The Relationship Between Supply-Chain Economies and Large Retailers’ Working Capital
By Martin Gosman and Mark Kohlbeck
The increasing concentration of retail sales has led to working-capital effi ciencies for many large retailers. But signifi cant differences exist in inventory and payable turnovers.
Sales Effectiveness and Management Systems: A Practical Plan for Implementation Success
By Gene Mehr
To be effective, sales systems must focus on the most pragmatic of all criteria for defi ning success: The system must help your sales team sell.
Signals from Sarbanes-Oxley for Best Practices in Smaller Borrowers
By C. William Thomas
Comparing nonpublic companies’ practices to the corporate governance provisions of SOX can give credit analysts valuable insights into these smaller borrowers’ creditworthiness.
Credit Risk Management and Bank Size
By William C. Handorf and Lili Zhu
An examination of quarterly loan-loss provisions, size of the allowance and charge-offs over the following 12 months fi nds that the largest and smallest banks are most adept at predicting expected losses.
SMALL BUSINESS BANKING
Sales Trends for 2005
By Jack Hubbard
Adding value in concrete ways, smoothing account transfers and improving incentive compensation are on the small business calendar for 2005.
CREDIT ANALYSIS
Insights from the Statement of Cash Flows
By Richard A. Turpin, E.L. Kittrell Smith and John G. Fulmer Jr.
Lenders can gain important information from the often overlooked statement of cash fl ows.
WORKOUTS
Can This Ownership and Management Group Turn It Around?
By Gerald M. Sherman
A structured approach to assessing management’s capabilities and determining the likelihood that a turnaround effort will succeed.
BOOKS
“Proceed On”: Conquering the Unknown with Lewis & Clark
By David J. Ginzl
You might gain insights about business leadership and how to address everyday management challenges. Or you might just enjoy a good read. Or both.

Top

November 2004

Recognizing Misleading Financial Statements: Lessons from SEC Enforcement Actions
By Jerry Thorne, R. David Mautz, Jr., Gwendolyn Highsmith-Quick and Diana R. Robinson
By understanding the types of accounting and reporting irregularities that occur most frequently, lenders can improve their ability to recognize misleading fi nancial statements and reduce lending risks.
Straight-Through Processing in Commercial Lending: A Solution Waiting for Awareness of the Problem
By Lee A. Kidder
Straight-through processing offers operational and strategic benefi ts that can assist banks to improve not only commercial lending profi tability but also customer satisfaction.
The Middle-Market Challenge: How to Grow?
By Simon Harris and John Walenta
The true scarce resource in the middle-market segment is human capital, not financial capital.
Estimating Loan-Loss Exposure: A Comparison of Traditional and Markov Models
By Kenneth R. Janson
A simulation using more complete loan histories—going beyond current risk grade to include path to that grade—to determine the loan-loss allowance is found to significantly reduce variability in the quarterly provisions for loan losses and, hence, income statement volatility.
TURNAROUNDS
The Nuts and Bolts of a Turnaround
By William Henrich
What concrete steps are necessary to turn a company’s fortunes around and bring it back to profitability?
ACCOUNTING
FASB Proposes New Guidance on Fair-Value Measurements
By I. Hilmi Elifoglu and Adrian P. Fitzsimons
A proposed FASB statement would improve the consistency and comparability of fair-value measurements.
ENVIRONMENTAL LIABILITY
New Environmental Insurance Products to Mitigate Environmental Risks
By Howard Tollin and Daniele Cervino
An overview of environmental insurance to protect borrowers and lenders.
BOOKS
Dynastic Lessons
By David J. Ginzl
Within the story of the Watsons and the growth of IBM can be found many strategic and management lessons.

Top

September 2004

The Risk Effects of Rapid Asset Growth
By Sean C. Keenan, Denny Yu and Deepa Mogili
Default risk increases with asset jumps, even in leverage-neutral cases.
A Primer on Second Lien Term Loan Financings
By Neil Cummings and Kirk A. Davenport
The intercreditor terms that govern second lien financings vary from deal to deal. It is important to read the small print in the intercreditor agreement to understand the terms of the debt.
Managing for Growth: Is Your Portfolio in Shape?
By Kathleen C. McClave
All small businesses are not equal. Managing for growth is good for the bank and good for the customer.
Strong Credit Culture: Basic Instinct and Common Sense
By Dev Strischek
To establish a value-driven credit culture, a bank has to balance its asset quality and profi tability goals by rewarding its lenders and credit approvers for pursuing prudent earnings and keeping them on track with strong credit discipline.
COMMERCIAL REAL ESTATE
Commercial Lenders Scramble to Scrape Mold off Their Portfolios
By Charles Perry
Mold prevention is essential to protect collateral value and avoid litigation. Lenders should consider
implementing tougher antimold requirements for new construction loans.
ACCOUNTING
FASB Proposes New Guidance on Share-Based Payment
By Adrian P. Fitzsimons and Gerard A. Lange
A long-expected FASB proposal would require companies to recognize compensation cost when issuing stock options to employees.
BOOKS
How Much “Bull” in the Bull Market?
By David J. Ginzl
Refl ections on the Wall Street boom of the 1990s.
RELATIONSHIP MANAGEMENT
Advisors, Not Adversaries
By Robert F. Schack
Trained and accessible account officers who can educate borrowers are key to a long-lasting and mutually beneficial relationship.

Top

July 2004

Lessons from the Rest of the Community Bank
Nancy Behanna
Best practices from other areas of your bank can improve the efficiency and effectiveness of the commercial lending function.
Audit Committee Best Practices and Earnings
Samuel L. Tiras
Lenders evaluating a borrower’s creditworthiness should examine the audit committee’s independence and effectiveness.
FASB’s New Consolidation Model and Its Implications for Financial Statement Users
Gregory L. Prescott, Jeanne Sylvestre, Donald L. Moak, and Ko Cheng Hsu
The FASB’s new consolidation guidance represents a sweeping change from the historical approach and may adversely affect the financial statements of commercial borrowers.
Perfecting Security Interests in Financial Assets
George A. Nation III
Two recent cases illustrate the challenges of taking financial assets as collateral.
Comparison of Rates and Maturities for Loans
Vance P. Lesseig and John G. Fulmer, Jr.
Lenders can give borrowers a framework for comparing different combinations of rate and maturity.
SMALL BUSINESS
A Paradigm Shift in Small-Business Lending
Adrian Cowan, Thomas Fetherston, and Lance Nail
Credit scoring seems to be increasing the importance of large banks in the small-business-lending market.
CREDIT ANALYSIS
Pro Forma Financial Statements for Loan Evaluation
William Ruland and Ping Zhou
An overview of principles for creating and evaluating pro forma financial statements.
WORKOUTS
Troubled Borrowers and Intellectual Asset Management
Sam Khoury and Paul Malz
Lenders should ensure that the intellectual property of troubled borrowers is not undervalued or abandoned.
TURNAROUNDS
The Hidden Psychology of a Corporate Turnaround
William Henrich
As a borrower descends into trouble, the debtor’s management can begin viewing the lender as an adversary and a cause of its problems.
ACCOUNTING
FASB and IASB Support Convergence of Accounting Standards
Yeong C. Choi and Adrian P. Fitzsimons
US and international accounting standards move toward alignment.

Top

May 2004

Before Relying on Auditors, Do Your Own Due Diligence
Debra C. Jeter
Loopholes in accounting rules pose continuing challenges for lenders. Do your own due diligence to evaluate the quality of a borrower’s financial reporting.
Will Syndicated Loans and Federal Securities Law Collide?
James E. Lilly and Jason Maxwell
Given developments in the syndicated loan market, and the convergence of the loan and bond markets, a court might determine that a syndicated loan is a security for purposes of federal securities laws. Substantial changes to the syndicated loan market would surely result.
Setting Reserves for Community Banks
Wayne Linder
Segmentation and forward-looking risk assessment are important to setting and documenting the allowance for loan-loss reserves.
Accounting and Disclosure Requirements for Guarantees
Thomas R. Robinson and Paul Munter
Credit analysts should carefully scrutinize the footnotes and MD&A in company reports to determine the existence of guarantees that are not reported on the balance sheet as a liability.
Board Governance: The Effect on Business-Development Strategies
Tom Ziemba, PhD, and David Westman
The board can add value to the bank’s business-development strategies, as well as fulfill its oversight and active governance roles.
CREDIT ANALYSIS
Low Interest Rates Could Be Masking Performance Problems
William Henrich
An enhanced understanding of a borrower’s business situation enables the lender to spot troubles early and to encourage management to address them.
WORKOUTS
Turnaround Succeeds by Focusing on the Big Picture
Harvey Kibel
Flat or declining revenues do not have to result in business failure. For companies in transition, it is crucial to take a step back and ask fundamental questions.
ASSET-BASED LENDING
Identifying and Managing Troubled Borrowers in Asset-Based-Lending Scenarios
Lee A. Diercks
Close monitoring and early intervention can make all of the difference for troubled borrowers.
BOOKS
Dumb, Dumber, and Dumbest: What Went Wrong at Enron
David J. Ginzl
An examination of the Enron collapse shows what can happen when checks and balances are ignored, when conflicts of interest and ethical boundaries are breached, and when ambition and supercharged egos metastasize into greed and dishonesty.

Top

March 2004

How Retail + Small-Business Partnerships Increase Sales
Nicholas T. Miller and Les Dinkin
How can financial institutions engage branch staff and small-business bankers to more effectively sell and service small-business customers? Three case studies provide insights.
Creating Value in Corporate Banking
Juergen E. Schwarz
Financial institutions must avoid managing to the average and keep the focus on the most valuable clients.
Interpreting Ambiguities in Loan Documents
William E. Hiller and Geoffrey R. Peck
Even detailed loan agreements can be open to second-guessing.The authors discuss three examples in the context of the fundamentals of contract interpretation.
The Evolution of Corporate Cash Management
Christine Barry
Corporate cash management systems are attracting more attention as banks increasingly look to improve service and automation for their business customers.
SECURED LENDING
Avoiding Pitfalls in Revised Article 9 of the UCC
Richard S. Rosenstein and Nicholas Vegliante
A discussion of new problems related to the filing and perfecting of security interests under revised Article 9 of the Uniform Commercial Code.
CREDIT ANALYSIS
FAS No. 150: The Effect on Debt Covenants
Mark G. McCarthy, Douglas K. Schneider, and Larry P. Seese
FASB Statement No. 150 mandates that mandatorily redeemable preferred stock be reported as debt.
MARKETING
Why Your Bank Will Fail at Cross-Selling
Theodore A. Rosen
Why does cross-selling fail and, more important, what can banks do to maximize success?

Top

January 2004

Financial Reporting Quality: Red Flags and Accounting Warning Signs
Thomas R. Robinson and Paul Munter
Two large accounting scandals, Enron and Sunbeam, show the importance of looking for and responding to accounting red flags.
Tying and Subsidized Loans: Is There a Problem?
Donald Mullineaux
Tying is not a rational strategy in today’s financial environment.
Recent Developments in the Regulation of Bank Tying Arrangements
Charles M. Horn, Andrew Karp, and Christine Poulon
A proposed Federal Reserve Board interpretation emphasizes the critical importance of compliance systems and policies to prevent illegal tying.
Earnings Management: Lessons from Freddie Mac
John R. Garrett and Thomas A. Gavin
Freddie Mac’s financial statement restatement provides lessons about corporate governance and insights into the problem of earnings management.
RISK MANAGEMENT
Responding to Regulatory Scrutiny of Loan-Loss Reserves
Scott Miller
Under current guidance, both methodology and documentation are key for justifying loan-loss reserves.
ACCOUNTING
FASB Revises Employers’ Disclosures about Pensions and Other Postretirement Benefits
Ibrahim M. Badawi and Adrian P. Fitzsimons
A proposed Statement of Financial Accounting Standards would eliminate the SFAS No. 132 requirement to provide reconciliations of beginning and ending balances of the fair value of postretirement benefit plan assets and benefit obligations.