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Commercial Lending 101: Loan Underwriting
Newport Beach and Sacramento sessions

The five-day Commercial Lending School is the centerpiece of our commercial lending curriculum. This school will cover the major areas commercial loan officers must master in order to build a safe and sound loan portfolio.

Commercial and industrial lending has moved to the forefront for many banks. After years of extending loans to develop and support commercial real estate, loan portfolios have become heavily concentrated in loans secured by commercial real estate. Regulators are demanding banks to diversify their commercial loan portfolios to include more commercial and industrial loans thus lessening the impact of commercial real estate loan concentration.

Commercial loans can be highly profitable but can expose banks to a high level of risk if they are not properly investigated and analyzed. Since the loan portfolio is the largest asset for most banks and it generates the majority of interest income and fees, it is vital that commercial loans are selected and analyzed carefully before they are approved and funded.

Who Should Attend?

This program is designed for junior commercial lenders, credit analysts, business development officers, credit officers, loan review officers, branch managers, and senior level commercial lending support staff.

Program Objectives

  • Describe the importance of commercial lending to banks and the role of the commercial loan officer (relationship manager)
  • Analyze industry, business and management risks
  • Apply the rules of debits and credits to develop a financial statement
  • Identify the major accounts displayed on financial statements
  • Describe the accounting development of major asset accounts that banks rely upon as a source of repayment
  • Describe the various tax forms required to be filed by various organizational structures
  • Describe the flow of tax forms into Form 1120, 1120S and 1065
  • Analyze schedule K-1 for pass-through entities
  • Complete a credit & ratio analysis to determine a commercial borrower’s:
    • Liquidity
    • Leverage
    • Asset management capabilities
    • Operating performance
  • Determine the financial impact on cash flow from changing asset turnover rates and from changing cost and expense margins
  • Calculate the asset conversion cycle to determine when and how much funding a commercial borrower will require on a short-term basis and when to expect payments on the short-term loans
  • Analyze borrowing causes to determine the proper loan structure required to insure maximum repayment capability
  • Describe how cash flow analysis is utilized to convert an accrual basis financial statement into a statement of cash flow
  • Demonstrate how cash flow analysis utilizing the universal cash analysis method (UCA) is calculated
  • Compare the traditional cash flow analysis with the UCA method
  • Convert management’s assumptions into a projected income statement, balance sheet and cash flow analysis statement
  • Sensitize management’s assumptions to create a more conservative financial forecast
  • Calculate the sustainable growth rate to determine how fast sales can grow without increasing leverage beyond a safe level
  • Calculate and interpret global cash flow analysis utilizing a self employed borrower with interest in various entities
  • Complete the commercial loan documentation process including documents required to:
    • Identify the borrower
    • Identify and value the collateral
    • Evidence the debt
    • Attach the collateral
    • Perfect the security interest
  • Describe the following credit administration issues:
    • Credit risk rating
    • Loan portfolio management
    • Problem or impaired loan management
    • Identifying trouble debt restructuring and accounting for them
    • Calculating the allowance for loans and lease losses

Tuition

Early-Bird Registration (through May 9, 2014)
CBA Member: $2,200
Non-Member: $3,200

Regular Registration
CBA Member: $2,700
Non-Member: $3,700

Cancellation and Complaint Resolution Policy

Substitutions are allowed, at no additional cost. Written notice is required for all cancellations/substitutions.

The following applies to the Newport Beach session (March 3 – March 7, 2014): The full registration fee will be refunded, minus a $500 processing fee, if written notice is received by February 10, 2014 and 50 percent if by February 17. No refunds will be provided after February 17. Registrations made on or after February 17 are not subject to refund.

The following applies to the Sacramento session (June 2 – June 6, 2014): The full registration fee will be refunded, minus a $500 processing fee, if the request is received by May 12, 2014 and 50 percent if by May 19. No refunds will be provided after May 19. Registrations made on or after May 19 are not subject to refund.

Complaints regarding this program should be directed to John Lingvall, VP, director of education, at (916) 438-4428.

Agenda

Sessions run from 8:30 a.m. to 4:30 p.m., with breakfast provided at 7:30 a.m.  and lunch at noon.


DAY ONE

Introduction to the Commercial Lending Process

  • Importance of commercial lending to banks
  • Role of the commercial loan officer (relationship manager)
  • Characteristics of a good commercial loan officer
  • Loan prospecting, business development and customer retention

Analyzing Industry, Business and Management Risks

  • Study of industry characteristics and industry life cycles
  • Study of business and product life cycles
  • Discover sources of information on various industries
  • The impact of macroeconomic factors on businesses and industries

Accounting Principles

  • Influential organizations that govern accounting principles development
  • Review of accounting standards that are relevant to the lending process
  • Review the rules of debits and credits
  • Apply the rules of debits and credits to develop a financial statement (case study)


DAY TWO

Detail Review of Corporate Financial Statements

  • Identify the major accounts displayed on financial statements
  • Understand the accounting development of major asset accounts that banks rely upon as a source of repayment

Review of Corporate Tax Returns

  • Describe the various tax forms required to be filed by various organizational structures
  • Describe the flow of tax forms into Form 1120, 1120S and 1065
  • How to analyze schedule K-1 for pass-through entities

Credit  and Ratio Analysis to Determine a Commercial Borrower’s:

  • Liquidity
  • Leverage
  • Asset management capabilities
  • Operating performance

Determining the Financial Impact on Cash Flow From Changing Asset Turnover Rates and from Changing Cost and Expense Margins

  • Comprehensive case study


DAY THREE

Calculate the Asset Conversion Cycle to Determine When and How Much Funding a Commercial Borrower Will Require on a Short-Term Basis and When to Expect Payments on the Short Term Loans

  • Short case study

Analysis of Borrowing Causes to Determine the Proper Loan Structure Required to Insure Maximum Repayment Capability

Calculation and Analysis of Cash Flow

  • How cash flow analysis is utilized to convert an accrual basis financial statement into a statement of cash flow
  • Review the rules of cash flow
  • Demonstration of how cash flow analysis utilizing the universal cash analysis method (UCA) is calculated
  • Comparison of the traditional cash flow analysis with the UCA method


DAY FOUR

Developing Projections and Financial Forecasting

  • Converting management’s assumptions into a projected income statement, balance sheet and cash Flow Analysis statement
  • Sensitizing management’s assumptions to create a more conservative financial forecast
  • Case study

Calculating the Sustainable Growth Rate to Determine How Fast Sales Can Grow Without Increasing Leverage Beyond a Safe Level

Calculation and Interpretation of Global Cash Flow Analysis Utilizing a Self Employed Borrower with Interest in Various Entities

  • Comprehensive case study

Review the Commercial Loan Documentation Process Including Documents Required to: 

  • Identify the borrower
  • Identify and value the collateral
  • Evidence the debt
  • Attach the collateral
  • Perfect the security interest


DAY FIVE

Review of Credit Administration Issues

  • Credit risk rating
  • Loan portfolio management
  • Problem or impaired loan management
  • Identifying trouble debt restructuring and accounting for them
  • Calculating the allowance for loans and lease losses

Comprehensive Case Study for a Corporate Borrower  (Group Study)

Group Presentation of the Corporate Borrower

Wrap-up

Accommodations

Monday, March 3 through Friday, March 7, 2014

Hyatt Regency Newport Beach
1107 Jamboree Road
Newport Beach, CA 92660
(949) 729-1234

A room block has been set up at the rate of $150/night. To reserve, please call (888) 421-1442 and reference the California Bankers Association Commercial Lending School rooming block. Room rate includes complimentary internet and overnight parking.

 Monday, June 2 through Friday, June 6, 2014

Embassy Suites Sacramento
100 Capitol Mall
Sacramento, CA 95814
(916) 326-5000

We have set up a room block at the rate of $149/night.  You can use the group code CLS on our website, call (916) 326-5000 and ask for the Commercial Lending School discounted rate or use the following link to book directly into your group: Embassy Suites Sacramento – Riverfront PromenadeBook by May 19 to reserve your room at the group rate!

Faculty

Jeffery W. Johnson, Principal, Bankers Insight Group

Jeffrey Johnson started his career with SunTrust Bank in Atlanta as a management trainee and progressed to vice president and senior lender for SouthTrust Bank (a large southeastern regional bank) and senior vice president and commercial banking division manager for Citizens Trust Bank of Atlanta (Community Bank).

Most of his career has been spent in credit administration, lending (commercial, consumer and real estate), business development, loan Review, management, and training and development. He has managed loan portfolios representing a cross section of loan types including: large corporate, high net worth individuals, middle market companies, small businesses, real estate and nonprofit organizations and managed several loan officers with portfolio management responsibilities.

Johnson is now a training professional in the banking industry by leading various seminars covering important topics relating to issues in banking. He teaches actively for fifteen state banking associations in the United States, the Risk Management Association (RMA) and individual banks nationwide. He co-authored a training course entitled “Lending to Service and Other Professional Organizations” for RMA in 2001.

Johnson earned a B.A. degree in accounting from Morehouse College in Atlanta, GA; a MBA in finance from John Carroll University in University Heights, Ohio; banking diploma from Prochnow School of Banking at the University of Wisconsin-Madison and a graduate certificate in bank management from the Wharton School of Business at the University of Pennsylvania.

Credit Information

Program Level: Beginner to intermediate

Prerequisite: Experience or training in accounting

Advance Preparation: None

Method of Presentation: Group – Live (lecture, discussion and case studies)

Recommended CPE Credits: 40.0 Hours Maximum
(Estimated 13.0 Accounting, 3.0 Taxes, 4.0 Auditing, 5.0 Finance, 3.0 Management Advisory Services, 8.0 Specialized Knowledge and Applications and 4.0 Communications.)
Sponsored learning activities are measured by program length, with one 50-minute period equal to one CPE credit. One-half CPE credit increments (equal to 25 minutes) are permitted after the first credit has been earned in a given learning activity. Please note that not all state boards have adopted this rule. Some participants may not be able to use one-half credit increments.

Approved for  40 CLBB credits by The Institute of Certified Bankers (ICB)
To report these credits, ICB members should visit www.icbmembers.org. We do not accept credit submissions from training providers on behalf of members.

Frequently Asked Questions

What do I need to bring?

Breakfast and lunch are provided each day. You only need to bring yourself, sharp pencils, and a calculator. All reference materials will be provided onsite.

What’s the dress code?

Casual. Think college class not a business meeting. Jeans and polo shirts are fine.

Do we have homework?

Yes, you will have one to two hours of homework each day. This is best accomplished with your classmates, so plan accordingly.

Other Questions?

Please contact John Lingvall, VP, director of education at 916/438-4428.

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