I Love My Banker


[First of a Three Part Series]
Yesterday I met with a Senior VP of a community bank. He has been in banking for 40 years. When I asked how he was doing, he said, “I’ve never seen it this bad, even during the RTC days in the 90s.” Do you have empathy for your local banker or disdain for their inability to make you a loan?
We have been talking to and working with lenders for 30 years. Rest assured, they much prefer the times of economic strength, liquidity, and lending. In my opinion, community banks are being overregulated in a time where credit and liquidity needs to be encouraged. FDIC and OTS regulators are restricting your bank from making loans, particularly commercial investment and development loans. Owner-occupied commercial, SBA, and some residential lending is encouraged. A bank with over 300% of their capital in development or commercial loans is not only encouraged not to make any new loans, but not to renew any existing commercial. This includes loans that have been current. Where does this borrower go? Answer: “Trouble in River City.”
Before you go into your bank to ask for a loan or to buy some of their troubled assets, know where they are financially. When most brokers meet with a client for the first time, we know very little about the client, maybe a little on their real estate. If one of your client prospects called to set a meeting with you to discuss selling their real estate and suggested they would e-mail you their detailed financial statement and income statement before the meeting, you would be more than shocked. It never happens. However, not with your local bank. Their financial data is updated quarterly and made public at www.FDIC.gov. Click on Call and Thrift Financial Report, then Call Report, then View Data, enter your bank name and location and 60 pages of financial data will appear on each FDIC insured bank. The main schedules to look at are the Balance Sheet, Income Statement, Loan Loss Reserves, Commercial and Construction Loans, REO, and Past Due and Non Accrual Loans.
Ratios to look for are capitalization rate at 10% of assets. Banks under 7% are at risk of Letter of Consent or takeover by FDIC. REO plus sub-performing loans should not exceed 100% of capital. Commercial and development loans should not exceed 300% of capital and total loans should be less than 100% of deposits. As you learn to analyze the bank’s financial position, solutions to their and your problems will begin to emerge. Our next article will discuss how to use this information.
Until then, research your main bank that you do business with and take your banker to lunch. Let them know you have empathy for their position. Share a little Love.
Ted J. Blank, Managing Partner
Ted was born and raised in Indiana but he has been a Colorado businessman since 1988. After graduating from Purdue University, he began his career in the commercial real estate business. For the past 25 years, Ted has specialized in syndications, note acquisitions, REOs and client-based counseling. He holds the CCIM designation from the National Association of Realtors.
Ted is a past President of the Society of Exchange Counselors. Founded in 1961, the S.E.C. is a dedicated group of commercial real estate brokers, experienced in counseling clients on acquiring or disposing of investment properties. These skilled professionals use creative and effective methods of marketing, exchange and sales of properties to extract the highest income and tax advantages available. Ted is a past recipient of the S.E.C. Counselor of the Year Award and serves on the Board of Governors.
As recognized experts in commercial real estate and note acquisitions, Ted and his partner, Charlie Muenzberg have been invited to speak to groups around the country about the current economic climate as it pertains to the note business. Ted And Charlie have been partners since 1993.
Ted also wrote and teaches a creative real estate education program for the S.E.C. Education Foundation entitled “High Touch Real Estate Brokerage.” The course examines the importance of understanding a client’s motivation when they are buying, selling, or exchanging. Using the skill of client counseling will allow any agent (residential, commercial, farm, etc.) to help his or her client reach a successful conclusion.
Ted is the founder of the “National Directory of Lender Owned Real Estate” and a member of 3 national, real estate marketing groups.
Ted, thanks for this info. I was just discussing this with someone today and we were contemplating how important it is to understand the financial health of your banks, especially if you are asking for new loans or renewals. Disdain is sometimes a feeling that comes to mind, but after looking at some of their financials, maybe empathy is better.
thanks again for a great article.
13 April 2010 at 11:13 pm