Western Independent Banker - July/August 2008 - (Page 13)

By Patricia Y. Trendacosta Monitoring Monitoring is important not only for its intended purpose but also to ensure that the covenant is enforceable. A lender that includes a financial covenant but never measures it and then one day realizes that a borrower has been out of covenant for several months or years gives the borrower an argument that it was effectively waived by the lender. Default What are a lender’s options when there is a default of a financial covenant? A default in a single financial covenant with no monetary default is problematic. Most courts would not look favorably in allowing a lender to sue for judgment when there is a failure of a single non-monetary default. However, when coupled a material adverse change (MAC clause) in the borrower’s financial condition, a lender might be able to do more. It is dependent on a whole host of circumstances and must be considered on a case by case basis. Ideally, the MAC clause would include language that expressly allows the lender to make the determination of a material adverse change in the exercise of its sole (or reasonable) judgment. Defaults in financial covenants are also excellent opportunities to start workout discussions to determine whether there are ways for a lender to shore up the loan whether through additional collateral or guarantees or by correcting defects in the loan documentation. When used correctly, fi nancial covenants can be an important lending tool. However, clarity, diligence and prompt action by a lender must be employed to ensure that they remain one of the sharpest tools in the shed. Patricia Y. Trendacosta is an attorney with Frandzel Robins Bloom & Csato, L.C. in Los Angeles and serves as WIB’s general counsel. She can be reached at (323) 852-1000 or ptrendacosta@frandzel.com. In Memoriam WIB Past Chairman Leonard Weil LEONARD WEIL, PRESIDENT emeritus of Manufacturer’s Bank and 1972-73 WIB chairman, died on April 7, 2008. Known as a banking legend, he served as the founding president and CEO of Manufacturer’s Bank from 1962 to 1986. In 1962 he was approached to become president, manager and CEO of a new bank, the first new bank to open in downtown Los Angeles in 35 years. The bank was formed by a group of people in the garment industry, with the goal of serving small- and medium-sized business firms – something that, for the time, was cutting edge. During the course of his distinguished career, Weil was president of the California Bankers Association, Independent Bankers Association of Southern California and Western Independent Bankers in 1972-73 and director of the American Bankers Association. He also was chairman of the board of the Pacific Coast Banking School, where, as early as the 1970s, he taught a course called “Banking and the Eighties and Nineties.” f you’re looking for an effective compensation program, then look to Amalﬁ Consulting, LLC. That’s because Amalﬁ Consulting can offer your ﬁnancial institution complete, comprehensive and innovative compensation solutions. We provide independent, unbiased, relevant advice, and a unique approach aimed at motivating, inspiring and retaining valued employees. For more information, contact Gayle Appelbaum, 952-893-6795 or gayle.appelbaum@amalﬁconsulting.com, and take your compensation in a new direction. Taking I Compensation in a New Direction. Western Independent Banker July/August 2008 381425_Amalfi.indd 1 13 5/10/08 11:00:20 AM http://www.amalficonsulting.com

Table of Contents Feed for the Digital Edition of Western Independent Banker - July/August 2008

Western Independent Banker - July/August 2008 Contents A Message from the President & CEO Getting Creative and Competitive with Leaders' Incentive Compensation Financial Covenants - What Good Are They Really? Homes Within Reach Revisiting Credit Quality and Risk Management Loan Yield Shock Wave - What Can You Do? What Lending Crisis? - Community Banks Flex with Lending Strength How to Fine-Tune ALLL During Uncertain Times Productivity, Technology and Export Growth Trump Housing's Fall in the Long Run - The Economy According to Brian Wesbury Distressed Real Estate Loans and Their Property Tax "Kicker" WIB Calendar Welcome New Members Index to Advertisers advertiser.com

Western Independent Banker - July/August 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.