ABA Banking Journal - August 2007 - (Page 21)

Pass the Aspirin: How do you say “no”? clients the importance of annual review of all borrowers, even those who have banked with the institution for a long time. This shouldn’t be a cursory once over, but a genuine effort by Loan Review to have a fresh look at how the borrower stacks up financially. “Banks become complacent,” warns Ghiglieri, “especially with customers they have known for a long time.” Red flags: • For borrowers once known as big depositors, have the balances dwindled? Are they overdrawing? Are large checks being sent back? • Are loan payments consistently arriving a few weeks late? • How is the business itself doing? Are sales still on track with past results? But, supposing that the bank truly has nonperformers, and that selling them looks attractive, consultant Rob Peacock suggests a four-step process to making a decision. Peacock, a veteran banker, is managing director at FinPro, Inc., a consulting firm based in Liberty Corners, N.J. 1. Assess collateral coverage and the bank’s lien position. If the situation looks manageable, don’t think of selling yet, but go on to the next step. 2. Find out if the journey is worth the payoff. Determine the bank’s best estimate of how long a workout would take, how much the bank is likely to recover at the end of the process, and what the present-value of the recovered funds would be. If the final number doesn’t look too promising, says Peacock, “that’s clearly a loan to sell early.” 3. Consider the bank’s reserves position for the loan. It’s more than likely the bank has reserved something based on performance of such credits. Peacock posits a hypothetical case to illustrate his concept. Say a $100 million-assets bank has $10 million in bad debt, and that a regulatory memorandum of understanding requires the bank to get that down to $2 million in 90 days. Could $8 million in bad debt be successfully worked out in one quarter? Not very likely. So, he continues, let’s say the bank shops the loans to a buyer, and obtains an offer of 40 cents on the dollar on C ommunity bankers frequently find themselves in more demand than there is banker to go around. We asked Pass the Aspirin “prescribers” how they say “no” to community leaders, local charities, their boards, trade association requests, and more, without leaving a bad impression. Find more bankers’ answers at www.passtheaspirinplus.com. Share your own ideas at scocheo@sbpub.com. fective, I would have to reduce my role in something else that I have already committed to, and that would not be fair. If the cause is something that I strongly believe in, I might tell them when one of my present commitments is set to end, and that I would consider a request then. Remedy 2 Ken Burgess, Jr., chief executive officer, First National Bank of Midland, $186.6 million-assets, Midland, Texas Community bankers have the responsibility to serve our communities and constantly work to make them better places to live and work. I feel—and our board feels— that taking a leadership role in our community on many fronts is one of the most important things we do. Many times this places us in ticklish situations when we have become so involved that we have to balance time for work and time for volunteer activities in the community. In our bank, we have tried to establish priority areas to support with our dollars and with our volunteer time. This, at least, gives us a framework to operate within. This does not ease the pain when it comes time to say no, but it does give us a way to better manage the process. While the bank may not directly support every event or project, we may have staff members who support those projects. In our case, saying no is not quite so hard because we have so much community involvement from our board and our management team already. We have board members or staff serving as mayor, school board member, city council member, hospital board members, United Way Chairs, and in many other local volunteer slots. As a result of the level of volunteer time we have given, people really do understand when we have to turn them down. When we do, we try to help out in other ways. The most important point is to develop a culture of community involvement within the bank. When that is in place and your bank is truly playing a strong leadership role in the community, the times when you must say no will be easier and accepted more often in a positive manner. BJ Remedy 1 John A. Klebba, Legends Bank, $220 million assets, Linn, Mo. Saying no is never easy, and is even harder when it is to an especially good cause or to an especially good customer. But experience has taught me that it is much easier to say no up front. This is better than to agree to join a cause, and then, later on, have to find a way to gracefully back out because of the existence of schedule conflicts, a lack of time, or even a lack of interest in what you originally thought was a great idea. As Clint Eastwood’s Dirty Harry once said: “A man’s got to know his limitations.” First and foremost, everyone needs to assess their ability to juggle multiple memberships, especially in light of their priorities as to family time, work commitments, leisure time, and other existing obligations. Once you exceed your own limitations by taking on something you shouldn’t, you have to realize that something in that set of priorities is being short-changed. I start with that premise, when I consider any request that will gobble up more time than is now committed. When I am at my maximum, my “limitation,” I try to be honest in saying no. I tell people what I am currently committed to, and that when I join something, I do so with the intent of doing my best to successfully assist in achieving the goal of that particular group or cause. I tell them that at this point I do not have the time to take on another commitment. I explain that they would be disappointed in me if I signed on and they then found out that they could not rely on me. Alternatively, if I would commit to join their cause and give the time they need in order for me to be ef- ABA BANKING JOURNAL/AUGUST 2007 21 http://www.passtheaspirinplus.com http://www.fnbmidland.com http://www.fnbmidland.com http://www.linnstatebank.com http://www.finpronj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - August 2007

Contents Editor's Column The Unbankers Snapshot: Do Share Repurchases Signal More M&A Activity Sleight of Mind Goals Behind Proposed ABA/ACB Merger ABA Resources ABA Chairman's Position Should You Sell Those Nonperformers Pass the Aspirin Branch Design - Evoking a Sense of Place Two Banks Take the LEED Move Over, Buddy Service Feature: Bankers' Banks Directory Websites: What's State of the Art for Banks? Citi Mobile to Go Strong with iPhone? Date First, Marry Later Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - August 2007

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