Blog Entries for Ed O'Leary

WHO SAYS LOSSES ARE OK?

eoleary — Fri, 03 Feb 2012 01:00:00 +0100

Stop and really think about that old saying about losses, for a minute

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The anecdotal evidence that our national business environment is improving is gaining momentum. There are exceptions here and there. But generally, community banks and community bankers are feeling more optimistic and anxious to resume a more active role in lending to their local marketplaces.

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PRIVATE EQUITY, VENTURE CAPITAL, AND COMMUNITY BANKS

eoleary — Fri, 27 Jan 2012 01:00:00 +0100

What are the appropriate funding roles for insured deposits?

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Near the center of our current political discussions are the subjects of venture capital and private equity. These are often mentioned in the same breath and somewhat interchangeably.

But they are not the same thing. The question to consider today is what roles community banks should appropriately [...]

O'LEARY'S ESSENTIALS: GOOD ADVICE, BAD ADVICE, AND MY ADVICE

eoleary — Thu, 19 Jan 2012 01:00:00 +0100

Ask yourself why you do what you do for a living

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Yesterday I visited a local branch of one of the mega-banking companies to get my signature notarized. It was a pleasant experience in one way, but a surprise in another.

The pleasant part was in chatting with the branch manager. Although there were several people in the lobby, she treat [...]

BETTER LOAN WORKOUTS HINGE ON BLENDING FAMILIAR AND ATYPICAL SKILLS

eoleary — Thu, 12 Jan 2012 01:00:00 +0100

Relationship banking has a place on the cleanup side

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Optimizing Distressed Loan Books , by John Michael Sheehan, which I review in ABABJ.com's Books for Bankers column this week, discusses why bankers don't always optimize problem debt resolution outcomes.

As I was reading the book, Sheehan's point reminded me of cer [...]

GETTING YOUR ATTITUDES IN SHAPE FOR 2012

eoleary — Thu, 05 Jan 2012 01:00:00 +0100

Ready yourself now for deposit building, credit concentration, and other challenges

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All things considered, we're in a more positive environment than we've experienced in a while. Question is, what will we do about it?

There are still mixed signals, but the economic recovery that started some months ago is gaining traction. And we can look to the Federal Reserve's commitment to hold rates low to assure a pos [...]

A LENDER LOOKS INTO HIS HEART

eoleary — Thu, 22 Dec 2011 01:00:00 +0100

Yearend makes a good time to assess what's important to you

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In the last few months, bankers have had several opportunities to consider how our values as individuals should have a direct bearing on our work as lenders--and how we in part evaluate our customers. One of the biggest disconnects in our society today seems to be the difference between what we say and what we do.

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BANKERS FACE A TIME FOR CARE AND VIGILANCE

eoleary — Thu, 15 Dec 2011 01:00:00 +0100

European developments get Ed O'Leary thinking of two long-ago debacles he lived through

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Part of what commercial lenders are supposed to do is think about what can go wrong.

That may mean with a lending deal ... or developments that can affect the health of the entire portfolio.

Such developments include local or reg [...]

CHARACTER IN LENDING�AN UNCERTAIN QUEST

eoleary — Thu, 08 Dec 2011 01:00:00 +0100

Why does "Character" seem like an option these days?

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All lenders are taught that a borrower's Character is the most important element in any credit transaction. The reasons seem obvious enough, but why is the identification of "good" character so elusive at times?

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LET'S SAVE OUR WAY TO PROSPERITY�AGAIN

eoleary — Fri, 02 Dec 2011 01:00:00 +0100

Some ways are better than others

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In the frothy atmosphere of the oil boom of the late 1970s and early 1980s I was in Midland, Texas. Money was easy and expense controls were lax, but the interesting thing that I remember about that period is that not all of us were comfortable with the excesses around us.

It seemed unreal.

And, of course, we learned soon enou [...]

LOOK BEYOND LENDING AND FIGURE OUT WHERE YOUR BANK IS HEADING

eoleary — Wed, 23 Nov 2011 01:00:00 +0100

Will people still want what your bank is selling?

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Perhaps I'm the only one who thinks of the struggle between the community banking and large banking business models in cataclysmic terms. I believe that what's at stake is a battle for how we and the generations coming after us will access banking services.

Comparing multiple banking models

To have a meaningful discussion, we sho [...]

5 WAYS TO GET BACK ON THE BUSINESS TRAIN

eoleary — Thu, 17 Nov 2011 01:00:00 +0100

Business will get better. Don't miss the turn!

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In 2007 many lenders didn't see the recession coming, so it's not surprising that many are not yet seeing the recovery in the credit cycle that is slowly beginning to emerge from the numbers and the accumulation of anecdotal evidence. One important metric of the change that's already underway: The list of problem banks is shrinking.

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BLABBING OR SHARING? BE SURE BEFORE YOU WHISPER A WORD ABOUT CUSTOMERS

eoleary — Thu, 10 Nov 2011 01:00:00 +0100

Trust is hard to glue back together

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Credit people deal with confidential information all the time. It's part of our job descriptions. How well do we observe the basic tenets of business confidentiality?

In a long career, I've observed that many people treat secrets and highly confidential information as either "too good to keep or not worth keepin [...]

O'LEARY'S ESSENTIALS: SHOULD DIRECTORS BE MAKING LOANS?

eoleary — Tue, 01 Nov 2011 01:00:00 +0100

Don't confuse oversight with hands-on involvement

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How many readers work for banks where outside directors are directly involved in the approval of credit?

Bank directors have the role of ultimately overseeing the activities of the banks they direct, including lending. But ...

• Does that include a specific role in the extension of credit?

• [...]

DON'T LET �CHARACTER LENDING' LABEL EXCUSE UNTRAINED UNDERWRITING

eoleary — Wed, 26 Oct 2011 01:00:00 +0100

Character should be a fundamental

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My good friend Jeff Judy, a credit training professional with a national practice whom many of you probably know, wrote very recently about what it means to be a "character lender." That term, to me, is an old-fashioned put-down of those lenders whose analytical skills are poorly developed or very rusty from disuse.

WHAT HAPPENED TO CORE DEPOSITS?

eoleary — Fri, 21 Oct 2011 01:00:00 +0100

Will old lessons be remembered when liquidity glut fades?

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There has been a lot of news in the financial press this week about banks' financial performance, as they start to announce earnings for the third quarter and the year to date.

Wells Fargo "disappointed" the investment community by missing consensus estimates of earnings per share by [...]

MORAL HAZARD BECOMES A GRAY AREA, THOUGH IT SHOULDN'T BE

eoleary — Fri, 14 Oct 2011 01:00:00 +0100

Age of strategic default makes the once-unthinkable apparently acceptable

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In the banking business, moral hazard used to be confined to old-fashioned dishonesty on the part of a customer or the shenanigans of a renegade banker.

Such risks continue, of course. There also appears to be an apparent resurgence of the old-fashioned [...]

LOOKING BACKWARD AND FORWARD AT TOM HOENIG, BANK REGULATOR

eoleary — Fri, 07 Oct 2011 01:00:00 +0100

Retiring KC Fed chief has served the industry well

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When I arrived in Albuquerque as the new president and CEO of First National Bank, the bank was under a Formal Agreement with the OCC and a Memorandum of Understanding at the holding company with the Federal Reserve Bank of Kansas City. One of the first regulators I dealt with was Tom Hoenig, the then newly installed president of the Kansas City Fed.

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O'LEARY'S ESSENTIALS: GREAT CREDIT POLICY IS NOT ENOUGH FOR A GREAT CREDIT CULTURE

eoleary — Thu, 29 Sep 2011 01:00:00 +0100

A followup to last week's take on credit policy

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Last week I expressed my strong conviction that as important as a good credit policy and an effective loan review process are to strong credit cultures, they aren't enough without a top down and almost ruthless commitment to internal controls.

I am referring to the sorts of controls that functionally implement the loan policy, including those tha [...]

O'LEARY'S ESSENTIALS: THE SAFETY AND SOUNDNESS EXAM PROCESS�AN UNFINISHED TASK

eoleary — Wed, 21 Sep 2011 01:00:00 +0100

Part one of two: How exam methods evolved into today's model

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The process of examining banking companies has evolved over the years, not only in what examiners look at and for, to how they do it. Overall, there was a shift from asset identification and valuation to judgment of the adequacy of policies and internal controls. Even with examiners' detailed attention to certain assets, they still tend to take a very "top down [...]

HOW LENDERS HANDLING WORKOUTS CAN COME OUT OF THE VALLEY OF THE SHADOW OF BAD CREDIT

eoleary — Tue, 13 Sep 2011 01:00:00 +0100

Take the work seriously, but not grimly, and don't take yourself too seriously

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People who know that I spent nearly ten years in the workout trenches in three different banks sometimes ask me how I did it for so long without losing my sense of humor or perspective. This is a good question and its outcome for me or anyone depends on a combination of organizational issues, individu [...]