Commercial lending academy brings formal training to Minnesota

Northwestern Financial Review, Oct 15, 2001 by Crews, Jennifer Goepfert

[training]

In recent years, the only way for commercial lenders to learn the ropes was through on-the-job training. This wasn't always so. When Kelly Dunn, executive vice president of The First National Bank of Hudson, Wis., first began in commercial lending in the 1980s, he attended a program for commercial lenders through Northwestern National Bank of Minneapolis.

"I was fortunate enough to have gone through a formal training program," said Dunn. "In my own career, that has been extremely beneficial because it combined on-the-job experience with formal classroom training."

In fact, training for commercial lenders was offered at various institutes regularly until the 1990s. This posed a dilemma for bankers such as Dunn who felt that there was still a need for some type of formal training.

"As our bank grew we had created some new opportunities and we needed to help move some people into commercial lending," explained Dunn. "Since this is such a vital part of a bank's profitability and value, the big question was, How do you train a commercial lender?.'"

A 23-year banking veteran, Dunn reflected back on his own experience and decided that since there weren't any formal training programs in place, he would start one. As a past chapter president of the Risk Management Association (RMA), formerly Robert Morris Associates, Dunn was aware of the resources such a professional group could offer.

A national organization that specifically focuses on commercial lending, RMA had previously offered 25 one-day seminars on topics in the field. Traditionally, a commercial lender would attend these one-day seminars as they became available. Classes, however, were not offered on a regular basis and a class on a topic such as cash flow that is offered one year might not come around for another four years. Dunn saw the opportunity to develop these seminars into a more solid training program. In 1998, he approached RMA with his proposal.

"From a lending perspective there is natural flow in how the materials and the data should be presented," said Dunn. "We took a number of courses that RMA had developed and that had been taught locally and then created a natural sequence for those courses."

RMA brought two qualified instructors, John Reik and Jeff Judy, on board to pilot the new training program. Reik, the founder and president of John Reik & Associates, Business Training and Consulting, had eight years in credit training and corporate finance. He also had more than 20 years as a consultant to banks and served as an assistant professor of finance at the University of Minnesota for more than 23 years. A 30-year commercial lending veteran, Judy is now an independent consultant providing training services to the banking industry. Both Reik and Judy had taught seminars through RMA before.

In 1999, RMA kicked off its first training session in St. Paul, Minn.

The program is open to all bankers who wish to gain the skills necessary to become a commercial lending officer. The program accepts 25 bankers each year. Dunn pointed out, however, that bankers who are new to the industry or who have been working in commercial lending for five years or more will not garner as much from the program as someone who has been in commercial lending for a just a few years. Program attendees are expected to have a strong working knowledge of general accounting, banking terminology and financial statements.

The program runs in three phases: tools, application and integration. Sessions begin in December and end in March. Each session runs for four days with about a month break in between. Students begin by learning the basics of cash flow and accounting principals. In the application phase, students work with case studies and apply the knowledge that they have gained in phase one. In the final phase, students must research a case, and make a loan presentation to a panel of experienced bankers. In between each session, bankers are asked to engage their bank managers in a discussion that enforces what they have learned in the classroom.

"We are trying to present a more structured approach to teaching credit analysis," said Judy. "The concept is that we can take one-day sessions on a given topic and we can expand it significantly, get into more detail, be far more focused and apply practical applications. When you put all the pieces together it does a great job of presenting a complete picture of the duties of a commercial lender."

The program is going into its third year. The sessions, team taught by Judy and Reik, have proven successful. "The feedback we have gotten has been excellent," Judy said.

"These particular instructors are a nice combination," said Tim Fallon, commercial lender at The First National Bank, Woodbury, Minn. Fallon was a member of the first graduating class of the program in 1999. "John is more analytical and Jeff is more light and brings in real world experience. They balance each other out and do a nice job."

Fallon was already working in the bank and was moving into commercial lending when he attended the program.