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Competition gives students glimpse into world of commercial lending

October 16, 2015
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Teams of local undergraduate students competed for $3,500 in prize money during a commercial lending analysis competition Saturday in Grand Rapids.

The West Michigan Chapter of the Risk Management Association sponsored the Commercial Analysis Challenge Oct. 17 in which 10 teams competed for a top prize of $2,000.

Steve Weber, director at O’Keefe LLC and past president of the West Michigan Chapter of RMA, said it is the first year the organization has run the undergraduate contest. Students were provided with a case to analyze as if they were going to make a loan to a business.

“In the first part of the contest, they did a presentation to a panel of judges … as if they were proposing a loan to a loan committee,” said Weber. “Then the second part of the contest, they took what they proposed and then pitched to another judge panel as a borrower committee, saying, ‘This is what our bank is prepared to do.’”

The 25 students comprising the 10 teams represented Western Michigan University, Grand Valley State University, Hope College and Davenport University.

Each team had a 15-minute opportunity in the morning to present their analysis on the test case in front of a panel of judges who work in the credit industry and respond to a five-minute question and answer period. Then in the afternoon, they pitched their analysis to a different panel of judges.

“The test case scenario was developed by bankers in the committee from some real-world type lending situations they have found themselves in. It is not based on any given company,” said Weber.

The teams had to evaluate financial projections and current financial results of the company, and then come to a lending decision based on their knowledge of the new distribution, new equipment purchases, expanded facility costs, and company forecasts in terms of revenue and expenses.

Based on how well the team addressed the scenario, the clarity of the presentation and the depth of the analysis, Weber said the winning team received $2,000 in prize money, while the second-place team received $1,000 and the third-place team was awarded $500.

The $3,500 in prize money was funded by sponsors the West Michigan Chapter of the RMA, ChoiceOne Bank, First National Bank of Michigan, Huntington National Bank and Mercantile Bank.

Scott Setlock, vice president at Mercantile Bank and adjunct professor at GVSU, indicated in a written statement the competition is an avenue that allows students to test the waters of a career in commercial banking in a fun, competitive and a non-committal way.

“If they enjoy it, terrific … the sky is the limit. There will be many banks interested in students with such an experience. It speaks volumes of the students who participate in an event like this,” said Setlock.

The contest also was intended to educate students on how to conduct an analysis of a potential transaction; through the West Michigan Chapter of RMA, students had access to resources to help make good decisions and understand the lending process.

“The RMA just had its 100th anniversary and is an industry group promoting strong risk management in lending so banks and their employees are educated on good lending practices and there is industry information provided for them to do their job better,” said Weber.

“One of the resources out there is called RMA University. … Part of that (was) open and available to the student participants.”

The test case was developed by a team of bankers led by Paul Cormendy, a loan review specialist at Mercantile Bank. The oversight committee was comprised of Heidi Spencer, vice president of middle market banking at Comerica Bank, along with Setlock and Weber.

“It is a new thing. There is another chapter that is actually based in Nova Scotia that has been doing a contest like this for about 10 years and there was another contest run in North Dakota this year, but it was something we have put together ourselves,” said Weber. “We are not using a planned case or anything like that from the RMA.”

Setlock indicated he was approached by GVSU to explore if a commercial lending analysis competition would be beneficial for “both the local banks who hire many students as well as the students themselves.”

“I knew RMA could be a great partner, given their connection to many banks, so I asked Steve Weber to consider joining the efforts,” said Setlock.

“The response from the RMA, sponsoring banks, schools and students has been outstanding. At this point, it is clear this competition belongs in the West Michigan market. It is also clear that we have room to grow participation at all levels.”

The Commercial Loan Analysis Challenge also featured a presentation during the lunch break by Heidi Turley, chief financial officer of the Risk Management Association. It touched on careers in the commercial lending and risk management fields, and industry trends.

Depending on the feedback from the inaugural contest, Weber said the organization hopes to hold the event again next year.

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