Wannabe commercial lenders get taste of real-world banking
It’s hard to imagine a better classroom than the real world.
This fall students in the commercial banking program at Marquette University in Milwaukee will learn about the fundamentals of the business by underwriting and managing a portfolio of small-business loans.
Along with Town Bank in suburban Hartland and the Wisconsin Women’s Business Initiative Corp., Marquette’s business school has established a revolving loan fund with two goals in mind: teach students how to underwrite and manage business loans and provide working capital to small businesses downtown. The program’s backers hope to broaden students’ perceptions about what a career in banking really means.
“When you think about banking, a lot of times you think about investment banking and Wall-Street-type positions and I don’t know if the local commercial banker has been communicated enough as a career opportunity for kids coming out of college,” said John Hazod, chief financial officer at the $2 billion-asset Town Bank, a subsidiary of Wintrust Financial.
If successful, the partnership could provide a blueprint for developing future commercial banking talent.
Good commercial lenders are in especially short supply, as the in-house credit training programs of yore have largely vanished. As a generation of established commercial bankers begins to contemplate retirement, various industry actors have stepped in to meet the educational need. Many trade associations offer credit training programs, some large banks have developed new programs, and some individuals have launched efforts, as well.
Marquette established a commercial banking concentration in its finance department about 18 months ago because of the expected demand for loan officers and credit analysts. Kent Belasco, the director of the commercial banking program, is also its only full-time professor, although he did recently hire an adjunct. Belasco has been in banking and consulting for 37 years, most recently as the chief information and operations officer for First Midwest Bank in Itasca, Ill.
In addition to general courses, electives and internships, finance majors on the commercial banking track take eight core courses, covering topics like investment analysis, risk management and financial modeling.
Belasco also wanted his students to get some hands-on experience underwriting and managing business loans, and that is where Town Bank and WWBIC came in.
Town Bank already had a relationship with Marquette. It recently replaced U.S. Bank as the university’s official banking partner. That 10-year agreement includes an on-campus branch, ATMs and (through its parent company Wintrust Financial) a $12 million contribution for scholarships, athletics and other programming.
WWBIC also had ties with Marquette, CEO Wendy Baumann said. The community development financial institution has worked with students in Marquette’s law and business schools on projects for WWBIC’s low- to moderate-income clients, like reviewing leases and helping with marketing plans.
Marquette likes its students to get hands-on experience in their chosen fields, she said. The revolving loan fund will be an extension of that philosophy.
The loan portfolio endeavor will be a part of Belasco’s bank leadership course. He said the first half of the course will take place in the classroom, where 17 or so students will learn about the terminology and mechanics of underwriting.
During the second half of the semester, those students will work with lenders at Town Bank and WWBIC, looking at applicants, presenting to the credit committee and underwriting loans. The idea is to be able to apply those classroom lessons in a real-world scenario.
“They have investment programs where students manage an investment portfolio,” said Jay Mack, CEO of Town Bank. “We thought, wouldn’t that be a neat idea if the banking program had a similar program where students would make loans and manage the loan portfolio?”
Town Bank committed $500,000 to the fund, although Mack said he anticipates that will grow over time. Lenders with Town Bank and WWBIC will find the small-business prospects, and the students will work with WWBIC to underwrite the loans, which will stay on WWBIC’s balance sheet.
The Marquette students will make small-business loans, mainly for equipment and working capital, to downtown businesses that fit WWBIC’s target market. That means largely women-, minority- and veteran-owned small businesses, as well as startups or new businesses, said Mike Hetzel, its director of lending. Most of the loans the Marquette students make will be for under $50,000.
“It’s good for them to see that we’re not just looking at million-dollar companies. Many times, when you’re looking at the textbook world of cash flow, you’re looking at an ideal company that has $500 million in revenues and 300 employees,” Hetzel said. “That doesn’t apply to small businesses, and the United States is built on small business.”
Students in the commercial banking program last school year — the first full year it was offered — got to learn in a different hands-on situation. WWBIC hosted the students and gave them real-life credits (about which WWBIC had already decided) to analyze and present to a mock loan committee, Hetzel said.
Michelle Fredericks, a 2018 graduate, credited financial modeling courses with giving her a solid foundation for the first day of her job as an analyst in Wells Fargo’s corporate banking group. She graduated in May and accepted a job with Wells early in August, just after completing an internship.
Fredericks also said the program at Marquette was especially helpful because it exposed her and her classmates to a variety of roles and actors in the industry. WWBIC was particularly vital to informing their understanding about the range of borrowing needs business clients might have, she said.
Belasco said that all five students in the commercial banking program last year found jobs in their field immediately upon graduating. He expects the same for the 15 he anticipates will graduate next spring.
He is also hoping to effect positive change in the industry.
“We talk about ethics, we talk about good and bad behavior, and one of my goals is to help change perceptions in banking,” he said. “With building a cadre of students that are informed of the industry, they understand the regulations, they understand good and bad behavior. My hope is they will be ethically sound and they can change the nature of commercial banking.”