We present an interview with former community banker Scott Proper, who headed the Vail, Colorado operations of Millennium Bank, a Colorado state-based and chartered bank, for five years. Scott left Millennium to start Proper Investments and Consulting, a firm specializing in debt restructuring services and distressed real estate workouts.

We find Scott’s perspective on the problems plaguing U.S. community banks — and on how to analyze them — invaluable, as he was an active industry participant until very recently.

Scott is a Yale graduate and former captain of the Yale Heavyweight Crew Team.

MOI Global: You experienced the boom and bust in U.S. community banking first-hand. Obviously, it appears banking executives and regulators learned little from the S&L crisis of the 1980s and ‘90s. Are we as a political and economic system doomed to keep repeating past excessive behavior, or is there a way to get things under control permanently?

Sudden increases in the loan loss reserve may indicate that the increase was mandated by a regulator and was not a voluntary decision of management (management tends to try to gradually appropriate a proper loan loss reserve over time).

Scott Proper: I think these economic cycles will continue. I do not have confidence that there is a way to get things under control permanently. I also do not have confidence that all of a sudden human beings will start paying more attention to the lessons of history than they generally do. Whether that means we are “doomed” or whether it simply means that we ought to anticipate more exaggerated economic peaks and troughs is a matter of perspective. I think that people are eager to forget about the exaggerated peaks and troughs, and get back to “business as usual.” In contrast, I now believe that these exaggerated peaks and troughs are business as usual.

MOI: Analyzing the quality of the loan assets on a bank’s balance sheet can be a daunting task, since investors typically don’t have access to data on individual loans. What do you focus on when trying to assess the quality of the loan portfolio of a publicly traded bank?

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