FIRST CLASS SERVICE. FIRST NAME BASIS.

Borrowing in Today’s Banking Environment

July 25, 2012

Presented by Charlie Crawford

FIRST CLASS SERVICE. FIRST NAME BASIS.

FIRST CLASS SERVICE. FIRST NAME BASIS.

Banking in Georgia

• 238 banks chartered in Georgia– 81 percent of Georgia’s banks are well

capitalized based on regulatory guideline for having 10% or higher total risk-based capital ratio.

FIRST CLASS SERVICE. FIRST NAME BASIS.

Banking in Georgia

FIRST CLASS SERVICE. FIRST NAME BASIS.

Decline of Troubled Banks

FIRST CLASS SERVICE. FIRST NAME BASIS.

Banking in Georgia

• 6 Georgia banks closed in 2012 (23 Georgia in 2011, 21 in 2010)

• 26 Georgia banks received TARP funds ($6.2 billion) in October of 2008– Most have not repaid

FIRST CLASS SERVICE. FIRST NAME BASIS.

Signs of Stabilization

• Credit quality continues to improve

• Income within the industry is improving

FIRST CLASS SERVICE. FIRST NAME BASIS.

Signs of Stabilization

FIRST CLASS SERVICE. FIRST NAME BASIS.

Signs of Stabilization

FIRST CLASS SERVICE. FIRST NAME BASIS.

Industry Shift

• The number of bank branches in the US has fallen for the second year in a row– Consolidation of the

industry – New technology allows

clients choices

FIRST CLASS SERVICE. FIRST NAME BASIS.

Technology Influence

• Remote Deposit Capture (RDC)– 2.1 billion checks are projected to

migrate to RDC from other channels by 2016, with adopters depositing 73% of their paper checks via RDC.

FIRST CLASS SERVICE. FIRST NAME BASIS.

Economic Hurdles

FIRST CLASS SERVICE. FIRST NAME BASIS.

Regulatory Environment

• New rules and regulations is hindering banks’ ability to serve their communities

• Regulatory examination pressures causing some bankers to resort to balance sheet shrinkage and curtailment of lending.

FIRST CLASS SERVICE. FIRST NAME BASIS.

SBA Lending

• Georgia SBA Lending Hits All-Time High – Approving over $1B in guaranteed loans to

small businesses in Georgia– Georgia leads the SBA's Southeast Region in

volume

FIRST CLASS SERVICE. FIRST NAME BASIS.

Lending Today

C&I Loans

FIRST CLASS SERVICE. FIRST NAME BASIS.

C & I Lending

• Migration from real estate lending to various forms of C&I lending

• For the Atlanta Region, C&I volume increased by ~$38.1B in 2011, or 15%

• Increases in capital levels led to a reduction in overall concentration levels for the Region

FIRST CLASS SERVICE. FIRST NAME BASIS.

C & I Lending

• The C&I delinquency rate for the Atlanta Region (2.11%) is notably above the national average (1.38%)

• Uptick in banks with C&I concentrations exceeding 100% of Total Capital

• Banks will need to implement and/or strengthen C&I credit underwriting and administration practices

FIRST CLASS SERVICE. FIRST NAME BASIS.

C & I Lending

• C&I Loans typically take the form of: – Short-term working capital loans (financing

accounts receivable, inventory, etc.)– Seasonal loans– Term loans (to finance capital assets)– Other loans to individuals for various business

purposes

FIRST CLASS SERVICE. FIRST NAME BASIS.

C & I Lending Risks

• On the Borrower Side– Faulty business plans– Poor management– Competition– Economic conditions

FIRST CLASS SERVICE. FIRST NAME BASIS.

C & I Lending Risks

• On the Bank Side– Inadequate knowledge of business line– Lax supervision and monitoring– Weak management information systems– Fraud– Economic conditions– Inappropriate loan structure (margins,

liquidation, etc.)– Concentrations

FIRST CLASS SERVICE. FIRST NAME BASIS.

Recent Bank Credits

• $1,000,000 Term Loan for an Owner Occupied Warehouse – Prime + 1.75% floating, with a 5.00% floor

FIRST CLASS SERVICE. FIRST NAME BASIS.

Recent Bank Credits

• $700,000 SBA 504 Loan to finance a business acquisition– P + 2.50% floating for a 10

year term

FIRST CLASS SERVICE. FIRST NAME BASIS.

Recent Bank Credits

• $2MM Revolving Line of Credit for business operations– Prime + 3.50%

floating, with a 6.75% floor

FIRST CLASS SERVICE. FIRST NAME BASIS.

“New Normal”

• Commercial Loan Underwriting– Cash Flow is key– More documents may be required– Requirement of more real equity

• Loan Participations Between Banks– Banks are hesitant to participate with others

due to considerable losses from the past

FIRST CLASS SERVICE. FIRST NAME BASIS.

Tips on requesting a loan

• Find a bank that fits you

• Plan to establish a full banking relationship

• Clearly articulate your need

• Come prepared with full financial information

• Be prepared to offer collateral

• Plan to give your personal guaranty

FIRST CLASS SERVICE. FIRST NAME BASIS.

What borrowing may look like for you today

• Healthy banks want / need to make more loans

• Expect to have more equity in your transaction and an emphasis on multiple sources of repayment

• You will be rewarded if you are willing to establish a relationship beyond the loan transaction

FIRST CLASS SERVICE. FIRST NAME BASIS.

Questions?

July 25, 2012

www.PrivateBankOfBuckhead.com