f irst c lass s ervice. f irst n ame b asis. borrowing in today’s banking environment july 25,...

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Borrowing in Today’s Banking Environment

July 25, 2012

Presented by Charlie Crawford

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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.

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Banking in Georgia

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Decline of Troubled Banks

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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

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Signs of Stabilization

• Credit quality continues to improve

• Income within the industry is improving

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Signs of Stabilization

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Signs of Stabilization

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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

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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.

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Economic Hurdles

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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.

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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

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Lending Today

C&I Loans

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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

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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

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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

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C & I Lending Risks

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

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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

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Recent Bank Credits

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

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Recent Bank Credits

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

year term

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Recent Bank Credits

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

floating, with a 6.75% floor

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“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

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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

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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

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Questions?

July 25, 2012

www.PrivateBankOfBuckhead.com