Borrowing in Today’s Banking Environment
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Transcript of Borrowing in Today’s Banking Environment
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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