State of the Banking Industry 2011, When is the Dust Going to Settle?

Bill McDermottMcDermott Financial Solutions, LLC

Presentation Outline-The 3 ThingsI. The Past-TARP

 

Banks had a liquidity and leverage crisis, US bailout of the banking industry

II. The Present-What You Need to Know Now About The Banking Industry 

Which banks are Healthy, Which Ones Aren’t

 

III. The Future-It’s a Long Road to Recovery, But We’re on the Path. Tight Credit Will Continue

What happened…

• In 1999, Fannie Mae, the nation’s biggest underwriter of home mortgages, announced…

• The Clinton Administration pressured Fannie Mae to help working- class home buyers…

• The Bush administration called for the entire housing industry to help 5.5 million minority families to become homeowners…

• The entire lending industry was being pressured to ease up on lending requirements…

We’ve become …

So, What Do You Need to Know Now About the Banking

Industry??

A.Which banks are healthy???

B.Bank failures will continue…

C.www.fdic.gov, Google Alerts

D.SBA Lending Programs……

Some Banks are healthy, Some are not….

• SunTrust TARP exit bolsters hope AJC 5/15/11

• RBC on the block? Charlotte Business Journal 5/11/11

• Brand Bank Complete $200 Million Capital Raise PR Newswire 5/4/11

• United Community Bank Reports 1st Qtr loss of $142.5 Million

• Two Georgia Banks Fail Atlanta Business Chronicle 4/29/11

Consolidation will continue..

It is estimated that another 50-60 banks will fail in Georgia over thenext 2-3 years

How do I keep up with all of this?

Texas Ratio Report, www.fdic.gov and Google Alerts

Texas Ratio

• To calculate the Texas Ratio, you divide a bank's bad debt on the books by the amount of money it has to absorb the bad debt. (shareholder equity)

• Bad debt/ net worth plus loan loss reserves

>100% could be a problem

www.fdic.gov

• Quick links-bankers, institution directory, bank find

• Type in the bank name

• Performance and condition ratios

• Capital to asset ratio (between 8%-12%)

• Profitable/unprofitable?

• Asset quality (non performers %)

Google Alerts

• If you have a Google profile

• Type in a name/topic

• Google will send all relevant information once a day or more often via email or text

• I follow 30 different banks with Google Alerts to get up to date information on each institution

SBA Loans

• SBA Business Express loans are smaller loans up to $350,000 with less documentation required and faster approval time

• Patriot Express loans are for former veterans that are looking to fund their business up to $500,000 for eligible purposes

SBA Loans (continued)

• The SBA 7a program has a wide variety of uses from expansion to business acquisition to companies that export to companies that do business in rural areas

• The SBA 504 program provides 90% purchase financing or refinancing on owner occupied real estate (50% bank loan 40% SBA bond with a 20 year fixed rate)

Help yourself by becoming familiar with these programs. A large amount of current bank lending is through these programs

The Future….

• It’s a long road to recovery, but we’re on the right path

• Tight credit will continue

• Many banks remain over leveraged and are forced by regulators or market forces to raise capital or reduce the overall size of their balance sheet

• A bank reduces the overall size of their balance sheet by selling off loans not making new ones.

Look for Banks that are …

• Raising capital or paying off TARP money

• Brand Bank Complete $200 Million Capital Raise PR Newswire 5/4/11

• SunTrust TARP exit bolsters hope AJC 5/15/11

SBA programs can become…

• An excellent way to help you with cash flow issues

• Success stories, mfg/distribution company $3.2 million mortgage and line of credit,

• concrete/paving contractor $400,000 mortgage and working capital loan,

• distributor of LCD displays $800,000 inventory loan

• CPA practice buyout $250,000

What types of loans??

Residential construction and development

(when ______ freezes over)

Other real estate (owner occupied, yes/SBA 504 Investor loans, no)

Working capital, equipment and acquisition loans, yes/SBA

An update on the banking industry…

• Past, TARP, the banking industry needs capital

• Present, use fdic.gov and google alerts to find healthy banks

• Future, tight credit will continue, SBA programs can help

Questions???

• Call me at 678-597-8184 or email bmcdermott@mcdfs.com

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