Borrowing in Today’s Banking Environment

1. Borrowing in Today’s Banking Environment Presented by Charlie Crawford • July 25, 2012

3. 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.

4. Banking in Georgia

5. Decline of Troubled Banks

6. 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

7. Signs of Stabilization • Credit quality continues to improve • Income within the industry is improving

8. Signs of Stabilization

9. Signs of Stabilization

10. 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

11. 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.

12. Economic Hurdles

13. 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.

14. 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

15. Lending Today C&I Loans

16. 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

17. 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

18. 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

19. C & I Lending Risks • On the Borrower Side • Faulty business plans • Poor management • Competition • Economic conditions

20. 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

21. Recent Bank Credits • $1,000,000 Term Loan for an Owner Occupied Warehouse • Prime + 1.75% floating, with a 5.00% floor

22. Recent Bank Credits • $700,000 SBA 504 Loan to finance a business acquisition • P + 2.50% floating for a 10 year term

23. Recent Bank Credits • $2MM Revolving Line of Credit for business operations • Prime + 3.50% floating, with a 6.75% floor

24. “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

25. 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

26. 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

27. Questions? • www.PrivateBankOfBuckhead.com • July 25, 2012