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									                          Anna Alvarez Boyd
    Deputy Comptroller for Community Affairs

                       Introduction



1
                             Julie Cripe
                    President and COO
                       Omnibank, N.A.

    Creating Loan Opportunities


2
                            Why Use Government
                             Guaranteed Loans?

       Increase Loans To Deposits
       Enhance Income
       Control Liquidity
       Increase Lending Limit
       Mitigate Risks
        –   Credit
        –   Interest Rate
       Encourage Economic Development Activities



3
                                      Increase Loans


    Train Loan Officers To Look For Opportunities
    Including:
          Volunteer Services
          Housing
          New Businesses
          Expansion Of Businesses
          Investment Properties
          Non-profit Organizations




4
                                        Increase Loans


    Educate Loan Officers & Community
    - Programs Available
            USDA B&I
            USDA Community Facilities Loan
            SBA 7(a)
            SBA 504
            Various State And Local Programs




5
                                    Livengood Feeds
                            Lockhart, TX Pop. 10,000

       We Purchased Failed Bank In 1991
       Low Loan Demand
       Major Businesses Banking In Nearby Austin
         – Other Bank Focused On Consumer Lending
       Livengood Had Loc Secured By R/E
         – Major Bank In Austin
         – Created Problem Due To Seasonality
         – We Converted To Long-term B&I Loan
              Significantly Improved Cash Flow
              Properly Matched Assets To Liabilities



6
                                  Enhance Income


       Traditionally Command Higher Rates
         – P + 2.5 Floating, 1 Point
         – Fee For Packaging


       Saleable In Secondary Market
         – Farmer Mac
         – Traditional Purchasers Of SBA Loans Now
           Buying B&I

7
                                  Specific Examples



       In 2001, Sold 1 B&I Loan For 7% Premium
       Utilized Various Sales In 2002 To Enhance
        Fee Income
         – Fees From Sales Go Immediately Into
           Income




8
                                    Control Liquidity


       Excess Liquidity
         – Hold Loans In Portfolio
         – Ability To Make Larger Loans And Hold In
           Portfolio

       Need Funding Source
         – Sell Loans In Secondary Market
             Guaranteed Portion
             Unguaranteed Portion


9
                            Increase Lending Limit



        Government Guaranteed Portion Does Not
         Count In Legal Lending Limit
          – Allows Banks To Make Larger Loans
          – May Increase Loans To Known Customers
        Builds Stronger Community Relationships




10
                                   Livengood Feeds



        1991 Our Lll Was Approximately $300,000;
         Their Credit Need Was $500,000
        New To Community
          – Outsiders (From The Big City)
          – Larger Businesses Had Established
            Relationships In Austin




11
                                Infisy And Hilltop Inn



        Both Long Term Customers Of Bank
        Both At Bank’s Lending Limit With Other Loans
        Utilized B&I On Loans For Each To Construct
         Buildings
          – First in Rapid Expansion
          – Latter Expanding Out of Territory




12
                                    Mitigate Risks



     Credit Risk
        – New Businesses Carry More Credit Risk,
          But Important For Economic Development
        – More Difficult To Grow And Start
          Businesses In Rural Areas
             Skilled Labor
             Potential Customer Pools




13
                                       Snyder Brick



        Restart Of 50 Yr Family Business
        Utilization Of Natural Resources
        Chief Industry In This Town
        Economic Downturn Slowed Building
        Reduced Exposure Allowed Us To Work With
         Them
        Found Buyer



14
                                       Mitigate Risk


     Interest RATE RISK
         – Generally Floating Rates Quarterly
         – Higher Spread Over Prime
         – R/E Generally Carries A Point
         – Generate Fees
         – Can Sell At Any Time




15
                            Encourage Economic
                           Development Activities

        Can Inspire Community To Bring In
         Businesses When Confident Of Bank Support
        Different Program Loans Are Combinable To
         Create More Opportunities
        Gives Banks Courage To Explore Working
         With Some Non-profits




16
                                     Globitech, Inc.


        Brought New Business To Small Community
         That Had Lost 900 Jobs In 2001
        Encouraged Support Of Local EDC And
         Taxing Authorities
        Multiple Combination Of Programs Will Move
         New Jobs From 60 To 150 In Next 12 Months




17
                           Kitchen Pride Mushrooms


        Gonzales, Texas Pop. <20,000
        Three Banks, None Would Consider
        Omnibank Used USDA B&I Loan Program For
         Original Plan
        Followed In 3 Years With A SBA-504 Loan To
         Double Plant
        Profitable And Expanded Again Out Of Cash



18
                              Combining Programs


        Utilize USDA B&I For Capital
         Improvements/acquisition
        Split Out Working Capital Needs, Utilizing SBA
        Equipment, Use USDA or SBA,combined With Local
         Government Programs




19
                                   Where Do I Start?


        USDA
        SBA
        State or Local Economic Development Councils
        Field Offices Of USDA and SBA Provide Bank
         Training On Site
        NAGGL – Examples And Training




20
                                                FAQ’S


        Isn’t There A Lot Of Paperwork?
          – Information Required Is Identical To What
            We Gather For Any Business Loan
          – Fill In The Blanks, Websites Offer
            Downloadable Forms
          – Smaller Loans ($150,000 Or Less) Can Be
            Done With SBA Low-doc Or SBA Express



21
                                     FAQ’s Continued



        Does It Take 6 Months For Approval?
          – If All Information Is Provided, Loans Can Be
            Approved Through Local Field Offices If
            Less Than $5,000,000 In A Few Weeks
          – USDA Loans On R/E Require Their Own
            Environmental Assessment Which Can
            Take 30 Days




22
                                           Summary



        Utilizing Government Guaranteed Loans Helps
         Banks Increase Loans And Income While
         Mitigating Credit And Interest Risk
        Builds Community Goodwill And Helps Fulfill
         CRA Requirements
        Enhances Government Relations Activities




23
                         William S. Glover
              Assistant Deputy Comptroller

     Rural Economic Development




24
                               Safety and Soundness
                                            Benefits

        Assessment of bank management
        Risk mitigation tool for management
        Improved Credit Quality
        Better asset quality/CAMELS ratings
        Better financial performance and flexibility
        Benefits to your compliance program
        Enhancing your reputation in your community



25
                                Use of Government
                               Guarantee Programs


        U.S. Department of Agriculture –
         Farm Service Agency (FSA)
        U.S. Department of Agriculture –
         Business and Industry Loan Program (B&I)
        SBA 7(a) Loan Guarantee Program
        SBA 504 Certified Development Company
         (CDC) Loan Program



26
                        Use of Government Programs
                           To Improve Credit Quality


        Improve the quality of your residential real
         estate loan portfolios
        Guarantees can provide a boost to your
         marketing effort in trying to attract new loan
         demand
        Federal Home Loan Bank – Affordable
         Housing Program (AHP)




27
                            Better Performance and
                                          Flexibility


        Improve earnings performance through
         increased interest income and lower loan
         losses
        Guaranteed portions can be sold
        Improve liquidity position




28
                                 Compliance Benefits


        Community Reinvestment Act
        Guaranteed portion of the loan is not subject to
         legal lending limit
        Retain larger loans and increase net interest
         income
        Guaranteed portion does not count against loan-
         to-value ratio when determining adequate
         collateral for a loan under appraisal regs.


29
                            Enhance Bank Reputation


        Enhance reputation of management and the
         bank in community and with regulators
        Community view bank as having deep concern
         for the community’s economic health
        Effort to retain younger people on farms, ranches
         and businesses viewed as positive
        Assisting first time homebuyers provides
         expanded market for local real estate properties
        Providing financing for local businesses can
         create jobs

30
                       Effectiveness of Management


        These positive things are not lost on examiners as
         they analyze the effectiveness of bank
         management
        Primary function of management is to control risk
        These programs will mitigate short-term risk and
         provide for long-term profitability
        Participation in these programs indicates
         willingness of management to seek innovative
         solutions for their institutions


31
                           Where to Find Information


        Resource Contact List provided with this seminar
        Obtain staff training from the organizations
         included on the list and other Internet web sites
        Contact the OCC’s District Community Affairs
         Officers for their assistance




32
                             Karen Tucker
                  National Bank Examiner/
              Senior Compliance Specialist

     Rural Economic Development


33
                                         CRA


     Rural Economic Development Needs:
        – Job training
        – Child Care
        – Access to credit
        – Affordable housing
        – Financial literacy
        – Technical support




34
                                                         CRA


     Small Bank
       –   Lending
             What do you primarily purchase and originate?
                – Typical - home mortgage loans, business
                  loans,
                – or farm loans
                – Sometimes - consumer loans


               Community development loans – optional
                 – Always a neutral or positive impact




35
                                           CRA


     Large Bank
       –   Lending – required to review:
               Home mortgage
               Small Business
               Small Farm
               Community Development
               Consumer is optional




36
                                                         CRA


     Small and Large Bank Lending:
       –   Number and amount of loans
       –   Borrower Distribution
               Especially to low- or moderate-income
                individuals
               Especially to small businesses/farms
       –   Geographic Distribution
               Especially in low- or moderate-income areas



37
                                                     CRA


     Special Loan Programs
       –   Small business loans are small loans to
           businesses in the amount of
           $1 million or less.
               SBA 7(a)
               504- Certified Development Company
               Export-Import
               USDA Business and Industry



38
                                                   CRA


     Special Loan Programs
       –   Small farm loans are small loans to farms in
           the amount of $500 thousand or less.

       –   A small business or small farm has gross
           annual revenues of $1 million or less.




39
                                                                   CRA


     Community Development Loans
       –   Affordable housing (including multifamily housing) for low- or
           moderate-income individuals;
       –   Community services targeted to low- or moderate-income
           individuals;
       –   Activities that promote economic development by financing
           businesses or farms that meet the size eligibility standards
           of the Small Business Administration’s Development
           Company or Small Business Investment Company programs
           or have gross annual revenues of $1 million or less; or
       –   Activities that revitalize or stabilize low- or moderate-income
           geographies.




40
                                                               CRA



     Business loan or community development loan?
       –   A business loan that is over $1 million and meets
           the purpose of community development = CD
               504-CDC loan if over $1 million generally meets CD
                purpose




41
                                                               CRA



     –   A business loan that is $1 million or less and
         meets the purpose of community development =
         small business loan
             Banks can use the Other Loan Data option to provide
              data on these types of loans and examiners will consider
              the qualitative impact of them.




42
                                                            CRA



     Community Development Loans
       –   Revitalize or stabilize a low- or moderate-
           income area:
               Retain a significant number of jobs to low- or
                moderate-income individuals
               Retain businesses and residents in the low- or
                moderate-income area




43
                                                               CRA



     –   Community development also includes activities
         that promote economic development by
         financing small businesses/farms. To meet this
         definition, activities must meet both a size test
         and a purpose test.
             Size: finance entities that either meet the size
              eligibility standards of SBDC, or SBIC, or have gross
              annual revenues of $1 million or less.
             Purpose: must promote economic development



44
                                                            CRA



     Promote economic development:
       –   Supports permanent job creation, retention,
           and/or improvement for:
               Persons who are currently LMI, or
               In LMI geographies, or
               In areas targeted for redevelopment by Federal ,
                state, local or tribal governments.




45
                                                    CRA



     –   The agencies presume that any loan to or
         investment in these promotes economic
         development:
             Small Business Investment Company
             Small Business Development Company
             New Markets Venture Capital Company




46
                                                                  CRA



     –   Economic Development doesn’t have to be in low-
         or moderate-income area
             Unsecured line of credit to a nonprofit organization that
              makes loans to small farms or small businesses
             Affordable housing
             504-CDC loans




47
                                                                      CRA



     –   Other types of community development lending or
         investment that doesn’t have to take place in a
         low- or moderate-income area:
             Multi-family affordable housing
             Providing community services (such as child care, educational,
              health, or social services) to low- or moderate-income
              individuals




48
                                                  CRA



     Selling portions of loans
        –   Report the origination amount
        –   Doesn’t affect designation as a CD loan




49
                                                    CRA



     Participations Purchased
       –   Use the lead loan amount to determine the
           original amount of a participation purchased




50
                                                  CRA


     Consortium Loans
       –   Must meet the definition of CD loans
       –   Must report the CD loan data
       –   No double-counting
       –   Claim only your percentage
       –   Considered under CD lending




51
     Questions




52

								
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