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Managing Concentration Risk FDIC Kansas City Region Teleconference Call February 10, 2010 James LaPierre, Regional Director, DSC Al McGregor, Supervisory Examiner, DSC Rich Cofer, Regional Manager, DIR CRE Lending Exposure Grew Sharply

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managing concentration risk

Managing Concentration Risk

FDIC Kansas City Region

Teleconference Call

February 10, 2010

James LaPierre, Regional Director, DSC

Al McGregor, Supervisory Examiner, DSC

Rich Cofer, Regional Manager, DIR

slide2

CRE Lending Exposure Grew Sharply

Source: FDIC, insured institutions based in metropolitan areas

FDIC, DIR-KC, 2/2010

including c d loans
…Including C&D Loans

Source: FDIC, insured institutions based in metropolitan areas

FDIC, DIR-KC, 2/2010

how did the industry end up here

How Did the Industry End Up Here?

Technology

Financial Innovation

Competitive Landscape

FDIC, DIR-KC, 2/2010

margin compression a major symptom
Margin Compression – A Major Symptom

Source: FDIC, all commercial banks

FDIC, DIR-KC, 2/2010

residential re markets soured
Residential RE Markets Soured

Case-Shiller Home Price Index – Q1:2000=100

Maximum Index Value/QQ:YY

Index Value as of Q3:2009

Source: Moody\'s Economy.com

FDIC, DIR-KC, 2/2010

recent failed banks often have high cre exposure
Recent Failed Banks Often Have High CRE Exposure…

Source: FDIC, 12-31-2007, all insured institutions

FDIC, DIR-KC, 2/2010

including c d loans8
…Including C&D Loans

Source: FDIC, 12-31-2007, all insured institutions

FDIC, DIR-KC, 2/2010

nearly two thirds of the nation s farm banks are in the kansas city region
Nearly Two-Thirds of the Nation’s Farm Banks Are in the Kansas City Region

Source: FDIC, 9-30-2009, farm banks

FDIC, DIR-KC, 2/2010

ag credit concentrations have been steady
Ag Credit Concentrations Have Been Steady

Source: FDIC, commercial banks based outside metropolitan areas.

FDIC, DIR-KC, 2/2010

but players move up down the spectrum
But Players Move Up & Down the Spectrum

Source: FDIC, commercial banks based outside metropolitan areas.

FDIC, DIR-KC, 2/2010

farm re lending up but ag production lending down
Farm RE Lending Up but Ag Production Lending Down

Source: FDIC, commercial banks based outside metropolitan areas.

FDIC, DIR-KC, 2/2010

slide15

Although Agricultural Credit Conditions Remain FavorableProfitability and Asset Quality in Other Loan Segments Has Weakened

FDIC, DIR-KC, 2/2010

slide16

The Percentage of Unprofitable Institutions Has Tripled in the Last Two Years

Source: FDIC, all insured institutions.

FDIC, DIR-KC, 2/2010

slide17

Nonmetro Institutions Have Not Been Immune to Rising Credit Problems

Source: FDIC, all insured institutions.

FDIC, DIR-KC, 2/2010

slide18

Less Than One-Third of Nonmetro Institutions Report Noncurrent Ag Loans

Source: FDIC, nonmetropolitan-based institutions.

FDIC, DIR-KC, 2/2010

slide19

For Those Institutions Reporting Noncurrent Loans – Nonag Loans Are Most Problematic

Source: FDIC, nonmetropolitan-based institutions.

FDIC, DIR-KC, 2/2010

slide20

Pertinent Links at WWW.FDIC.GOV

  • FIL-61-96 Analysis and Classification of Agricultural Credits
  • http://www.fdic.gov/news/news/financial/1996/fil9661.html
    • FDIC Risk Management Manual of Examination Policies, Section 3.2
    • http://www.fdic.gov/regulations/safety/manual/section3-2_toc.html
  • FIL-104-2006 Commercial Real Estate Lending: Joint Guidance
  • http://www.fdic.gov/news/news/financial/2006/fil06104.html
  • FIL-22-2008 Managing Commercial Real Estate Concentrations in a Challenging Environment
  • http://www.fdic.gov/news/news/financial/2008/fil08022.html
  • FIL-61-2009 Policy Statement on Prudent Commercial Real Estate Loan Workouts
  • http://www.fdic.gov/news/news/financial/2009/fil09061.html

FDIC, DIR-KC, 2/2010

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