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Tara Humston Assistant Vice President August 19, 2011

Small Business Lending and Regulatory Perspectives. Tara Humston Assistant Vice President August 19, 2011. Discussion topics. Small Business lending statistics Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers

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Tara Humston Assistant Vice President August 19, 2011

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  1. Small Business Lending and Regulatory Perspectives Tara Humston Assistant Vice President August 19, 2011

  2. Discussion topics • Small Business lending statistics • Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers • Examiner assessment of government guaranteed programs and approach to reviewing guaranteed loans

  3. Funding Sources For Small Businesses Bank Loan Credit Cards 19% of small firms use a 2nd mortgage as collateral for a business loan Source: National Small Business Association, 2011 Mid-Year Economic Report

  4. Bank Lending to Small Businesses $ Billions Total amount of small business lending: $756 Billion Sources: Reports of Condition and Income, June 2011 The Nilson Report, June 2011

  5. Small Business Lending by Bank Size $ Billions Total: $756 Billion Credit Card data from The Nilson Report, June 2011 Small Loan data from Reports of Condition and Income, June 2011

  6. Loans To Small Businesses Has StabilizedAlong With Small C&I Loans $ Billions Source: Reports of Condition and Income – Small Loan data

  7. More Community Banks Increased Small Business Lending, While More Large Banks Increased Overall Business Lending (June 2010 – June 2011) % Increasing Lending Bank Count: 4,340 1,502 412 47 33 Source: Reports of Condition and Income – Small Loan data *Note: The sample of banks used to calculate these trends was adjusted to eliminate distortions from acquisitions, including failed banks

  8. Small Businesses Report Little Demand for Credit % of Small Businesses 64% 28% 8% Source: NFIB Small Business Economic Trends (August 2011)

  9. Bankers Report Stronger Loan Demand From Small Businesses Net Percentage Reporting Stronger Demand for C&I Loans Strengthening 9.6 25.5 Weakening -63.5 Source: Senior Loan Officer Opinion Survey on Bank Lending Practices (April 2011)

  10. ConclusionsLending Activity to Small Business • Small business credit appears to be available currently, with more banks showing increasing lending across credit products. Smaller banks in particular are focused on small business lending. • Small businesses report show growing concerns other than credit availability. Small businesses are fairly satisfied with current financing options. • Banking conditions are slowly improving with the industry showing better earnings and a lower level of problem loans on their books. This could likely bolster increasing levels of lending in future reporting periods.

  11. Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers • Supervisory Expectations • Underwriting and Risk Management Considerations • Examination Reviews

  12. Examiner Approach to Review of Guaranteed Loans • Guaranteed loans are viewed as credit enhancements on potentially weaker credits and are typically “passed” for classification purposes • Examiners assess if improper practices may jeopardize the guarantee • Guaranteed portions of credits are given preferential treatment based on risk calculations for capital standards – generally 20%

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