Overview of Commercial Banking

1. Overview of Commercial Banking • Ken Carson • SVP/Credit Administrator • Umpqua Bank • February 8, 2006

2. Agenda • Marketing • Commercial Lending • Credit Assessment • Credit Policy • Pricing • Problem Loans • Careers in Commerical Lending

3. Marketing Commercial Banking Products • Consumer Lead Product: • The checking account • Commercial Lead Product: • The loan

4. Marketing Commercial Banking Products • Commercial Banking Products: • Loans • Depository • Cash Management Services • Merchant Visa • Internet & Electronic Banking • Investments • Leases

5. Marketing Commercial Banking Products

6. Marketing Commercial Banking Products • Competition • Other Commercial Banks • Non-Bank Competition • Quasi-governmental agencies

7. Commercial Loans • Types of Commercial Loans • Short Term Working Capital Loans • Revolving Lines of Credit • Term Loans • Commercial Real Estate Loans

8. Cash Flow Based Asset Based Commercial Loans • Cash Flow vs. Asset Based

9. Credit Assessment • The Five C’s • Character • Capacity

10. Credit Assessment • Capacity The Key Principle: Loans are repaid by cash, not by profits.

11. Credit Assessment • Capacity Corollary to the Key Principle Your loan is repaid by cash, not by ratios.

12. Credit Assessment • The Five C’s • Character • Capacity • Capital • Collateral • Conditions

13. Credit Policies and Procedures • Internal Credit Procedures • Board of Directors • Chief Credit Officer • Credit Committee vs. One-over-one • House Limit & the Legal Lending Limit • Total Credit Exposure

14. Credit Policies and Procedures • Monitoring Loans • Loan Covenants • Collateral Monitoring • Risk Ratings

15. Credit Policies and Procedures • Lending Between Banks • Why? • Reduce concentration risk • Manage overall portfolio • Manage the bank’s balance sheet • Types of inter-bank lending • Syndications • Participations • Sale to the Secondary market

16. Pricing Loans • Pricing Structures • Variable Rate Loans • Fixed Rate Loans • Swaps, Collars & Other Derivates • Loan Fees

17. Pricing Loans • Pricing Considerations • Cost of Funds • Actual Cost of Funds • Marginal Cost of Funds

18. Interest Rate Yield Curve

19. Pricing Loans • Pricing Considerations • Cost of Funds • Actual Cost of Funds • Marginal Cost of Funds • Risk Factors • Market Factors • Relationship Factors

20. Managing Problem Loans • Risk Rating Systems • 1 through 10 (1=high, 10=low) • Pass Rated (1 through 6) • Criticized (7), Classified (8 & 9), Loss (10) • Non-Performing Loans (NPAs) • Charge-Offs & Recoveries • Special Assets Department

21. Loan Loss Allocation

22. Adequacy of Loan Loss Allocation

23. Careers in Banking • The Typical Career Path • Loan Assistant • Credit Analyst • Assistant Relationship Manager • Relationship Manager

24. Careers in Banking • Skills & Character Qualities • Non-negotiables • You will be drug tested • No criminal records

25. Careers in Banking • Skills & Character Qualities • Technical Skills • Accounting • Computer Skills

26. Careers in Banking • Skills & Character Qualities • Character Qualities • Work Ethic & Initiative • Professionalism • Teachable • Patience