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Overseeing Fixation Hazard

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  1. 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

  2. CRE Lending Exposure Grew Sharply Source: FDIC, insured institutions based in metropolitan areas FDIC, DIR-KC, 2/2010

  3. …Including C&D Loans Source: FDIC, insured institutions based in metropolitan areas FDIC, DIR-KC, 2/2010

  4. How Did the Industry End Up Here? Technology Financial Innovation Competitive Landscape FDIC, DIR-KC, 2/2010

  5. Margin Compression – A Major Symptom Source: FDIC, all commercial banks FDIC, DIR-KC, 2/2010

  6. 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

  7. Recent Failed Banks Often Have High CRE Exposure… Source: FDIC, 12-31-2007, all insured institutions FDIC, DIR-KC, 2/2010

  8. …Including C&D Loans Source: FDIC, 12-31-2007, all insured institutions FDIC, DIR-KC, 2/2010

  9. Lessons for Kansas City Region Ag Lenders? FDIC, DIR-KC, 2/2010

  10. 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

  11. Ag Credit Concentrations Have Been Steady Source: FDIC, commercial banks based outside metropolitan areas. FDIC, DIR-KC, 2/2010

  12. But Players Move Up & Down the Spectrum Source: FDIC, commercial banks based outside metropolitan areas. FDIC, DIR-KC, 2/2010

  13. Farm RE Lending Up but Ag Production Lending Down Source: FDIC, commercial banks based outside metropolitan areas. FDIC, DIR-KC, 2/2010

  14. FDIC, DIR-KC, 2/2010

  15. Although Agricultural Credit Conditions Remain FavorableProfitability and Asset Quality in Other Loan Segments Has Weakened FDIC, DIR-KC, 2/2010

  16. The Percentage of Unprofitable Institutions Has Tripled in the Last Two Years Source: FDIC, all insured institutions. FDIC, DIR-KC, 2/2010

  17. Nonmetro Institutions Have Not Been Immune to Rising Credit Problems Source: FDIC, all insured institutions. FDIC, DIR-KC, 2/2010

  18. Less Than One-Third of Nonmetro Institutions Report Noncurrent Ag Loans Source: FDIC, nonmetropolitan-based institutions. FDIC, DIR-KC, 2/2010

  19. For Those Institutions Reporting Noncurrent Loans – Nonag Loans Are Most Problematic Source: FDIC, nonmetropolitan-based institutions. FDIC, DIR-KC, 2/2010

  20. 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