Tag Archives: lending

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Andy Landeen joins Ryley Carlock

Ryley Carlock & Applewhite added attorney Andrea (Andy) Landeen to the firm’s Creditors’ Rights and Bankruptcy, Lending and Commercial Litigation practice groups, where she will continue her practice of representing lenders and other creditors in pre- and post-judgment litigation.

“We’re very excited about what Andy brings to the firm as well as our creditors’ rights and bankruptcy team,” said Scott Jenkins, Jr. who leads the firm’s lending, creditor’s rights and bankruptcy group.  “With Andy’s diverse experience, she will help us better serve our expanding client base.”

Prior to joining the firm, Andy also represented debtors in litigation in involving commercial real estate transactions arising from judicial and non-judicial foreclosures, as well as representing sub-contractors and materialmen in construction defect and/or mechanics’ lien dispute in both state and federal courts, and the Arizona Registrar of Contractors.

“I am so excited to join Ryley Carlock & Applewhite not only because of the culture of professionalism, teamwork and commitment to excellence for which the firm is known, but also because of the balanced approach and high regard this firm has towards its attorneys as well as its clients.  I look forward to working with my team and growing with the firm.”

Landeen attained her law degree, cum laude from the Sandra Day O’Connor College of Law, Arizona State University and her undergraduate summa cum laude from Smith College.

A Guide to Applying for a Bank Loan

Are Arizona banks lending?

Are they or aren’t they?

Banks can only stay in business by making loans, not turning away customers who want to borrow money. So why does the public believe that banks aren’t lending?

“The truth of the matter is that when things were really bad a few years ago, banks weren’t lending,” said Robert Sarver, CEO of Western Alliance Bancorporation. “The banking business, not unlike other businesses, tend to react and overreact and sometime we react too much when times are good and we lend too much money on too liberal terms, and when times are tough, we don’t lend enough money and are too conservative.”

Banks are a business — a unique kind of business — that is under significant pressure to make a profit like any other like any other business. A typical bank, in healthy years, should earn a return on assets (ROA) of 1.1 percent to 1.5 percent. That translates into an return on equity (ROE), because of leverage, of anywhere between 8 percent and 18 percent, similar to most other businesses.

A bank makes its money by investing deposits into either securities or loans, both of which earn a return. Typically, loans earn more than securities and both earn more than what banks pay out to depositors. Although loans earn more, they come with a credit loss rate that a securities portfolio generally does not have. In 2009, in the depths of the economic crisis, a typical bank had a loan loss rate of 1.73 percent on its loan portfolio, which ate into the profitability of the bank. So what does a bank to do when it incurs such high loss rates in its loan portfolio? It invests in fewer loans.

But that is changing. Banks have increased their lending for four of the last five quarters, but Federal Deposit Insurance Corporation (FDIC) acting chairman Martin Gruenberg, is still taking a ”wait and see if the trend toward increased lending can be sustained” approach.

“Banks are lending today, and most banks have excess liquidity that they would prefer to put out in loans,” said Keith Maio, president and Chief Executive Officer of National Bank of Arizona. “Those that feel that banks aren’t lending are likely those who have had their credit compromised in recent years. Loan demand is down from consumers and businesses particularly, since the recession. The recession has caused many personal borrowers to be more conservative in their approach to leverage. Businesses tend to increase borrowing when their revenues are increasing and they need to finance that growth.”

Sarver said that banks do want to lend, “but unfortunately there is a lot of regulation in our industry, which to a certain degree has stifled long-term growth because our capital requirements have almost doubled over the last five years, so that’s been another barrier to banks lending money.”

As an outgrowth of those regulatory changes, lending standards have tightened in certain consumer loan categories like mortgages, experts said. But while mortgage rules have changed, lending standards for business haven’t seen dramatic shifts.

“Commercial lending standards for owner-occupied real estate and commercial and industrial loans have not changed much,” said Kevin Sellers, executive vice president with First Fidelity Bank in Arizona. “For investment property loans, banks are requiring owners to maintain more equity capital in the properties and higher net operating income relative to the property debt service.”

According to Adam White, senior vice president of credit administration at Biltmore Bank of Arizona, bankers have always used the “Five C’s of Credit” to determine if a business is credit worthy.  Those included:
1. Cash flow – history of positive cash flows and probability of recurring
2. Collateral – adequate collateral support
3. Capital – adequate capital to support normal business operations
4. Conditions – what’s affecting the business
5. Character – who are the people behind the business

“In today’s environment, banks emphasize ALL five elements,” White said, “whereas in the past too much reliance may have been placed upon appreciating collateral values under unsustainable market conditions.”

Kevin Halloran, Arizona state president of Mutual of Omaha Bank, said that while there have been shifts in the requirements banks are setting for lending, he sees the industry taking steps toward normalcy.

“I believe lending standards have returned to the original norm,” he said. “In the early to mid-2000s, the banking industry required only limited borrower documentation relating to income and other basic information for residential loans. Now, the industry is requesting proper information to make sound decisions.”

On the business lending side of the equation, “lending standards over the past 10 months have loosened in both pricing and structure for both large and small companies,” Halloran said.

And while some banks have pulled back lending activity, it’s definitely not the case at many Arizona banks.

“Loans at our company have grown 8 percent this year and in discussions with my colleagues at other financial institutions in the Valley, they are experiencing similar results,” said Dave Ralston, chairman and CEO of Bank of Arizona. “Loans are the lifeblood of a bank and at Bank of Arizona. loan growth is our number one priority.  We are seeing increasing demand from credit-worthy consumers and businesses in the Valley.”

Halloran echoed Ralston’s observations.

“Over the past three years, we have completed more than $500 million in new loans in Arizona,” Halloran said. “That includes commercial loans and commercial real estate financing across multiple industries, as well as private banking loans and residential mortgages. Our local commercial banking group has provided local businesses with working capital, revolving lines of credit, equipment loans, owner-occupied loans and merger and acquisition loans. Our commercial real estate group has provided loans in industrial, multi-family, senior and student housing, charter schools and multiple other real estate segments. So we have been – and will continue to be – a very active lender.”

A positive result in the changes in lending banks have been forced to examine in the wake of the Recession is that bank have learned lessons that will create a stronger business model for the industry.

“Banks need to consistently monitor their concentrations in all lending sectors and understand they can only provide so much capital to any one industry,” Halloran said. “Arizona’s population grew so much over the past decade that it resulted in a substantial need for real estate lending. The concentration Arizona banks had in real estate negatively affected all Arizona banks.  In the future, I believe all banks will be better at managing their overall balance sheet risk as a percentage of capital.”

pennies

Banks report stronger profits, more lending

U.S. banks are enjoying their best profits in six years and are lending a bit more freely. The gradual improvement suggests that the industry will sustain its healing from the worst financial crisis in decades and help strengthen the economy.

The industry earned $37.6 billion from July through September — a 6.6 percent increase from its earnings in same quarter last year.

For the first time since 2009, the stronger earnings were due mainly to higher revenue rather than to less money set aside by the banks to cover losses, data issued by the Federal Deposit Insurance Corp. showed Tuesday. And loans to consumers rose nearly 1 percent from the July-September period of 2011.

“We are seeing the classic recovery from a recession,” said Bert Ely, a banking industry consultant based in Alexandria, Va. “All of the arrows are pointing in the right direction.”

Some of the largest banks are cautioning, though, that their earnings are up mostly because they’ve sold less-profitable businesses, shed bad loans and trimmed jobs — not because of a more vibrant economy.

Some banks are testing higher fees on consumer loans and services to offset new rules mandated after the crisis that have crimped revenue.

Consumer lending grew in most categories in the third quarter. That shows banks are becoming less cautious, which could help the economy. More lending leads to more consumer spending, which drives roughly 70 percent of economic activity.

The banks’ mortgage loans increased 0.8 percent from the previous quarter. Auto loans jumped 2.4 percent.

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National Bank of Arizona Hires New Business Banking Manager

National Bank of Arizona (NB|AZ) announced the hire of new business banking manager, Ward Hickey. Hickey has more than 25 years of experience in the Arizona banking industry, specializing in entrepreneurship, business development and small business administration (SBA) lending.

“I am thrilled to join the NB|AZ team,” Hickey said. “I’m looking forward to expanding the small business products group and developing mutually beneficial partnerships for the bank and the companies we serve.”

In his new role as business banking manager, Hickey will focus on growing deposit and lending products in the SBA department, reinforcing the strong commitment NB|AZ has to fueling the entrepreneurial spirit of Arizona. He will work directly under Brent Cannon, executive vice president and director of community banking, managing a small team of bankers at the NB|AZ Corporate Headquarters at the Biltmore.

“We are extremely pleased that Ward has joined the team at NB|AZ,” Cannon said. “His specialty in the small business segment, and specifically SBA guaranteed loans, will add considerable value to our organization. Under Ward’s leadership, NB|AZ will continue and improve our products and services to small businesses throughout Arizona.”

Prior to joining NB|AZ, Hickey held several executive positions and shared his expertise with various local and national banks, including Heritage Bank, Wells Fargo and Alerus Bank and Trust, among others. Over the course of his career, Hickey has procured and funded more than $500 million in SBA and commercial loan volume.

Hickey has been recognized with many awards for his exemplary work, including the 2006 SBA Financial Services National Champion of the Year, 2000-2003 SBA Arizona Small Business Banker, and the 2000 Southwestern Business Financing Corporation Banker of the Year.

In addition to his professional success, Hickey dedicates a significant portion of his time to giving back to the community through board positions with the Boys & Girls Club of Metro Phoenix and the Arizona State University Dean’s Council.

Big money tight times 2008

Big Money, Tight Times-SBA Loans Can Help

By Don Weiner

It may be true that numbers don’t lie, but they don’t always tell the whole story. When the 2008 fiscal third quarter ended June 30, statewide Small Business Administration-guaranteed lending showed a 25 percent decline from 2007 in both total loans and dollars lent, according to the Arizona District Office.

big money 2008

In fact, District Director Robert Blaney says numbers have been dropping throughout the fiscal year, which is indicative of a slowing economy and business owners holding back.

“I think that we’re feeling the effects like everybody else,” he says. Even active SBA lenders have noticed a slowdown.

“The customers are not expanding as much,” says Dee Burton, an Alliance Bank of Arizona senior vice president dealing with SBA and commercial lending. “The customers are, you know, a little bit leery and they’re not expanding their business. So, yes, that has impacted the number of requests that we get to look at, simply because most of the customers are not in high-growth mode.”

Yet a closer look at the SBA’s third-quarter numbers shows some positive trends. Veteran lending jumped almost 70 percent. Rural lending dollar totals were up 93 percent. And loans for start-ups increased 147 percent.

“When the angels cry, sometimes they also sing,” Blaney says.

The upshot for small-business owners is that if they need money and can meet certain requirements, financial help is available.

“Here at Alliance Bank, we look at these type of slowdowns, if you will, as an opportunity to help people get a loan to expand and grow with them,” Burton says. “We’re definitely still in the lending process.”

Thankfully, business owners have no better friend than the SBA. It provides resources for those starting new businesses or expanding existing ones. And it has programs for businesses in need of capital.

When it comes to the financial side, it’s important to be clear: The SBA is not a lender. Instead, it works with banks, credit unions or other entities that make and administer loans. The SBA backs up loans with guarantees, which can run as high as 75 percent to 85 percent depending on the amount borrowed and the type of loan.

“For us, it’s a critical program,” says Lori Stelling, vice president and SBA lending manager for National Bank of Arizona. “We can serve so many more customers by givingthem a loan with an SBA guarantee, because the loans that we do under SBA we would not be able to do conventionally. And there’s a number of reasons for that. If somebody doesn’t quite meet our conventional cash-flow requirements, under SBA we can give them a longer term than we can conventionally.”

“For lenders, I would say SBA is a critical part of what we do.”

The SBA has several different loan programs.

The most common is the 7(a) loan, which serves a range of business financing needs with a maximum amount of $2 million. Another is the SBAExpress program. It makes smaller loans available, but the SBA only offers a 50 percent guarantee. One of the newest is the Patriot Express Initiative, a program that helps veterans and others in the military community with funding and training. Established businesses in need of long-term financing for major fixed assets can turn to the 504 program.

Not all active SBA lenders participate in all programs. Some specialize in 7(a) loans; others offer SBAExpress loans as their primary product. They also have varying restrictions and minimum loan amounts. Many lenders refuse to offer loans for start-ups. Also, only certain active lenders are approved for certain programs, such as Patriot Express. And some are given special status. Especially active and expert lenders qualify for the Preferred Lenders Program, which equates to a quicker turnaround on SBA loan applications.

Visit the SBA’s Arizona District Web site at www.sba.gov/az to find a completelisting of statewide lenders.

The SBA loan process is not that complicated. Take your proposal to a lender and, according to Blaney, if the lender is unwilling to do a loan without an SBA guarantee, they will deal with the agency’s loan processing center.

“It’s as simple as that,” Blaney says. “You have to fill out a couple of more forms for us. I mean, it is the government, we do have a form or two. But it’s not an arduous process. And it has been severely streamlined over time.”

cover october 2008

Before taking that step, however, Arizona small-business owners may want to take advantage of two other SBA programs: SCORE and the Arizona Small Business Development Network. Their experts can assist with business plans and help you understand lender requirements.

John Alig, branch manager and a counselor for the East Valley SCORE chapter in Mesa, says this may mean passing out what a fellow counselor calls “reality cookies.”

“Sometimes that includes telling people things that they don’t want to hear,” Alig says.

He warns that business owners who lack a proper credit rating, collateral and capital do have one thing: a big problem.

www.sba.gov/az
www.alliancebankofarizona.com
www.nbarizona.com