Mitchell W. Hassell Senior Vice President Commercial Banking - - PowerPoint PPT Presentation

VEDA ANNUAL MEETING & MEMBERSHIP LUNCHEON

Mitchell W. Hassell

Senior Vice President Commercial Banking Division

November 30, 2011

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Mitch Hassell, Senior Vice President

23-year Banking Career with experience in Retail, Commercial/Corporate & Government Banking Richmond-based Commercial Relationship Manager Part of position is traditional “loan officer” where I underwrite, co-approve, close & service loans in my portfolio Clients & Prospects are primarily closely held and established middle market companies Lead a team of Richmond-based professionals that help my clients achieve their business and personal goals

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BB&T Corporation

Number of branches per state as of Sept. 30, 2011 Deposit Market Share data as of June 30, 2011 Source: FactSet, SNL Financial

State # of Branches Deposits State Rank

Virginia 389 $ 20.3 bn North Carolina 363 $ 22.9 bn Florida 269 $ 12.6 bn Georgia 170 $ 11.3 bn Maryland 128 $ 6.6 bn South Carolina 115 $ 6.7 bn Kentucky 89 $ 3.9 bn Alabama 87 $ 4.5 bn West Virginia 77 $ 5.1 bn Tennessee 56 $ 2.8 bn Texas 23 $ 1.1 bn District of Columbia 12 $ 1.3 bn Indiana 2 NM Total # of Branches 1,780 41

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NM

4 2 5 5 3 4 4 1 6 7

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BB&T Corporation

• Founded in 1872 and headquartered in Winston-Salem, N.C.
• Among the nation's top financial-holding companies
• $168 billion in assets & $14.9 billion in market capitalization,

as of Sept. 30, 2011

• Rated one of the country’s safest and soundest financial

institutions

• 36 banking regions organized as a group of community banks,

each with a regional president, which allows decisions to be made locally, close to the client

• Community banking model allows for client service that is

more responsive, reliable and empathetic… “We’re as big as you need us to be and as small as you want us to be”

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BB&T Corporation

• One of only three large regional banks in the country to

remain profitable during the “Great Recession”

• Paid a dividend to shareholders every year since 1903
• BB&T Insurance Services Inc., is the 6th largest insurance

agency/brokerage in the country, through a network of independent agencies

• Richmond-based Scott & Stringfellow LLC is a full-service

regional brokerage firm with 43 retail brokerage

• ffices throughout the Virginias, Carolinas, Georgia and New

Jersey

• The Wall Street Journal consistently ranks BB&T Capital

Markets Equity Research analysts among the nation's "Best on the Street."

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BB&T’s Mission

Helping our CLIENTS achieve economic success and financial security; Creating a place where our EMPLOYEES can learn, grow and be fulfilled in their work; Making the COMMUNITIES in which we work better places to be; and thereby: Optimizing the long-term return to our

SHAREHOLDERS, while providing a safe and sound

investment.

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Industry Leading Client Satisfaction

* From Maritz Research 2011 Retail Client Satisfaction and Loyalty Survey, represent percentage of “top box” scores, indicating a 9 or 10 rating on a 10-point scale. Peers include BAC, RF, STI and Wachovia

“Highest in Customer Satisfaction among Mortgage Servicing Companies, Two Years in a Row”**

 Winner of 19 Excellence Awards from Greenwich Associates; 17 National Awards and 2 Regional Awards  Received more awards than any other financial institution in the nation  Second consecutive year BB&T has received more awards than any other financial institution in the nation

**Branch Banking and Trust received the highest numerical score among mortgage servicers in the proprietary J.D. Power and Associates 2010-2011 Primary Mortgage Servicer Study SM. 2011 study based on responses from 4,944 consumers measuring 20 companies and measures the satisfaction of consumers with their current mortgage servicer. Proprietary study results are based on experiences and perceptions of consumers surveyed in April-May 2011. Your experiences may vary. Visit jdpower.com

62.9% 25 35 45 55 65 Peer 4 Peer 3 Peer 2 Peer 1 BB&T

LIKELIHOOD TO RECOMMEND* 61.6%

25 35 45 55 65 Peer 4 Peer 3 Peer 2 Peer 1 BB&T

LIKELIHOOD FOR FUTURE USE*

60.4% 25 35 45 55 65 Peer 4 Peer 3 Peer 2 Peer 1 BB&T

OVERALL BANK SATISFACTION*

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Are Banks Lending in Today’s Environment?

• Yes (although the lending landscape has changed)
• Continued problem loans create the need for new

loans to be less risky on average (banks need batting averages of 999.5 every season)

• Heightened regulatory environment
• Banks are hungry for loans today due to decreased

demand, especially C&I loans

• Bank lending is a profitable endeavor and often the

key to a bank’s relationship with its client

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Financing a Business in Today’s Environment

• Banks focus on a company’s track record and

expectations of future results by looking at:

 Financial Leverage (Total Liabilities/Tangible Net Worth)  Profitability  Debt Service Coverage  Cash Flow (relative to demands and stability)  Financial Trends & Outlook (sales, profits & leverage)  Management (abilities, experience & back-up)  Financial Flexibility (liquidity & asset values relative to

debt, i.e. additional borrowing capacity?)

 Guarantor Support (financial strength and flexibility)

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Due Diligence Process

• Understand company’s business and industry (past, present

& future)

• Get to know management team (abilities, experience & back-

up)

• Understand borrowing need, collateral, primary & secondary

sources of repayment, and personal guarantors (if offered)

• Gather project information, business plan, prior year-end

financials, most recent interims with prior year information for comparison purposes, budgets/forecasts/proformas

• Spread and digest data that will lead to questions
• Loan proposal
• Typically 2 – 4 week process once all information is in hand

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Risk of Default vs. Risk of Loss

• Risk of Default

 Likelihood that a Borrower will default on a loan during its

term- “cash flow” focus

• Risk of Loss

 Likelihood of a loss from the resolution of a default-

“collateral” focus

• Banks are interested in understanding and

identifying the cash flow that will repay a loan and the collateral that will serve as the secondary source

• f repayment
• “Airballs”, or unsecured portions of loans, are much

more difficult to get done in today’s environment

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Commercial Loan Risk Grades

• Risk Grading System, often 10 grades, used to assign

level of risk at loan inception and during life of loan

• Risk of Default & Risk of Loss factor into Risk Grade
• The better the grade, the better the interest rate
• Determines the amount of reserves needed for each

loan and ultimately the entire loan portfolio

• When a loan’s risk grade deteriorates with no change

in fees or interest rate, loan profitability suffers due to higher reserve requirement

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Financial Covenants

• Borrower and Bank agree to financial covenants that

both feel can be maintained during term of loan

• If maintained (and loan payments, financial

information delivery, etc. are handled as agreed), Bank should feel good about company’s performance and return on the loan

• Typically relate to maintaining a certain level of

leverage and profitability or cash flow coverage

• Banks want the company they lend to today, to look

roughly similar during the term of the loan

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Typical Affirmative Covenants

• Borrower will:

Maintain existence, current legal form of business,

records, properties & insurance

Conduct business continually Comply with laws Allow inspections Furnish financial and other information when due Provide notice of litigation or defaults Do what other loan documents require

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Typical Negative Covenants

• Borrower will not (without bank’s prior written consent):

 Allow liens on bank’s collateral  Create additional debt (or leases) above $TBD  Guaranty debt of another entity  Exceed capital expenditures of $TBD  Change current legal form of business  Purchase the equity or assets of another entity  Pay dividends or distributions in excess of $TBD  Pay salaries/bonuses or make loans to directors/owners/management

in excess of $TBD

 Dispose or transfer ownership of assets other than in the ordinary

course of business

 Violate negative covenants in other loan documents

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