Credit Evaluation School Dec 2022

Internal Use Only

Protection

Collateral consists of a first REM on the commercial building located in Iowa City, Iowa along with a blanket security agreement covering general business assets. An appraisal performed on 9-2-16 indicates an “as is” value of 950M and an “as completed” value of 1,350M.

Protection

7

Internal Use Only

Problem

The business was a new venture for Mr. Woods, who previously worked as a semi-professional golfer. The golf simulation bay closed last winter as Mr. Woods lost his contract with operator/servicer of the golf simulator. The entity struggles with employee turnover, unreliable suppliers, and pressure from existing competition. The operation continues to be unprofitable on a monthly basis and some suppliers are demanding cash upon delivery further limiting liquidity. President Mickelson now estimates the value of the property at 1,200M based on sales of similar properties. Due the to the apparent cash flow and liquidity issues, unprofitable operations, leveraged position, and marginal collateral coverage, the loan is classified Substandard. This is a downgrade from management’s internal Pass rating.

Problem

8