Credit Evaluation School Instructor eBook - Oct 2023

People:

Borrower: Stop, C&L, LLC Guarantor: Robert Van Winkle Retired musician turned home improver and (now) real estate developer Loan to fund a mixed ‐ use commercial building which has stalled. Building is 2/3 finished and contractors and borrower have both walked away from the project

Purpose:

Payment:

Loan is now 101 days past due Loan is on internal watchlist.

Protection:

Funded 100% of construction costs with minimal equity from borrower Current loan balance of $1,000M and accrued interest of $55M

Problem:

Loan is fully funded and construction is not complete. Work has stopped and all parties are non ‐ responsive. Foreclosure proceedings in process.

Prospects:

Property is in a good location. Bank has updated appraisal and believes it is worth $755M, net of fees, etc.

Commercial Credit Quick Hitter – Nonaccrual & Split Rating Who can tell me what a split rating is? Possible split rating: $755 Substandard; $300 loss

Why would split rating not be substandard and doubtful? Because value of property has been determined and collection is not highly questionable; the amount of loss is known. Nonaccrual: Loan should be on nonaccrual because it is over 90 days past due; borrower has walked away.