Koger Propst, President

Access to Capital

Member FDIC 10/16/13 |

Status of Banks in Colorado

• Main Street Businesses and Community Banks Caught in a Sub-Prime Trap Caused by Wall Street

• Most are Now Healthy• Regulators and Public - Everything a Bank• Dodd-Frank – Solved Some Problems, but

Harms Customer Access to Credit

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Member FDIC 10/16/13 |

Status of Banks in Colorado

• Dodd-Frank - Mortgage and Other Rules – End of Judgment Banking?

• 40% Colorado Banks Self Identified – Not in Business Five Years

• Why you Should Care…

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Member FDIC 10/16/13 |

Is Your Banker Your Partner?

• A Partner Makes Strategic Decisions • A Partner Shares in Operational

Decisions• A Partner Equally Shares Risk• A Partner Equally Shares in Upside

Return• Partner’s Interests are Fully Aligned

Member FDIC 10/16/13 |

Your Banker is NOT Your Partner

• A Banker Advises on Your Strategy Only• A Banker may not Engage in Operational Decisions• A Banker Cannot Share in Risks – Banker Must be

Right 99.9% of Time – Loans Need Multiple Sources of Repayment

• A Banker not Share in Upside – Receives Fixed Interest whether you Return 5% or 50% ROI

• A Banker’s Interest do not Fully Align – Your Banker Wants you to Succeed, but First Obligation is to Shareholders and Depositors

Member FDIC 10/16/13 |

Prepare to Win

• Develop Your Full Skill Set – Technical, Financial, Managerial and Strategic

• Network – You Need Friends• Do Your Research• Build Your Business Plan• Develop Plan B, Plan C and…

Member FDIC 10/16/13 |

Prepare to Win

• Build a Key Support Team• Build Appropriate Financial Depth• Build Personal and Business Liquidity

– You will need it!• Be Realistic

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THE POWER OF LEVERAGE

Leverage Equity Loan Amount

Total Assets

Net Profits @ 10%

ROI New Equity

No Leverage

$100 $0 $100 $10 10% $110

50% Leverage

$100 $100 $200 $20 20% $220

75% Leverage

$100 $300 $400 $40 40% $440

90% Leverage

$100 $900 $1,000 $100 100% $1,100

Member FDIC 10/16/13 |

The Danger of LeverageLeverage Equity Loan

AmountTotal

AssetsNet

Return @ (10%)

ROI New Equity

No Leverage

$100 $0 $100 ($10) (10%) $90

50% Leverage

$100 $100 $200 ($20) (20%) $80

75% Leverage

$100 $300 $400 ($40) (40%) $60

90% Leverage

$100 $900 $1,000 ($100) (100%) ($0)

Member FDIC 10/16/13 |

Sustainable Growth – 10% Retained Earnings Who Owns Your Company

0

50100150

200250300

350400450

AssetsDebtEquity

Member FDIC 10/16/13 |

Dealing with Bankers - Advice

• You Have One Mission – Long-Term Profits

• Long-Term Profits Make all Other Goals Possible

• Be Realistic• Picking the Right Banker – It Matters!• Bank’s are Regulated Institutions• No News is Not Good News –

Communicate!

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Member FDIC 10/16/13 |

Dealing with Bankers - Advice

• When Win…Don’t be that Guy• Build Financial Depth and Liquidity• You and Your Banker Cannot

Outsmart the Market – Homebuilders…

• Don’t Chase Irrational Competitors• Build a Company that is Good in

Good Times and Great in Bad Times

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Member FDIC 10/16/13 |

Dealing with Bankers - Advice

• If Win, Don’t Assume it Makes You an Expert in Everything.

• Even if Your Banker Believes It!• “Play Above the Death Line” – Jim

Collins in “Great by Choice”• Know Your Competencies

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Member FDIC 10/16/13 |

Access to Capital

• Thank You

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