The loan approval board has currently reviewed the loan application of the Redhook Ale Brewery in connection to the proposed issuance of an expansion loan for the amount of $6.5 million dollars. Redhook Ale has been a valued customer with no complaints but yet there are still some areas of concern in regards to this proposed application. U.S. Bank could possibly face losses on their investment in the end causing more liability.
Currently the profit indices for the banking overall were weak in 1989. The larger banks were reporting weak earnings and commercial and industrial (C&I) loan growth was recently on the decline. This problem is then weather or not this would be a good investment for U.S. Bank due to the under performing industry trends and will it this investment properly fit into the company’s portfolio.
Another problem that may possibly arise, could be Redhook failing. The new Redhook ale may not do as well as projected and attract fewer sales leading to a default on their loan. But for the sake of this case we will assume that Redhook received the $5 million equity infusion.
Analysis of Data
Much of U.S. Bancorp concerns come from the poor perfomance of the banking industry especially within the C&I market. After revealing that of the losses in commercial real-estate and domestic were on the mainly on the East Coast, gives positive light to Redhook Ale. The northwest area is thriving for business with high price ale sales expected to reach $145 million in that region alone. If Redhook Ale is optimistically able to capture that 50% market share in that area as well in lager market they would be able to bring in roughly $7.25 million almost tripling what they bring in now in revenues. The potential is definitely there since they are the only ones in the local market. Since they created a niche the board see no reason why they will not do extrodinarily well.
Redhook Ale’s sales have been on the steadily rise