1. Appraisal Review Challenges: Reviewing Outside Major MSAs and Reviewing Another Institution’s Report Presenters Stephen S Wagner, MAI, SRA, AI-GRS Chief Appraisal Officer, VP Old National Bank Indianapolis, IN 765-427-5414 M. Ralph Griffin, MAI, AI-GRS Marion R. Griffin & Co., Inc. Spartanburg, SC

2. Slide 2 Definitions  Primary Metropolitan Statistical Area (PMSA)  An area of more than one million people that consists of a large, urbanized county or a cluster of counties with very strong internal economic and social links; designated under standards established in 1980 by the Federal Committee of MSAs.  Metropolitan and Micropolitan Statistical Areas  The general concept of a metropolitan or micropolitan statistical area is that of a core area containing a substantial population nucleus, together with adjacent communities having a high degree of economic and social integration with that core.  Rural  Not urban or suburban

3. Slide 3 Definitions Continued  Each metropolitan statistical area must have at least one urbanized area of 50,000 or more inhabitants.  Each micropolitan statistical area must have at least one urban cluster of at least 10,000 but less than 50,000 population  Metropolitan Area  Micropolitan Area

4. Slide 4 Example-Metropolitan  Evansville -120,235 (2012) Evansville is the commercial, medical and cultural hub of Southwestern Indiana and the Illinois-Indiana-Kentucky tri-state area. It is the third-largest city in the state of Indiana and the largest city in Southern Indiana.

5. Slide 5 Example-Micropolitan  Jasper -15,157 (2012) Jasper is a city in Dubois County, Indiana, United States. The population was 15,038 at the 2010 census. The city has been the county seat of Dubois County since 1830, succeeding Portersville.

6. Slide 6 Geographical Perspective Jasper to Evansville is about a 45 to 60 minute drive.

7. Slide 7 Low Density/Rural Markets  Discussion  Buyer/seller motivations  Level of sophistication Income producing properties Owner Occupied  Demand Drivers Population Income Employment  Data Available MLS Informal Data Banks

8. Slide 8 Residential Low Density Markets  So what’ll we do with this thing in NoWhere Indiana?

9. Slide 9 Residential Low Density Markets

10. Slide 10 Residential Low DensityResidential Low Density Markets

11. Slide 11 Residential Low DensityResidential Low Density Markets

12. Slide 12 Residential Low DensityResidential Low Density Markets

13. Slide 13 Residential Low Density  DOM 573;The Subject was listed for sale for $3,950,000 on 09/13/2011 and was lowered to it's current list price of $3,500,000 on 07/31/2012.  With a loan of $2,000,000 to $2,400,000  ADS would be $128,000 to $155,000  At a 28% debt to income level it requires an annual income of $460,000 to $555,000 Residential Low Density Markets

14. Slide 14 Residential Low Density  Only 2.5% of the subject county population has an income above $200,000 per year.  Land to Value Ratios for higher end properties in the subject area are 15 to 20% at best. The subject waterfront site is estimated to be $400,000. That would indicate that the overall value could be as follows: Residential Low Density Markets

15. Slide 15 Residential Low Density  Buyers will most likely have to come from a larger Metropolitan or Micropolitan area.  Have to get comparables on a regional basis.  Examine other sales to estimate and determine functional obsolescence. Residential Low Density Markets

16. Slide 16 Commercial Low Density Markets  So what’ll we do with this, in SomeWhere Indiana? Is that a Strip Center?

17. Slide 17 Commercial Low Density  Out of 4 sales, the report showed one cap rate and a Band of Investment  Little in the way of expense comps, but did have subject alleged past performance  As a Reviewer, is there more you can or should do? Commercial Low Density Markets

18. Slide 18 Commercial Low Density  So what’ll we do with this, in WhoKnowsWhere? Commercial Low Density Markets The Cost Approach is not your friend!

19. Slide 19 Commercial Low Density Markets

20. Slide 20 Commercial Low Density  House of Worship  Town of 3,000  What the report said –Most Likely Purchaser-The subject is a church facility. Given the specialized nature of these buildings, conversion of these properties to an alternate use is typically unlikely but possible. Commercial Low Density Markets

21. Slide 21 Commercial Low Density –Therefore, given the physical characteristics of the subject, the most likely purchaser would be another growing congregation or possibly a public use such as a daycare facility considering the gymnasium and overall site improvements.  How many congregations are looking for a church in a town of 3,000?  Have to consider alternative use. Most likely-significant functional obsolescence Commercial Low Density Markets

22. Slide 22 Commercial Low Density First 3 sales sold as churches, Comparable 4 sold as a daycare. All comps in major metro. Reconciled to $41/SF. Commercial Low Density Markets

23. Slide 23 How to do you calculate the Functional Obsoleence and whaere are th comparables?

24. Slide 24  The End  Thank You