March 5, 2010
STRICTLY CONFIDENTIAL
UBPR for Management
Required Disclosures
The following information is for informational purposes only and was prepared from sources
believed to be reliable but is not guaranteed as to accuracy and is not a complete summary
or statement of all available data. The views or opinions expressed in this material are solely
those of the author and do not necessarily represent those of Janney Montgomery Scott LLC.
Janney Montgomery Scott LLC is a broker-dealer registered with the US Securities and
Exchange Commission and member NYSE, FINRA, and SIPC.
2
Speaker Credentials: Roger G. Powell
Experience
Investment Banking
Janney Montgomery Scott (2008 - )
 Banks / Thrifts
 Mortgage Cos
 Credit Card Cos
 Commercial Fin
Alex. Brown & Sons (1990-2000)
 Asset Based
 Premium Fin
Academic
B.A. Economics 1971
Davidson College, Davidson, NC
Certificate, Advanced
Management Program
1978
North Carolina School of Banking,
Chapel Hill, NC
Investment Research
Alex. Brown & Sons (1983-1990)
 Banks / Thrifts
 Mortgage Cos
 Credit Card Cos
 Asset Managers
The Powell Group (1972-1976)
Corporate Development /
Strategic Planning
Deutsche Bank AG (2000-2007)
United Carolina Bancshares (1976 – 1982)
3
Goal:

Critical themes for strategy and tactics in 2010
 Competition
 Capital
 Control / Externals and Internals

Importance of UBPR

Users and motives

Construction of UBPR

Comparison to GAAP and MIS

Current regulator emphasis
UBPR = Uniform Bank Performance Report
4
In the beginning….
Fra Luca Bartolomeo de Pacioli (1446/7–1517)
Giovanni
di Averardo
detto
Bicci, de’
Founder
of the Medici
Bank 1397
Medici (1360-1429)
 Summa de arithmetica, geometria, proportioni et proportionalita
1494
Mediateca di Palazzo Medici Riccardi
Galleria Nazionale di Capodimonte (Naples)
5
The UBPR is:

An analytical tool

Created for
 Bank supervisory;
 Examination; and
 Management purposes

Used as an aid in evaluating the
 adequacy of earnings, liquidity, capital, asset and liability management, and growth
management
…a common point of financial analysis between regulator and banker…
Source: A User’s Guide for the Uniform Bank Performance Report, December 2008
6
Users and Motives…
User
Regulators
Board and
Management
Source
Format
Company Call
Reports
UBPR
Supplemental
Ledgers and
reports
GAAP / SEC
General Ledger and
analysis
MIS
Ledgers
GAAP / SEC
UBPR
Motive
Frequency
Guarantor / Safety,
soundness and
compliance
Constant
Fiduciary / ‘Prudent
Man’ / Shareholder
Value
Constant
Incentives
Operations
Company
GAAP / SEC
- Equity
Analysts
UBPR
- Debt
Regulators
Investors
Debt – Cash flow
and repayment
Equity – Earnings
and franchise value
Company
GAAP/ SEC
Confidence
- Depositor
Analysts
UBPR
Strategic vendor
- Borrower
Regulators
Public
Frequent
Occasional
7
FFIEC Website
8
FFIEC Website
9
UBPR Construction

Sources: Regulatory reports

Custom Peer Groups may be constructed

Changes in 2008: added detail on construction and other risky lending categories

‘Trimmed Averages’ eliminate outliers

Tax Equivalent Adjustment mechanism

Sub S adjustment mechanism
Source: A User’s Guide for the Uniform Bank Performance Report, December 2008
10
UBPR Construction

Modules
Net Income =
Non-interest income +
Net-interest income +
[Interest Income – Interest Expense]
Credit expense –
Non-interest expense –
Tax expense
Source: A User’s Guide for the Uniform Bank Performance Report, December 2008
11
UBPR Construction / Net Income
Net income
(to average assets)
Net interest income (TE)
(to average assets)
Fiduciary activities
(income) (if available)
Noninterest income
(to average assets)
Deposit service charges
Net from trading fees &
comms (if available)
Foreign exchange trading
(if available)
Other noninterest income
Average assets per
employee - $MM
Noninterest expense
(to average assets)
Personnel expense
(to average assets)
Provision for loan & lease
losses (to average assets)
Occupancy expense
(to average assets)
Realized G/L
held-to-maturity sec
Other operating expense
(to average assets)
Average personnel expense
per equiv employee - $MM
Premises, fixed assets
(to average assets)
Average assets per
domestic office
Realized G/L
available-for-sale sec
Net extraordinary items (to
average assets)
Source: Federal Financial Institutions Examination Council
Applicable inc tax (TE) (to
average assets)
12
UBPR Construction / Net Interest Income
Real estate loans (yield on)
Interest income (TE)
(to avg earning assets)
Total loans & leases (TE)
(yield on)
Loans to individuals
(yield on)
Other interest income
Interest income (TE)
(to average assets)
Commercial & industrial loans
(yield on)
Agricultural loans
(yield on)
US Treasury & agency
securities (yield on)
Investment securities (TE)
(yield on)
Interest-bearing bank
balances (yield on)
Federal funds sold & repos
(yield on)
Average earning assets
(to average assets)
Mortgage backed
securities (yield on)
All other securities
(yield on)
Net loans & leases
(to average assets)
Securities (AFS + HTM)
(to average assets)
Interest-bearing bank
balances (to average assets)
Federal funds sold & resold
(to average assets)
Interest expense
(to average assets)
Source: Federal Financial Institutions Examination Council
Trading account assets
(to average assets)
I.O. strips and other equity
securities (to average assets)
13
UBPR Construction / Interest Expense
Transaction accounts
(cost of)
Total interest–bearing
deposits (cost of)
Other savings & deposits
(cost of)
Time deps over $100MM
(cost of)
Interest expense
(to avg earning assets)
All other time deposits
(cost of)
Foreign office deposits
(cost of)
Federal funds purchase &
repos (cost of)
Other borrowings
(cost of)
Interest-bearing transaction
accounts (to average assets)
Subord notes &
debentures (cost of)
Interest-bearing non
transaction accounts (to
average assets)
Federal funds & repos (to
average assets)
Interest-bearing funds
(to average assets)
Source: Federal Financial Institutions Examination Council
Foreign office deposits
(to average assets)
Other borrowings
(to average assets)
Subord rates & debentures
(to average assets)
14
Peer Groups
Group #
Asset Size
Branches
Market
1
$3 billion<
NA
NA
2
$1B<$3B
NA
NA
3
$0.3B<$1B
NA
NA
4
$0.1B<$0.3B
3 or more
Metropolitan
5
Non-metropolitan
6
2 or fewer
7
8
Non-metropolitan
$0.05B<$0.1B
3 or more
9
2 or fewer
11
<$0.05B
2 or more
Metropolitan
Non-metropolitan
14
1
15
Specialty Groups
Metropolitan
Non-metropolitan
13
De-novo
Metropolitan
Non-metropolitan
10
12
Metropolitan
Metropolitan
Non-metropolitan
<0.75B
Grouped by year of formation for five years
FDIC Savings Banks, Credit card banks (<$1B, $1<$5B, $5B<), Bankers Banks, Fiduciary Banks
(<$0.1B, $0.1<$0.5B, $0.5<$1.0B, $1<$10B, $10<$100B, $100B<)
Source: Federal Financial Institutions Examination Council
15
Critical Issues
 Capital
 Asset Quality
 Management
 Earnings
 Liquidity
 Sensitivity to Market Risk
16
Case:
NASDAQ:FSBK
Total Assets
$830 mm
Tang Common Equity
$ 82 mm
5-Year Avg ROAA
1.52%
5-Year Avg ROAE
17.24%
Market Capitalization
~$100 mn
Special Skills:
Direct FreddieMac originator; packages
own loans into securities for portfolio.
Residential construction lending.
HQ: Washington, NC (Beaufort Co.)
Major Competitors:



BB&T
Royal Bank of Canada
Wells Fargo
Source: Company; SNL Securities LLC
17
Summary - 01
CERT # 31084
CHARTER # 0
DIST/RSSD: 05 / 883874
COUNTY:
9/30/2009
9/30/2008
878,976
5,717
1,200
N/A
PG 3
BANK
913,895
9,338
1,189
N/A
PG 3
PCT
6.79
2.59
4.2
1.01
2.59
0.42
2.2
0.01
2.22
1.36
1.62
6.02
2.45
3.58
0.79
2.86
0.39
1.15
-0.03
1.04
0.74
0.92
92
60
83
71
37
66
88
72
89
79
84
AVERAGE ASSETS ($000)
NET INCOME ($000)
NUMBER OF BANKS IN PEER GROUP
EARNINGS AND PROFITABILITY
PERCENT OF AVERAGE ASSETS:
INTEREST INCOME (TE)
- INTEREST EXPENSE
NET INTEREST INCOME (TE)
+ NONINTEREST INCOME
- NONINTEREST EXPENSE
- PROVISION: LOAN&LEASE LOSSES
= PRETAX OPERATING INCOME (TE)
+ REALIZED GAINS/LOSSES SEC
= PRETAX NET OPERATING INC (TE)
NET OPERATING INCOME
ADJUSTED NET OPERATING INCOME
NET INC ATTRIB TO MIN INTS
NET INCOME ADJUSTED SUB S
NET INCOME
MARGIN ANALYSIS:
AVG EARNING ASSETS TO AVG ASSETS
AVG INT-BEARING FUNDS TO AVG AST
INT INC (TE) TO AVG EARN ASSETS
INT EXPENSE TO AVG EARN ASSETS
NET INT INC-TE TO AVG EARN ASSET
FIRST SOUTH BANK
SUMMARY RATIOS
BANK
5.74
1.94
3.8
0.98
2.83
0.68
1.27
0.14
1.41
0.87
0.96
0 N/A
5.17
1.75
3.42
0.75
2.92
0.9
0.41
0.04
0.44
0.31
0.6
PCT
86
63
71
71
48
52
71
83
75
68
61
98 N/A
0.87
0.26
0.31
68
95.18
78.83
6.03
2.04
3.99
93.63
81.72
5.53
1.87
3.67
68
29
82
60
66
N/A
N/A
1.36
0.67
0.74
79
95.2
78.78
7.13
2.72
4.41
93.88
80.64
6.43
2.61
3.83
67
35
90
57
80
Source: Federal Financial Institutions Examination Council; UBPR
18
Summary – 01
CERT # 31084
CHARTER # 0
DIST/RSSD: 05 / 883874
COUNTY:
FIRST SOUTH BANK
SUMMARY RATIOS
9/30/2009
LOAN & LEASE ANALYSIS
NET LOSS TO AVERAGE TOTAL LN&LS
EARNINGS COVERAGE OF NET LOSS(X)
LN&LS ALLOWANCE TO NET LOSSES(X)
LN&LS ALLOW TO LN&LS NOT HFS
LN&LS ALLOWANCE TO TOTAL LN&LS
NON-CUR LN&LS TO GROSS LN&LS
9/30/2008
0.69
3.34
2.4
1.79
1.77
1.98
0.85
6.52
4.32
1.71
1.7
3.07
55
53
47
64
64
42
0.19
16.04
7.55
1.49
1.48
1.86
0.34
18.17
9.72
1.3
1.3
1.7
48
65
60
72
73
63
LIQUIDITY
NET NON CORE FUND DEPENDENCE
NET LOANS & LEASES TO ASSETS
31.91
79.97
26.65
69.26
64
83
31.53
84.73
30.25
72.37
55
88
CAPITALIZATION
TIER ONE LEVERAGE CAPITAL
CASH DIVIDENDS TO NET INCOME
RETAIN EARNS TO AVG TOTAL EQUITY
RESTR+NONAC+RE ACQ TO EQCAP+ALLL
9.33
102.2
-0.2
34.11
8.79
28.8
-0.31
30.11
66
91
37
67
9.05
62.66
5.42
26.45
8.93
37.66
2.56
14.86
59
73
60
79
-3.71
-0.61
-9.12
631.39
25.77
6.2
5.39
1.98
216.2
7.52
12
25
12
85
74
-2.16
0.06
-1.45
511.87
3.24
9.08
6.04
10.37
11.71
20.6
11
22
13
95
34
GROWTH RATES
ASSETS
TIER ONE CAPITAL
NET LOANS & LEASES
SHORT TERM INVESTMENTS
SHORT TERM NON CORE FUNDING
Source: Federal Financial Institutions Examination Council; UBPR
19
Capital – 11
RISK-BASED CAPITAL
TIER ONE RBC TO RISK-WGT ASSETS
TOTAL RBC TO RISK-WEIGHT ASSETS
TIER ONE LEVERAGE CAPITAL
OTHER CAPITAL RATIO:
DEF TAX ASSET TO T1 CAP
BANK
11.94
13.2
9.33
PEER 3
11.88
13.13
8.79
PCT
58
58
66
0.85
2.24
50
Source: Federal Financial Institutions Examination Council; UBPR
20
Capital – 11
CAPITAL RATIOS
PERCENT OF BANK EQUITY:
NET LOANS & LEASES (X)
SUBORD NOTES & DEBENTURES
LONG TERM DEBT
COM RE & RELATED VENTURES
PERCENT OF AVERAGE BANK EQUITY:
NET INCOME
DIVIDENDS
RETAINED EARNINGS
OTHER CAPITAL RATIOS:
DIVIDENDS TO NET OPER INCOME
BANK EQUITY CAPITAL TO ASSETS
BANK EQ CAP + MIN INT TO ASSETS
GROWTH RATES:
TOTAL EQUITY CAPITAL
EQUITY GROWTH LESS ASST GROWTH
INTANG ASSETS % BANK EQUITY
MORTGAGE SERVICING RIGHTS
GOODWILL
PURCH CREDIT CARD RELATION
ALL OTHER INTANGIBLES
TOTAL INTANGIBLES
BANK
PG 3
PCT
7.94
0
0
518.22
7.5
0.02
0.02
357.4
56
94
94
79
8.85
9.05
-0.2
2.97
2.59
-0.31
67
89
37
102.2
10.08
10.08
42.51
9.45
9.46
88
66
66
0.25
3.96
8.33
1.2
23
57
1.45
4.91
0 N/A
0.17
6.53
0.12
2.73
92
75
97
68
73
0.46
3.87
Source: Federal Financial Institutions Examination Council; UBPR
21
Asset Quality – 07A
LOAN MIX, % AVERAGE GROSS LN&LS
CONTRUCTION & DEVELOPMENT
1-4 FAMILY CONSTRUCTION
OTHER CONST & LAND DEVEL
1 - 4 FAMILY RESIDENTIAL
HOME EQUITY LOANS
OTHER REAL ESTATE LOANS
FARMLAND
MULTIFAMILY
NON-FARM NON-RESIDENTIAL
OWNER OCCUPIED NFARM NRESID
OTHER NONFARM NONRESIDENTIAL
TOTAL REAL ESTATE
FINANCIAL INSTITUTION LOANS
AGRICULTURAL LOANS
COMMERCIAL & INDUSTRIAL LOANS
LOANS TO INDIVIDUALS
CREDIT CARD LOANS
MUNICIPAL LOANS
FOREIGN OFFICE LOANS & LEASES
ALL OTHER LOANS
LEASE FINANCING RECEIVABLES
SUPPLEMENTAL:
LOANS TO FOREIGN GOVERNMENTS
LOANS TO FINANCE COMML REAL EST
MEMORANDUM (% OF AVG TOT LOANS):
LOAN & LEASE COMMITMENTS
OFFICER, SHAREHOLDER LOANS
OFFICER, SHAREH LOANS TO ASSETS
Source: Federal Financial Institutions Examination Council; UBPR
BANK
36.87
11.16
25.72
27.02
3.65
28.66
0.46
2.78
25.42
5.45
19.97
92.55
0
0.11
4.45
1.31
0
0
0 N/A
0
1.58
0 N/A
0
14.42
0.14
0.11
PG 3
13.27
3.29
9.52
23.58
3.47
37.36
2.56
2.51
30.61
15.17
14.72
77.55
PCT
96
94
94
63
54
22
40
63
33
9
74
91
0
1.45
13.48
3.69
0.07
0.5
0.3
0.05
93
48
9
28
68
40
99
13
95
0.16
99
68
14.97
1.62
1.12
50
15
17
22
Asset Quality – 07B
LOAN & LSE % TOTAL CAPITAL
CONTRUCTION & DEVELOPMENT
1-4 FAMILY CONSTRUCTION
OTHER CONST & LAND DEVEL
1 - 4 FAMILY RESIDENTIAL
HOME EQUITY LOANS
OTHER REAL ESTATE LOANS
FARMLAND
MULTIFAMILY
NON-FARM NON-RESIDENTIAL
OWNER OCCUPIED NFARM NRESID
OTHER NONFARM NONRESIDENTIAL
TOTAL REAL ESTATE
FINANCIAL INSTITUTION LOANS
AGRICULTURAL LOANS
COMMERCIAL & INDUSTRIAL LOANS
LOANS TO INDIVIDUALS
CREDIT CARD LOANS
MUNICIPAL LOANS
FOREIGN OFFICE LOANS & LEASES
ALL OTHER LOANS
LEASE FINANCING RECEIVABLES
SUPPLEMENTAL:
LOANS TO FOREIGN GOVERNMENTS
LOANS TO FINANCE COMM REAL EST
BANK
278.76
70.66
208.1
216.22
28.5
230.99
3.77
19.36
207.86
42.68
165.18
725.97
0 N/A
0.99
31.68
9.61
0
0
0 N/A
0
12.26
0 N/A
0
PG 3
92.11
20.17
67.99
174.7
26.62
284.53
18.86
19.6
232.75
115.03
113.3
569.53
PCT
95
92
94
67
55
32
41
59
43
11
76
80
2.09
0.37
95
50
11
28
69
41
99
14
95
1.03
99
70
10.47
97.01
25.31
0.48
3.5
NONOWNER OCC COMML RE % TOT CAP
TOTAL COMML REAL ESTATE % TOT CAP
463.3
505.98
239
359.56
91
79
CONSTRUCTION & DEVEL % TOT LNS
NONOWNER OCC COMML RE % TOT LNS
TOTAL COMML REAL ESTATE % TOT LNS
35.72
59.36
64.83
12.34
32.21
48.8
96
92
81
Source: Federal Financial Institutions Examination Council; UBPR
23
Asset Quality:
Noncurrent Rate on Real Estate and Construction Development Loans
20.0%
18.0%
…When the cycle turns against him, the best
construction lender will see 10% of his
construction portfolio non-performing; the
worst will see 100%.
16.0%
14.0%
12.0%
Source: Robert Morris Associates training program 1976
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Nationwide
2001
2002
2003
2004
2005
2006
2007
2008
2009
Q3
Maryland
Source: FDIC US Bank Statistics
24
Asset Quality – 07
LOAN & LSE % TOTAL CAPITAL
CONTRUCTION & DEVELOPMENT
1-4 FAMILY CONSTRUCTION
OTHER CONST & LAND DEVEL
1 - 4 FAMILY RESIDENTIAL
HOME EQUITY LOANS
OTHER REAL ESTATE LOANS
FARMLAND
MULTIFAMILY
NON-FARM NON-RESIDENTIAL
OWNER OCCUPIED NFARM NRESID
OTHER NONFARM NONRESIDENTIAL
TOTAL REAL ESTATE
FINANCIAL INSTITUTION LOANS
AGRICULTURAL LOANS
COMMERCIAL & INDUSTRIAL LOANS
LOANS TO INDIVIDUALS
CREDIT CARD LOANS
MUNICIPAL LOANS
FOREIGN OFFICE LOANS & LEASES
ALL OTHER LOANS
LEASE FINANCING RECEIVABLES
SUPPLEMENTAL:
LOANS TO FOREIGN GOVERNMENTS
LOANS TO FINANCE COMM REAL EST
BANK
278.76
70.66
208.1
216.22
28.5
230.99
3.77
19.36
207.86
42.68
165.18
725.97
0 N/A
0.99
31.68
9.61
0
0
0 N/A
0
12.26
0 N/A
0
PG 3
92.11
20.17
67.99
174.7
26.62
284.53
18.86
19.6
232.75
115.03
113.3
569.53
PCT
95
92
94
67
55
32
41
59
43
11
76
80
2.09
0.37
95
50
11
28
69
41
99
14
95
1.03
99
70
10.47
97.01
25.31
0.48
3.5
NONOWNER OCC COMML RE % TOT CAP
TOTAL COMML REAL ESTATE % TOT CAP
463.3
505.98
239
359.56
91
79
CONSTRUCTION & DEVEL % TOT LNS
NONOWNER OCC COMML RE % TOT LNS
TOTAL COMML REAL ESTATE % TOT LNS
35.72
59.36
64.83
12.34
32.21
48.8
96
92
81
Source: Federal Financial Institutions Examination Council; UBPR
25
Asset Mix / Construction Lending
Construction Loans as a % of Total Loans
45
40
% of Total Loans
35
30
25
20
15
10
5
0
2006
FSBK
2007
Peer Group 3
2008
Source: UBPR 9/30/2009
26
Asset Quality – 08
% OF NON-CURR LN&LS BY LN TYPE
BANK
PG 3
PCT
REAL ESTATE LNS-90+ DAYS P/D
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0.34
1.75
2.1
0.74
0.18
3.16
3.45
1.38
77
37
40
38
CONST & LAND DEV-90+ DAYS P/D
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0.73
1.64
2.37
0.43
0.16
7.94
8.38
1.71
87
32
34
47
1-4 FAM CONS & L DEV-90+ DAYS
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0
1.53
1.53
1.49
0.07
6.74
7.16
1.42
88
51
50
70
OTHER CONST & LAND DEV-90+ DAYS
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0.97
1.68
2.65
0.07 N/A
8.01 N/A
1.46
0.43
SINGLE & MULTI MTG-90+ DAYS P/D
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0.2
2.03
2.24
0.8
0.15
1.78
2.03
1.3
71
64
64
41
NON-FARM/RESI MTG-90+ DAYS P/D
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0
1.61
1.61
1.1
0.09
1.8
2.02
0.93
71
55
52
66
OWN OCC NFARM NONRE-90+ DAYS P/D
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0
0
0
0.27
0.07
1.6
1.78
0.84
80
28
25
45
OTH NONFARM NONRES-90+ DAYS P/D
-NONACCRUAL
-TOTAL
-30-89 DAYS P/D
0
2.03
2.03
1.31
0.05
1.61
1.84
0.79
83
68
65
75
39
41
46
Source: Federal Financial Institutions Examination Council; UBPR
27
Management – 03

Trend analysis in every category
CERT # 31084
CHARTER # 0
DIST/RSSD: 05 / 883874
COUNTY:
FIRST SOUTH BANK
WASHINGTON, NC
NONINTEREST INCOME AND EXPENSES ($000) AND YIELDS
9/30/2009
PERCENT OF AVERAGE ASSETS
PERSONNEL EXPENSE
OCCUPANCY EXPENSE
OTHER OPER EXP(INCL INTANGIBLES)
TOTAL OVERHEAD EXPENSE
OVERHEAD LESS NONINT INC
OTHER INCOME & EXPENSE RATIOS:
BANK
1.63
0.29
0.91
2.83
1.85
PG 3
1.46
0.38
1.05
2.92
2.11
9/30/2008
BANK
1.53
0.29
0.76
2.59
1.57
PG 3
1.54
0.4
0.89
2.86
2.01
12/31/2008
BANK
1.52
0.29
0.79
2.6
1.63
PG 3
1.53
0.4
0.93
2.91
2.05
12/31/2007
BANK
1.54
0.29
0.64
2.47
1.47
PG 3
1.57
0.4
0.87
2.85
1.98
PAGE 03
1/20/2010 14:28
12/31/2006
BANK
1.54
0.27
0.63
2.44
1.51
PG 3
1.57
0.4
0.85
2.84
1.96
Source: Federal Financial Institutions Examination Council; UBPR
28
Earnings – 01
AVERAGE ASSETS ($000)
NET INCOME ($000)
NUMBER OF BANKS IN PEER GROUP
EARNINGS AND PROFITABILITY
PERCENT OF AVERAGE ASSETS:
INTEREST INCOME (TE)
- INTEREST EXPENSE
NET INTEREST INCOME (TE)
+ NONINTEREST INCOME
- NONINTEREST EXPENSE
- PROVISION: LOAN&LEASE LOSSES
= PRETAX OPERATING INCOME (TE)
+ REALIZED GAINS/LOSSES SEC
= PRETAX NET OPERATING INC (TE)
NET OPERATING INCOME
ADJUSTED NET OPERATING INCOME
NET INC ATTRIB TO MIN INTS
NET INCOME ADJUSTED SUB S
NET INCOME
MARGIN ANALYSIS:
AVG EARNING ASSETS TO AVG ASSETS
AVG INT-BEARING FUNDS TO AVG AST
INT INC (TE) TO AVG EARN ASSETS
INT EXPENSE TO AVG EARN ASSETS
NET INT INC-TE TO AVG EARN ASSET
BANK
5.74
1.94
3.8
0.98
2.83
0.68
1.27
0.14
1.41
0.87
0.96
0 N/A
878,976
5,717
1,200
PG 3
5.17
1.75
3.42
0.75
2.92
0.9
0.41
0.04
0.44
0.31
0.6
PCT
86
63
71
71
48
52
71
83
75
68
61
98
0.87
0.26
0.31
68
95.18
78.83
6.03
2.04
3.99
93.63
81.72
5.53
1.87
3.67
68
29
82
60
66
Source: Federal Financial Institutions Examination Council; UBPR
29
Earnings – 01
AVERAGE ASSETS ($000)
NET INCOME ($000)
NUMBER OF BANKS IN PEER GROUP
LOAN & LEASE ANALYSIS
NET LOSS TO AVERAGE TOTAL LN&LS
EARNINGS COVERAGE OF NET LOSS(X)
LN&LS ALLOWANCE TO NET LOSSES(X)
LN&LS ALLOW TO LN&LS NOT HFS
LN&LS ALLOWANCE TO TOTAL LN&LS
NON-CUR LN&LS TO GROSS LN&LS
BANK
0.69
3.34
2.4
1.79
1.77
1.98
878,976
5,717
1,200
PG 3
0.85
6.52
4.32
1.71
1.7
3.07
PCT
55
53
47
64
64
42
LIQUIDITY
NET NON CORE FUND DEPENDENCE
NET LOANS & LEASES TO ASSETS
31.91
79.97
26.65
69.26
64
83
CAPITALIZATION
TIER ONE LEVERAGE CAPITAL
CASH DIVIDENDS TO NET INCOME
RETAIN EARNS TO AVG TOTAL EQUITY
RESTR+NONAC+RE ACQ TO EQCAP+ALLL
9.33
102.2
-0.2
34.11
8.79
28.8
-0.31
30.11
66
91
37
67
-3.71
-0.61
-9.12
631.39
25.77
6.2
5.39
1.98
216.2
7.52
12
25
12
85
74
GROWTH RATES
ASSETS
TIER ONE CAPITAL
NET LOANS & LEASES
SHORT TERM INVESTMENTS
SHORT TERM NON CORE FUNDING
Source: Federal Financial Institutions Examination Council; UBPR
30
Earnings – Annualized Quarter – 12
PERCENT OF AVERAGE ASSETS:
INTEREST INCOME (TE)
- INTEREST EXPENSE
NET INTEREST INCOME (TE)
+ NONINTEREST INCOME
- NON-INTEREST EXPENSE
- PROVISION: LOAN&LEASE LOSSES
PRETAX OPERATING INCOME (TE)
+ REALIZED GAINS/LOSSES SECS
PRETAX NET OPERATING INC (TE)
NET OPERATING INCOME
ADJUSTED NET OPERATING INCOME
NET INC ATTRIB TO MIN INTS
NET INCOME ADJUSTED SUB S
NET INCOME
MARGIN ANALYSIS:
INT INC (TE) TO AVG EARN ASSETS
INT EXPENSE TO AVG EARN ASSETS
NET INT INC-TE TO AVG EARN ASST
LOAN & LEASE ANALYSIS
NET LOSS TO AVERAGE TOTAL LN&LS
EARNINGS COVERAGE OF NET LOSS(X)
LN&LS ALLOWANCE TO NET LOSSES(X)
BANK
5.71
1.77
3.95
0.97
2.99
0.58
1.35
0
1.35
0.82
1.09
0 N/A
0.82
0.82
PG 3
5.1
1.63
3.48
0.74
2.9
1.03
0.36
0.04
0.37
0.27
0.56
0.23
0.27
PCT
87
60
74
71
57
46
72
62
70
63
64
98
66
63
5.98
1.85
4.13
5.47
1.74
3.73
80
57
69
0.38
6.24
4.6
1.02
7.13
4.82
40
67
67
Source: Federal Financial Institutions Examination Council; UBPR
31
Liquidity – 10
PERCENT OF TOTAL ASSETS
SHORT TERM INVESTMENTS
MARKETABLE EQUITY SEC (MES)
CORE DEPOSITS
S T NON CORE FUNDING
BANK
2.92
0.05
56.09
28.67
PG 3
5.5
0.03
64.34
20.09
PCT
35
81
18
81
LIQUIDITY RATIOS
NET S T NONCORE FUND DEPENDENCE
NET NON CORE FUND DEPENDENCE
BROKERED DEPOSITS TO DEPOSITS
BROKER DEP MAT &lt 1YR TO BKR DEPS
SHORT TRM INV TO S T NCORE FUND
SHORT TERM ASSET TO S T LIABS
NET S T LIAB TO ASSETS
NET LOANS & LEASES TO DEPOSITS
NET LN&LS TO CORE DEPOSITS
NET LN&LS & SBLC TO ASSETS
27.94
31.91
0.13
0
10.18
59.65
21.78
95.38
142.59
80.12
16.32
26.65
5.73
69.38
31.58
81.69
7.46
84.8
109.13
69.8
84
64
32
2
25
31
85
76
90
82
Source: Federal Financial Institutions Examination Council; UBPR
32
Sensitivity to Market Risk – 09
LONG ASSETS INSTS W/ OPTIONS
MORTGAGE LOANS & PASS THRUS
LOANS & SECURITIES OVER 15 YRS
LOANS & SECURITIES 5-15 YRS
BANK
26.46
10.29
5.09
PG 3
16.68
2.88
3.31
PCT
82
90
74
OTHER LOANS AND SECURITIES
LOANS & SECURITIES OVER 15 YRS
LOANS & SECURITIES 5-15 YRS
TOTAL LOANS & SECURITIES OVR 15
64.33
0.39
7.3
10.68
65.34
1.98
9.02
5.58
44
25
43
80
OVERALL RISK INDICATORS
AVAILABLE FOR SALE
HELD TO MATURITY
OFF BALANCE SHEET
10.69
0.07
11.95
15.32
1.01
11.92
36
62
55
0
0
0.02
0.24
73
69
CONTRACTUAL MAT/REPRICE DATA
LOANS/SECURITIES OVER 3 YEARS
LIABILITIES OVER 3 YEARS
NET 3 YEAR POSITION
38.59
0.12
38.47
35.89
3.13
32.24
56
10
66
LOANS/SECURITIES OVER 1 YEAR
LIABILITIES OVER 1 YEAR
NET OVER 1 YEAR POSITION
59.84
5.31
54.53
54.83
11.81
42.32
64
22
78
NON-MATURITY DEPOSITS
NON-MATURITY DEPS % LONG ASSETS
NET OVER 3 YEAR POSITION
29.13
75.49
9.46
41.61
129.86
-5.59
15
16
80
UNREALIZED APPN/DEPN
UNREAL APP/DEP % TIER ONE CAP
Source: Federal Financial Institutions Examination Council; UBPR
33
Custom Peer Group
AVERAGE ASSETS
NUMBER OF BANKS IN TABULATION
EARNINGS AND PROFITABILITY
PERCENT OF AVERAGE ASSETS:
INTEREST INCOME (TE)
- INTEREST EXPENSE
NET INTEREST INCOME (TE)
+ NONINTEREST INCOME
- NON-INTEREST EXPENSE
- PROVISION: LOAN&LEASE LOSSES
= PRETAX OPERATING INCOME (TE)
+ SECURITIES GAINS (LOSSES)
= PRETAX NET OPERATING INC (TE)
NET OPERATING INCOME
ADJUSTED NET OPERATING INCOME
NET INC ATTRIB TO MIN INTS
NET INCOME ADJUSTED SUB S
NET INCOME
9/30/2009
878,976
19
BANK
PEER
PCT
5.74
1.94
3.8
0.98
2.83
0.68
1.27
0.14
1.41
0.87
0.96
0
5
1.9
3.1
0.69
2.7
1.05
0.03
0.09
0.12
0.08
0.43
0
0.08
0.08
95
50
90
70
65
30
95
65
95
95
85
95
0.87
95
Source: Federal Financial Institutions Examination Council; UBPR
34
Comparison

Regulators rely on UBPR / CDR

Most investors, borrowers and investment banks
 Subscribe to SNL Financial
 Review Company SEC reporting documents
 Construct ‘relevant’ comparison groups
 Rely on GAAP
35
The OCC’s “Canary Report” – Red Flags / Capital

Ratios below “well capitalized” or those required by order or agreement

Capital growth rate is less than total asset growth rate

Ratios significantly different from peer ratios

Declining capital levels or ratios

Dividend payout ratio is significantly higher than peer ratios

Concentration in nontraditional activities

Significant growth in off-balance-sheet activities
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
36
Red Flags / Asset Quality

Significant increase in loans to total assets ratio

Significant increase in loans to equity ratio

Significant change in portfolio mix

Significant upward or downward trend in the percent of the ALLL to total loans and
leases

High growth rates in total loans or within individual categories of loans

Significant increase in loan yields
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
37
Red Flags / Asset Quality

Loan yields significantly higher than peer group

Downward trends in risk ratings among pass credits and/or increases in special
mention or classified assets

Significant volume of retail loans that have been extended, deferred, renewed, or
rewritten

Increasing levels of past-due and nonperforming loans as a percent of loans

Significant changes in the ALLL

Significant increases in ALLL provisions

Stable or declining ALLL at the same time net loan losses trend upward
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
38
Red Flags / Asset Quality

Annual net charge-offs that exceed the balance in the ALLL

ALLL averages and percentages significantly different from the peer group’s

Increasing levels of other real estate owned

Loans identified by internal and external loan review that are not included in problem
loan lists provided by management

Any significant changes in the above relative to historical performance, planned
performance, or peer performance
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
39
Red Flags / Earnings

Significant increases or decreases in noninterest income

Significantly higher or lower average personnel expenses than peer banks

Significant variances in the ROAA, ROE, or NIM from prior periods and as compared
with peer group

Significant variances from budgeted amounts on income or expense items and balance
sheet accounts
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
40
Red Flags / Liquidity

Significant increases in reliance on wholesale funding

Significant increases in large certificates of deposit, brokered deposits, or deposits
with interest rates higher than the market

Significant increases in borrowings

Significant increases in dependence on funding sources other than core deposits

Declines in levels of core deposits

Significant decreases in short-term investments
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
41
Red Flags / Market Risk

Capital falling below the level established by the board to support interest rate risk

Significant increases or decreases in the percent of long-term assets to total assets

Significant decrease in the percent of nonmaturity funding sources to long-term assets

High or increasing percent of asset depreciation to tier 1 capital
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
42
Red Flags / Growth Management


Inconsistent with the bank’s budget or strategic plan

Unaccompanied by an increasing level of and sophistication in risk management
controls

Results in:
Significantly greater than that of peer banks, even if projected in the bank’s budget or
strategic plan
 a higher risk profile than forecast
 Declining capital levels or ratios that result from asset growth
 Reliance on unstable or short-term funding sources to support growth

Based on Introduction of new products or activities with little or no expertise or
inadequate risk management controls

Generated largely by brokered or agent transactions
,
Source: Detecting Red Flags In Board Reports A Guide for Directors Office of the Comptroller of the Currency, Washington, D.C. October 2003
43
Maryland State Average – All Insured Banks
SUM M ARY INFORM ATION FOR BANKS IN STATE OF M ARYLAND
STAVG
AVERAGE FOR ALL INSURED COMMERCIAL BANKS IN STATE
BANKS WITH ASSETS - $MILL 9/30/2009
9/30/2009
9/30/2008
12/31/2008
12/31/2007
12/31/2006
0-25
25-100
100+
INTEREST INCOME (TE)
5.14
5.91
5.84
6.74
6.34
NA
##
5.23
- INTEREST EXPENSE
1.80
2.31
2.28
2.79
2.32
NA
##
1.85
NET INTEREST INCOME (TE)
3.32
3.57
3.53
3.92
4.04
NA
##
3.40
+NONINTEREST INCOME
0.54
0.58
0.56
0.60
0.70
NA
##
0.51
- NON-INTEREST EXPENSE
3.08
3.20
3.25
3.37
3.15
NA
##
2.99
- PROVISION: LOAN&LEASE LOSSES
0.90
0.44
0.59
0.20
0.09
NA
##
0.91
= PRETAX OPERATING INCOME (TE)
-0.25
0.55
0.30
1.01
1.57
NA
##
-0.04
+SECURITIES GAINS (LOSSES)
0.03
-0.02
-0.02
0.00
0.00
NA
##
0.03
= PRETAX NET OPERATING INC (TE)
-0.24
0.49
0.24
0.99
1.56
NA
##
-0.02
NET OPERATING INCOME
-0.22
0.33
0.13
0.64
1.00
NA
##
-0.01
ADJUSTED NET OPERATING INCOME
0.17
0.47
0.41
0.77
1.05
NA
##
0.29
NET INC ATTRIB TO MIN INTS
N/A
N/A
N/A
N/A
N/A
##
##
N/A
NET INCOME ADJUSTED SUB S
-0.23
0.31
0.12
0.65
0.97
NA
##
-0.02
NET INCOME
-0.22
0.33
0.13
0.64
1.00
NA
##
-0.01
EARNINGS AND PROFITABILITY
PERCENT OF AVERAGE ASSETS:
Source: Federal Financial Institutions Examination Council; UBPR
44
Maryland State Average – All Insured Banks
SUM M ARY INFORM ATION FOR BANKS IN STATE OF M ARYLAND
STAVG
AVERAGE FOR ALL INSURED COMMERCIAL BANKS IN STATE
BANKS WITH ASSETS - $MILL 9/30/2009
9/30/2009
9/30/2008
12/31/2008
12/31/2007
12/31/2006
0-25
25-100
100+
AVG EARNINGS ASSETS TO AVG ASSETS
93.94
94.04
94.29
94.23
94.13
NA
##
94.22
AVG INT-BEARING FUNDS TO AVG AST
78.35
76.46
76.28
76.03
75.70
NA
##
79.14
INT INC (TE) TO AVG EARN ASSETS
5.48
6.32
6.24
7.20
6.81
NA
##
5.56
INT EXPENSE TO AVG EARN ASSETS
1.92
2.45
2.41
2.95
2.46
NA
##
1.96
NET INT INC-TE TO AVG EARN ASSET
3.57
3.85
3.80
4.21
4.33
NA
##
3.60
NET LOSS TO AVERAGE TOTAL LN&LS
0.67
0.34
0.41
0.12
0.04
NA
##
0.72
EARNINGS COVERAGE OF NET LOSS(X)
4.74
21.05
10.81
53.05
113.90
NA
##
4.79
LN&LS ALLOW TO LN&LS NOT HFS
1.51
1.11
1.28
1.06
1.07
NA
##
1.48
LN&LS ALLOWANCE TO NET LOSSES(X)
4.44
10.88
5.92
30.73
44.43
NA
##
4.49
LN&LS ALLOWANCE TO TOTAL LN&LS
1.51
1.10
1.27
1.06
1.06
NA
##
1.47
MARGIN ANALYSIS:
LOAN & LEASE ANALYSIS:
Source: Federal Financial Institutions Examination Council; UBPR
45
Maryland State Average – All Insured Banks
SUM M ARY INFORM ATION FOR BANKS IN STATE OF M ARYLAND
STAVG
AVERAGE FOR ALL INSURED COMMERCIAL BANKS IN STATE
BANKS WITH ASSETS - $MILL 9/30/2009
9/30/2009
9/30/2008
12/31/2008
12/31/2007
12/31/2006
0-25
25-100
100+
NET NON CORE FUNDING DEPENDENCE
28.03
27.59
29.47
23.97
18.03
NA
##
28.37
NET LOANS & LEASES TO ASSETS
74.25
76.28
76.52
75.17
70.98
NA
##
75.30
TIER ONE LEVERAGE CAPITAL
9.79
10.24
10.09
10.36
10.26
NA
##
9.33
CASH DIVIDENDS TO NET INCOME
27.04
58.05
42.79
40.42
29.33
NA
##
26.56
RETAIN EARNS TO AVG TOTAL EQUITY
-3.91
-1.21
-2.39
1.92
5.80
NA
##
-2.82
ASSETS
10.84
10.80
11.17
7.85
11.99
NA
##
9.59
TIER ONE CAPITAL
8.41
5.47
5.97
4.05
9.50
NA
##
7.88
NET LOANS & LEASES
6.94
14.53
13.63
12.68
12.99
NA
##
5.91
SHORT TERM INVESTMENTS
108.87
54.71
30.58
0.86
34.32
NA
##
116.93
SHORT TERM NON CORE FUNDING
28.39
23.50
25.03
22.26
72.95
NA
##
22.11
TOTAL LN&LS-90+DAYS PAST DUE
0.34
0.27
0.37
0.15
0.05
NA
##
0.37
- NONACCRUAL
2.67
1.31
1.65
0.65
0.34
NA
##
2.74
- TOTAL
3.16
1.64
2.07
0.84
0.43
NA
##
3.27
LIQUIDITY:
CAPITALIZATION
GROWTH RATES:
NON-CURRENT LOANS & LEASES:
23,252
31,665
28,132
29,725
44,148
0
435
22,817
2,340
2,945
2,760
2,941
4,827
0
124
2,215
NET INCOME ($ MILLIONS)
-60
72
-76
213
538
0
-20
-40
NUMBER OF BANKS IN TABULATION
50
55
53
55
65
0
5
45
TOTAL ASSETS ($MILLIONS)
EQUITY CAPITAL ($MILLIONS)
Source: Federal Financial Institutions Examination Council; UBPR
46
Maryland State Average – All Insured Banks
SUM M ARY INFORM ATION FOR BANKS IN STATE OF M ARYLAND
STAVG
AVERAGE FOR ALL INSURED COMMERCIAL BANKS IN STATE
BANKS WITH ASSETS - $MILL 9/30/2009
9/30/2009
9/30/2008
12/31/2008
12/31/2007
12/31/2006
0-25
25-100
100+
TOTAL ASSETS ($MILLIONS)
23,252
31,665
28,132
29,725
44,148
0
435
22,817
EQUITY CAPITAL ($MILLIONS)
2,340
2,945
2,760
2,941
4,827
0
124
2,215
NET INCOME ($ MILLIONS)
-60
72
-76
213
538
0
-20
-40
NUMBER OF BANKS IN TABULATION
50
55
53
55
65
0
5
45
Source: Federal Financial Institutions Examination Council; UBPR
47
Summary All Insured Banks in Maryland, Virginia and North Carolina
MD
VA
NC
MD
VA
NC
9/ 30/ 2009
9/ 30/ 209
9/ 30/ 2009
9/ 30/ 2009
9/ 30/ 209
9/ 30/ 2009
NET NON CORE FUNDING DEPENDENCE
28.03
25.43
34.60
NET LOANS & LEASES TO ASSETS
74.25
72.22
72.27
EARNINGS AND P ROFITABILITY
LIQUIDITY:
PERCENT OF AVERAGE ASSETS:
INTEREST INCOME (TE)
5.14
5.33
4.87
- INTEREST EXPENSE
1.80
1.92
1.85
NET INTEREST INCOME (TE)
3.32
3.40
3.02
CAPITALIZATION
+NONINTEREST INCOME
0.54
0.62
0.64
TIER ONE LEVERAGE CAPITAL
- NON-INTEREST EXPENSE
3.08
3.33
3.23
CASH DIVIDENDS TO NET INCOME
- PROVISION: LOAN&LEASE LOSSES
0.90
0.70
1.05
RETAIN EARNS TO AVG TOTAL EQUITY
= PRETAX OPERATING INCOME (TE)
-0.25
0.05
-0.61
+SECURITIES GAINS (LOSSES)
0.03
0.03
0.04
= PRETAX NET OPERATING INC (TE)
-0.24
0.05
-0.57
NET OPERATING INCOME
-0.22
-0.01
-0.58
0.17
0.35
-0.17
NET INC ATTRIB TO MIN INTS
N/A
N/A
N/A
NET INCOME ADJUSTED SUB S
-0.23
0.00
-0.58
NET INCOME
-0.22
0.00
-0.58
ADJUSTED NET OPERATING INCOME
M ARGIN ANALYSIS:
AVG EARNINGS ASSETS TO AVG ASSETS
93.94
93.61
93.39
AVG INT-BEARING FUNDS TO AVG AST
78.35
78.11
81.17
INT INC (TE) TO AVG EARN ASSETS
5.48
5.71
5.25
INT EXPENSE TO AVG EARN ASSETS
1.92
2.06
1.99
NET INT INC-TE TO AVG EARN ASSET
3.57
3.65
3.23
9.79
10.09
9.99
27.04
19.66
7.87
-3.91
-1.20
-4.89
16.92
GROWTH RATES:
10.84
12.75
TIER ONE CAPITAL
8.41
6.71
6.36
NET LOANS & LEASES
6.94
9.79
14.10
108.87
124.41
90.03
28.39
17.84
11.88
TOTAL LN&LS-90+DAYS PAST DUE
0.34
0.25
0.09
- NONACCRUAL
2.67
1.71
2.06
- TOTAL
3.16
2.15
2.23
TOTAL ASSETS ($MILLIONS)
23,252
353,783
2,223,522
EQUITY CAPITAL ($MILLIONS)
2,340
45,731
254,023
-60
139
7,371
50
103
76
ASSETS
SHORT TERM INVESTMENTS
SHORT TERM NON CORE FUNDING
NON-CURRENT LOANS & LEASES:
NET INCOME ($ MILLIONS)
NUMBER OF BANKS IN TABULATION
LOAN & LEASE ANALYSIS:
NET LOSS TO AVERAGE TOTAL LN&LS
0.67
0.45
0.83
EARNINGS COVERAGE OF NET LOSS(X)
4.74
6.55
2.39
1.51
1.56
1.81
4.44
7.51
3.99
1.51
1.55
1.79
LN&LS ALLOW TO LN&LS NOT HFS
LN&LS ALLOWANCE TO NET LOSSES(X)
LN&LS ALLOWANCE TO TOTAL LN&LS
Source: Federal Financial Institutions Examination Council; UBPR
48
Themes for 2010 and beyond….

Competitive position

Capital
 For growth
 For stability

Control
 External
 Internal
49
Janney Montgomery Scott Contact Information
JMS Contact
Cliff Booth, Head of FIG Practice
Telephone
410-583-5992
Email
cbooth@janney.com
Location
Baltimore / Philadelphia
Ed Losty, Head of Bank Practice
757-564-9737 / 215-665-4491
elosty@janney.com
Virginia / Philadelphia
Roger Powell, Managing Director
410-583-5993 / 215-665-6687
rpowell@janney.com
Baltimore / Philadelphia
Jay Junior, Managing Director
215-665-4497
jjunior@janney.com
Philadelphia
50
Where do they get this stuff?
Off the Charts
Banks Out of the Woods? Maybe Not
By FLOYD NORRIS Published: February 26, 2010
MORE than $1 in every $10 that American
banks have outstanding in loans is lent
to a troubled borrower, a ratio far higher
than…
51