A presentation on TriNovus' stress testing product.

1. Your Bank Loan Risk & Stress Test Demonstration Date Designed For:

4. How Do You Determine Shock Values?

8. How Does It Work - Methodology

9. Example Data Input

11. Current Loan Share Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% This depicts the institution's current dollar amount of loans by major category as a percentage of all loans. Explanation

12. CRE Loan Share Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% This depicts the institution's current dollar amount of CRE loans by major category as a percentage of all CRE loans. Explanation

13. CLD Red Flag Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% Regulators of financial institutions have communicated certain criteria ("Red Flags") that, if exceeded, may cause concern about the institution's financial health and viability Explanation

14. Red Flag – CRE Loans/Capital & CRE Loan Growth Inputs: Confidence Interval 80% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% Regulators of financial institutions have communicated certain criteria ("Red Flags") that, if exceeded, may cause concern about the institution's financial health and viability Explanation

15. Return On Equity Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% Return on Equity = Net Income / Shareholder's Equity. The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE begins in the base period within the normal range that we would see at a community bank. Due to the shock, it falls dramatically in year one. Since overall profitability (net income) is negative in year one, ROE must also be negative. Explanation Analysis

16. Return On Assets Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% Return on Assets = Net Income / Total Assets. An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. ROA begins in the base period within the normal range that we would see at a community bank. Due to the shock, it falls dramatically in year one. Since overall profitability (net income) is negative in year one, ROA must also be negative. Explanation Analysis

17. Equity to Asset Ratio Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% This presents the total equity of the institution as a percentage of total assets. This is a measure of the relative amount of capital resources available to maintain and grow the institution. Capital is not particularly strong to begin with, then gets compromised by the shock period where they experience negative net income. Equity drops by the amount of the negative net income in period one, but begins to recover slowly once loan loss levels return to normal. This bank has a fairly high dividend payout ratio at 50%, but if they were to lower their dividend after the shock, their equity ratio would recover more quickly. Explanation Analysis

18. Efficiency Ratio (Note: ratio is not impacted by provision or charge offs) Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% Efficiency Ratio is used to evaluate the overhead structure of a financial institution. Banking is no different from any mature industry - the surviving companies are those that keep costs down. The efficiency ratio provides a measure of how effectively a bank is operating. Efficiency is also a good measure of profitability. Efficiency Ratio is used to evaluate the overhead structure of a financial institution. Banking is no different from any mature industry - the surviving companies are those that keep costs down. The efficiency ratio provides a measure of how effectively a bank is operating. Efficiency is also a good measure of profitability. Explanation Analysis

19. Net Chargeoffs to Total Loans Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% Measure of defaulted and charged off loans, net of recovery, as a percentage of loans. The example bank here shows charge offs going from fairly normal or maybe somewhat elevated levels into the "stressed" period and then back to pre-stress levels. The inter-relationships of loan data from the past 25+ years informs us of how the different loan types respond to stress events for each of the other loan types. Notable here is that CLD is stressed to a 99% "bad case" scenario. That is, this level of loan loss would place it in the worst 1% of loan loss in your state over a 20 year observation period. The rest of the loans will respond accordingly based on the observed loss correlations from the historical data. Explanation Analysis

20. Net Losses By Loan Category Inputs: Confidence Interval 95% Asset Growth Rate 4% CLD Loan Rates Shocked From 3.5% to 7.4% Charge Offs by Loan Type / Loan Balance by Loan Type Measure of defaulted and charged off loans, net of recovery, as a percentage of loans. The example bank here shows charge offs going from fairly normal or maybe somewhat elevated levels into the "stressed" period and then back to pre-stress levels. The inter-relationships of loan data from the past 25+ years informs us of how the different loan types respond to stress events for each of the other loan types. Notable here is that CLD is stressed to a 99% "bad case" scenario. That is, this level of loan loss would place it in the worst 1% of loan loss in your state over a 25+ year observation period. The rest of the loans will respond accordingly based on the observed loss correlations from the historical data. Explanation Analysis

21. Sample Projected Income Statement

22. Sample Projected Balance Sheet

25. THANK YOU!