Navigating Uncharted Financial Waters By: Peter W. Leibundgut, Esq., Executive Vice President, General Counsel

1. Navigating Uncharted Financial Waters By: Peter W. Leibundgut, Esq., Executive Vice President, General Counsel

2. Peter W. Leibundgut, Esq. Mr. Leibundgut recently retired from the large law firm environment where, for 25 years, he was a partner and member of the financial services and public finance practice groups. Throughout his career he was involved in the public and commercial financial markets representing lenders, underwriters and issuers. He is a Managing Director of ICS Compliance (“ICS”) and founding member of Precision Loan Solutions, LLC, a subsidiary of ICS. Peter also serves as General Counsel to both companies. Precision was recently formed to provide select loan review, risk management and specialized due diligence services to the financial community. As a partner in several national law firms, Mr. Leibundgut spent his career representing primarily underwriters, institutional lenders and finance companies in bond transactions, syndicated loans and complex structured financings. His experience includes all facets of finance: structured; secured and unsecured; project; asset based; factoring; syndications; revenue stream securitization; franchise; debt portfolio sales and purchases; letters of credit; tenant credit lease backed transactions; construction, development and mortgage loans; merger and acquisition finance, equipment leasing; vessel financing; cross border transactions; health care; debtor in possession loans and debt restructurings; commercial leasing; tax lien securitization; P3’s, private activity bonds (including Military Housing, Renewable and Conventional Energy and Transportation Infrastructure); private and public offerings; and Microfinance. Mr. Leibundgut was also instrumental in structuring collateralized surety bonding programs and syndications for insurance companies and represented money center banks as sellers of charged off consumer credit card debt on a bulk sale and forward flow basis. He has experience in cross border and international transactions. www.ICScompliance.com 2 www.precisionloansolutions.com

3. Introduction: Banking Industry Overview Traditional Lending and Banking What Happened? Paradigm Shift to Services & Cash Management Where Are We? Return to Fundamental Banking and Lending Practices and Due Diligence Regulatory and Government Activism 3

4. Silos of Under Collateralized Debt • Public Finance • Commercial Finance • Real Estate: Commercial and Consumer • Securitized Debt • Derivative and Synthetic Products • Failure of Credit Insurance • Tremendous Exposure 4

5. Over Leveraging • Lack of Liquidity • Under Collateralization • Dollar Devaluation and Interest Rate Risk • Declining Markets, Cash Flow and Revenue Streams in All Sectors • Tight Credit Markets • Domino Effect Impacting Money Center Banks to small Community Banks and all Businesses and Government Agencies and Body Politics 5

6. Enter the Great Government Bail Out • Unprecedented Stimulus • Roll the Printing Presses • Millions to Billions to Trillions • Memories of Wheel Barrels and the Gold Standard 6

7. Exponentially Growing Debt One Billion Dollars One Million Dollars (All neatly stacked $100 Bills)

8. One Trillion Dollars

9. The Result: Unprecedented Government: • Expenditure • Intervention • Control • Scrutiny • Oversight • Regulatory Reform & Expansion • Agency Restructuring 9

10. Emerging Legislation • One Big Agency? • Unprecedented Regulation, Rules, Laws and Directives • Increased Oversight, Reporting and Transparency Demands • Dramatic Changes 10

11. Reactive or Proactive Approach? • In Many Instances Both are Required • BUT • Proactive is Favorable • Find and Address Issues in your Loan Portfolios Now 11

12. Proactive Approach • Back to Basic Fundamentals of Lending; Two Main Questions: • How will a Borrower Pay Back the Loan? • What Happens When it Can’t? • Lenders Lost Sight of Basic Underwriting Principles: “Too Many Loans Made Too Fast” 12

13. Return to Normalcy • Slow Down • Track New and Emerging Legislation and Regulation • Review and Revise Underwriting, Credit and Loan Administration Policies and Procedures • Ensure Proper Underwriting, Administration and Reporting • Institute Appropriate Independent Audits, Reviews, Oversight and Examinations. • Internal and External Reviews 13

14. Prudent Steps to Consider Now • Enterprise Risk Management Evaluation • Stress Testing • External Independent Reviews • Reduce Reliance on Technology and Econometric Models • Do the Math (“Garbage In, Garbage Out”) • Review and Revise Policies and Procedures to Comply with Emerging Regulations and New Financial Landscape 14

15. Bank Failures • 115 (as of 10/31/09) • 1000 More to Go Over Next 12 Months? • Large Banks to Community Banks • Unprecedented Level of Assets for Sale • Liquidity Issues at FDIC 15

16. Common Traits • Structural Weakness • Poor Financial Information • CRE Concentrations • Geographical Issues • Poor Administration • Lack of Oversight and Independence 16

17. What Is In Your Loan Portfolio? • Concentration Kills • Real Estate • Risk is Exponential Not Linear • ALLL Recalculate: Innovative Approach • Syndicated Loans, Participations, SNC’s? • Specialty Loans • Prudence of Independent Loan Review 17

18. What Is In Your Loan Portfolio (Cont’d) • Defined Repayment Source? • Defined Repayment Terms? • Adequate Net Worth and Debt Service Coverage? • Current Value of Collateral and Integrity of Lien Thereon? • Adequate Exit Strategy? • Enforceability and Integrity of Loan Documents? 18

19. What Is In Your Loan Portfolio (Cont’d) • Strength of Guarantors? • Regular Analysis of Loan Covenants, Borrowing Base Certificates, Collateral? • Sound Underwriting and Appropriate Risk Grading? • Identified and Written Down Problem Loans? • Anticipate Problem Loans Prospectively? • Accurate and Appropriate Data Migration 19

20. Proactive and “New” Approach to Underwriting and Administration • Review and Revise Underwriting, Credit and Loan Administration Policies, Procedures and Processes (Same old Same Old?) • Loan Review (Internal or External?) Adequate Coverage and Risk Based Scope? • Compliance Review • Trained and Qualified Staff? • Independent Audits? 20

21. “New” Approach (Cont’d) • Internal Conflicts? • Sufficient Time and Money Allocated to Accomplish Accurate and Timely Reporting? • Cash Flow Analysis (Where Is The Money Coming From To Service Debt?) • Balance Sheet Analysis? • Properly Identify and Monitor FAS 114 Loans 21

22. “New” Approach (Cont’d) • Account For All Risk Criteria in FAS 5 Allocations and Overall Calculations • Documentary Support for Any Significant Unallocated Reserves • Obtain Quality Financial Information, Analyze and Act • Monitor and Test Covenants • Re-Evaluate Collateral • Re-Examine Data Migration Tools 22

23. Summary • Know Your: • Borrower, its Business and its Credit Facility; • Its ability to continue to pay and; • The Collateral Supporting the loan • Review Your Policies and procedures On All fronts • Maintain Document Integrity • Ensure Regulatory Compliance • Be Proactive 23

24. Contact Us for Additional Information Richard Ercolani President 856-234-6142 rercolani@precisionloansolutions.com Peter W. Leibundgut EVP/General Counsel 856-234-3010 pleibundgut@precisionloansolutions.com www.precisionloansolutions.comwww.ICScompliance.com