How to Design an Efficient Workflow in Banking

Chris Droussiotis2013

How to Design an Efficient Workflow in Banking

Executive Summary: Commercial banks, assaulted by the pressures of globalization, competition from non-banking

financial institutions, and volatile market dynamics are constantly seeking new ways to add value to their services.

Community banks have a different focus – how to stay competitive in their local markets with fresh new products and ideas and excellent performance

The question is what drives performance? Based on many studies the key to designing an efficient workflow in banking is to establish the

linkage between marketing, operations, organizational structures and human resource management in achieving excellence as well as implementing the right technology.

How to Design an Efficient Workflow in Banking Community Banks:

When entering a specific market area or introduce a new product, you must analyze and plan all of the issues associated with branch and product development: finding a location, recruiting management, clarifying the customer base, introducing a new delivery system. The bank marketing plan as developed by management will depend on this information as bench marks to measure its success. A matrix can be used for all of these tasks; even the analysis of the bank's Asset/Liability portfolio can be driven through the following matrix.

How to Design an Efficient Workflow in Community Banking

Measuring the Quality of Service: It Starts from Customer Feedback - Output

Measuring Quality of Service: Reliability: The ability to perform the promised services accurately and dependably Responsiveness: The willingness to help customers and provide prompt service Assurance: The knowledge and courtesy of employees and their ability to convey

trust and confidence.. Tangibles: The appearance of physical facilities, equipment, personnel and

communication materials Empathy: The caring, individualized attention provided to customers

Measuring the Quality of Service: It Starts from Customer Feedback - Output

RESOURCESPERCEIVED MEASURESOF QUALITY

Personnel Incidents Duration ReliabilityResponsiveness

Techology Waiting Time AssuranceTangibles

Space Credit Approval Empathy

BRANCH (as seen by Management)

BRANCH (as seen by Client)

OBJECTIVE MEASURES OF QUALITY

Workplace Design:

Job Design / Procedures / Policies Initiatives

Personnel : Measuring the Quality of Service

The Workflow Process - Specialization

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Front Office (Relationship Manager)

• Initial Market, Structure and Credit Analysis

Middle Office

• Credit and KYC Compliance Process

•Portfolio Management

Back Office – Credit Committee

• Credit Analysis

• KYC

Controlling Time – feedback from Client

Action Plan: PersonnelHow to Get the Best Performance From Team Members

• Workshop materials to teach teamwork & team building skills – redesigning the Job procedures and policies for efficiency for all employees in the process

Step 1• Conduct a meeting with your team as soon as it forms and explain the mission of the

company and why your department or team is important to realizing the goals. Tell the members why they were chosen to fulfill the duties of the project.

Step 2• Include your team in planning the activities to meet deadlines. Allow each member to

determine their duties that lead to the end result. Write down performance plans and reassess regularly to ensure compliance.

Step 3• Encourage employees who do not perform at a high level to take responsibility for

their work and help keep the team moving forward. Let the laggard members know that their tasks are important and that other workers rely on

Action Plan: PersonnelHow to Get the Best Performance From Team Members

• Workshop materials to teach teamwork & team building skills.

Step 4• Organize brainstorming sessions with your team to discover more efficient avenues

for task completion. This exercise also shows that you respect your team members' ideas and will listen when approached about new solutions to output delays.

Step 5• Allow team members to resolve conflict among themselves, with you as a guide.

Ensure that each one respects the other person's idea and position, but make it clear that they must do what's best for the group and the company. Teaching your staff how to place their personal conflicts aside to advance the goals of the team helps them learn how to avoid behavior that slows down progress so they can perform at their best together.

Step 6• Reward employees for meeting interim deadlines and completing portions of the

larger project. A pizza lunch in the workplace or a half-day off with pay serves to refresh and motivate the team. If your budget allows, organize a morale booster that includes a day of activities and bonding away from the office to encourage your team members to perform efficiently as a team.

Action Plan: Technology & Space: Balancing efficient technology, regulations and customer

demand.

Step 1 Set up a Marketing plan that includes the latest external technology including a web based

banking, internet services and social media for the fiorst point of contact.

Step 2 Set-up state of the art internal technology at the branch level – showing innovation – including

documentation workflow which should reduce the time necessary to generate a commercial loan without effecting the thorough approval process and the quality of loan documents.

Software systems ystems are available such as “Hotdocs” for efficient loan document workflow. The loan document workflow begins by questing the bank’s various databases for information about the customer making the loan application. All relevant data is mapped into the system. The relationship manger keys in all remaining necessary data and submits the interview of he loan approval committee.

A lot the business analytics are built into the documentation flow, so the approval committee can run their analysis and send back questions to the relationship manager.

Action Plan: Technology & Space: Balancing efficient technology, regulations and customer

demand.

Example 1: A bank teller in a retail branch performs many mission-critical activities that can be supported by

production workflow. There are set number of procedures that are done at the counter at the counter. Each procedure triggers follow-up actions by others within the organization. It is critical to the correct operation of the bank that a teller’s every action is well defined and

consistently performed across large number of tellers

Example 2 Loan processing which financially oriented has rigorous rules to be followed, both in terms of

accounting practices as well as laws that define how such organizations are allowed to operate. Since the product supplied, such as money in the case of loan applications, is identical from

various sources, the market favors those companies that can handle a large number of loans accurately and correctly.

Case Study:Structuring Acquisition Financing

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LBO OpportunityAres Venture Management Group (“Ares”) decided to purchase ABC hotel property and its land in Austin Texas for $10,000,000. In addition, Areas will spend $2,000,000 for Renovations including new furniture and equipment.

Capital Raising

Bank Debt: Amount of Loan: 3.0x ABC’s First Year’s EBITDA Interest Rate: LIBOR + 4.5%Term: 7 yearsSchedule Principal Payments:

Mezzanine: Amount of Loan: Up to 4.0x of ABC’s First Year EBITDA (Equity - not be less than 35% of total Capital)Interest Rate: 9.00%Term: 10 yearsSchedule Principal Payments: Years 1-9: $0 ; Year 10: The Balance

Equity: Ares’ equity contribution to the purchase will be 35% or up to total leverage of 4.0x dictated by the Mezzanine Loan requirements.

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 300,000 500,000 500,000 600,000 700,000 900,000 Balance

Structuring a Loan – Middle Market (Case Study)

Preliminary Debt Capacity, Leverage, Coverage and Collateral Analysis

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COST OF DEBT CALCULATIONS

3M-LIBOR Assumptions

Loan Spread Initial All -In

0.50% 4.00% 4.50%

9.00%COST OF MEZZANINE NOTE CALCULATION

COST OF BANK DEBT CALCULATION(Floaring Rate)

COST OF EQUITY CALCULATIONS

6-year Treasury Note [ rf ] 1.95%Beta for Publicly Traded Hotel [ β ] 1.633xEquity Premium [ Pe ] 11.05%Firm Specific Risk Premium [e] 0.0%Cost of Equity 20.00%

E (re) = rf + β . Pe + e

ABC CompanyLBO Equity Analysis using CAPM

3 TRANSACTION SOURCES & USES

4

Sources:

Debt Capacity

(EBITDA x)Amount % Capital

Expected Return

Expected Return

(After Tax)

WACC (After Tax)

EBITDA Multiple

5Bank Loan 3.0x 6,000,000 48.5% 5.607% 3.589% 1.74% 3.0x

6 Mezzanine Note 2,000,000 16.2% 9.000% 5.760% 0.93% 1.0x7 Total Debt 4.0x 8,000,000 64.7% 2.67% 4.0x8 Equity 4,360,000 35.3% 20.00% 20.00% 7.05% 2.2x9 Total Sources 12,360,000 100.0% 9.73% 6.2x10

11 Uses:

1st Year'sEBITDAMultiple

Amount

% of Total Uses

WACD = 4.132%

12 Puchase of Property 10,000,000 13 Renovation 2,000,000 First Year's EBITDA = 2,000,000 14 6.0x 12,000,000 97.1% Tax Rate= 36.0%15 Transaction Fees & Expenses 3.0% 360,000 2.9%16 Total Uses 12,360,000 100.0%

Structuring a Loan – Middle Market (Case Study) - ContinuedPreliminary Debt Capacity, Leverage, Coverage and Collateral Analysis

21

18 DEBT ASSUMPTIONS & RETURN ANALYSIS

19 Bank Loan Information Debt IRR Terms 1 2 3 4 5 6 720 Amount Outstanding (End of Year) 6,000,000 5,700,000 5,200,000 4,700,000 4,100,000 3,400,000 2,500,000 - 21 Schedule Principal Payments 7 years 300,000 500,000 500,000 600,000 700,000 900,000 2,500,000 22 Interest Payment (Calc based on last Year's Outs) 5.61% 270,000 285,000 286,000 305,500 266,500 221,000 162,500 23 Total Financing Payment 5.607% (6,000,000) 570,000 785,000 786,000 905,500 966,500 1,121,000 2,662,500 24 Interest Rate 4.50% 5.00% 5.50% 6.50% 6.50% 6.50% 6.50%25 LIBOR RATE 0.50% 0.50% 1.00% 1.50% 2.50% 2.50% 2.50% 2.50%26 LIBOR Rate Increase Assumptions 0.00% 0.50% 0.50% 1.00% 0.00% 0.00% 0.00%2728 Corporate Bond Information29 Amount Outstanding 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 30 Schedule Principal Payments 10 Years - - - - - - - 31 Interest Payment (Calc based on last Year's Outs) 9.00% 180,000 180,000 180,000 180,000 180,000 180,000 180,000 32 Total Financing Payment 9.000% (2,000,000) 180,000 180,000 180,000 180,000 180,000 180,000 180,000 3334 Total Financing 750,000 965,000 966,000 1,085,500 1,146,500 1,301,000 2,842,500 35 Total Debt Outstanding 7,700,000 7,200,000 6,700,000 6,100,000 5,400,000 4,500,000 2,000,000

Structuring a Loan – Middle Market (Case Study) - ContinuedPreliminary Debt Capacity, Leverage, Coverage and Collateral Analysis

22

CASH FLOW & EQUITY RETURN ANALYSIS

Company Projections Operating Entry Year Year 1 Year 2 Year 3 Year 4 Year 5 Exit YearAssump. 0 1 2 3 4 5 6 7

Revenues 5.00% growth 4,000,000 4,200,000 4,410,000 4,630,500 4,862,025 5,105,126 5,360,383 Cost of Revenues 35.0% % of Revenue (1,400,000) (1,470,000) (1,543,500) (1,620,675) (1,701,709) (1,786,794) (1,876,134) Operating Costs 15.0% % of Revenue (600,000) (630,000) (661,500) (694,575) (729,304) (765,769) (804,057) EBITDA 50.0% 2,000,000 2,100,000 2,205,000 2,315,250 2,431,013 2,552,563 2,680,191 Less Depreciation 3.00% % of Revenue (120,000) (126,000) (132,300) (138,915) (145,861) (153,154) (160,811) Less Amortization of Fees 7 years (51,429) (51,429) (51,429) (51,429) (51,429) (51,429) EBIT 1,828,571 1,922,571 2,021,271 2,124,906 2,233,723 2,347,981 2,519,380 Less Interest (Unlevered for DCF Analysis) - - - - - - - EBT 1,828,571 1,922,571 2,021,271 2,124,906 2,233,723 2,347,981 2,519,380 Less Taxes (adj out Interest Exp) 36.0% % of EBT (658,286) (692,126) (727,658) (764,966) (804,140) (845,273) (906,977) Plus Depreciation & Amortization 171,429 177,429 183,729 190,344 197,289 204,582 160,811 Less Working Capital 1.00% % of Revenue (40,000) (42,000) (44,100) (46,305) (48,620) (51,051) (53,604) Less Capex 3.00% % of Revenue (120,000) (126,000) (132,300) (138,915) (145,861) (153,154) (160,811) Cash Flow Before Financing (CFBF) 1,181,714 1,239,874 1,300,942 1,365,064 1,432,391 1,503,085 1,558,799

Less Financing ( P + I ) (750,000) (965,000) (966,000) (1,085,500) (1,146,500) (1,301,000) (2,842,500) Equity Cash Flows 431,714 274,874 334,942 279,564 285,891 202,085 (1,283,701)

Terminal Value EBITDA Multiple Method (initial purchase multiple)Growth 6.0x 15,315,379

Perpetuity Method (using WACC + growth) 3.50% 9.73% 25,025,580

Average Terminal Value 20,170,479

Debt Outstanding 4,500,000 Equity Value (TV - Debt) 15,670,479

Equity Cash Flows (4,360,000) 431,714 274,874 334,942 279,564 285,891 15,872,564

x x x x x x$ 1 PV Table (Expected Equity Rate) 20.00% 0.8333398 0.6944552 0.5787172 0.4822680 0.4018931 0.3349135

PV Table (Expected Equity Rate) 6,310,149 359,765 190,888 193,837 134,825 114,898 5,315,937

Initial Investment (4,360,000) NPV= 1,950,149

IRR= 28.6%

Structuring a Loan – Middle Market (Case Study) - ContinuedPreliminary Debt Capacity, Leverage, Coverage and Collateral Analysis

23

Collateral Analysis

Advance Rates (ABL

Facility)

BV of Assets($ mm)

Debt Capacity based on Colateral

4 Cash 100% 50.00 50.00

5 A/R 85% 200.00 170.00

6 Inventory 50% 150.00 75.00

7 Fixed Assets 50% 300.00 150.00

8 Investments 50% 100.00 50.00

9 Total 800.00 495.00 Debt Capacity

101112 Cash Flow Analysis (Debt Capacity)1314 0 1 2 3 4 5

15 Assumptions16 Revenue 5.00% 100.0 105.0 110.3 115.8 121.6 127.6 17 CoGS 65.00% (68.3) (71.7) (75.2) (79.0) (83.0) 18 Oper. Exp. 10.00% (10.5) (11.0) (11.6) (12.2) (12.8) 19 EBITDA 26.3 27.6 28.9 30.4 31.9 20 Less Capex 5.00% (5.3) (5.5) (5.8) (6.1) (6.4) 21 Less Cash Taxes (% of EBIT) 40.00% (12.6) (13.2) (13.9) (14.6) (15.3) 22 Less WC 2.00% (2.1) (2.2) (2.3) (2.4) (2.6) 23 CFADS 6.3 6.6 6.9 7.3 7.7

2425 Terminal Value (based on EBITDA) 6.0x 191.4 2627 PV 157.9 6.3 6.6 6.9 7.3 199.1

28 Inerest Rate (Cost of Funds) 8.00%2930 Cushion 20.00%31 Debt Capacity 126.31 32 Leverage 4.8x3334 * Adj for Depr = same as Capex

18

Loan Pricing Model

Bloomberg

19

Loan Pricing Model – Negotiating the Price

Pricing Credit StatsPrimary

Name Business

Description Moodys S&P

Facility Total

($mm) R/C / ABL

($mm)

Term Loan B($mm)

R/C Spread (bps)

Term Loan B Spread (bps)

Term Loan B

OID (% Par)

All -in Spreead

Term Loan B (bps)

Libor Floor

Rate %

All -in spread

incl. Libor Floor Term

Loan B(bps)

EBITDA($mm)

Snr Lev

x

Total Lev

x

CompuCom Computers & Electronics B1 B 755.0 150.0 605.0 150.0 325.0 99.5 325.1 100 425.1 143 4.1x 5.8x

Hienz Food & Beverage Ba2 BB 8,550.0 2,000.0 6,550.0 200.0 250.0 99.5 250.1 100 350.1 2,093 5.0x 6.4x

Gardner Denver Industrials B2 B 2,200.0 400.0 1,800.0 325.0 325.0 99.5 325.1 100 425.1 462 5.0x 6.5x

Apex Tools Manufact. & Machinery B1 B 1,010.0 175.0 835.0 325.0 325.0 99.5 325.1 125 450.1 234 3.6x 5.5x

Heartland Dental Healthcare B1 B 500.0 100.0 400.0 500.0 99.0 500.3 125 625.3 96 4.1x 5.9x

Houghton Chemicals NR B 505.0 50.0 455.0 425.0 400.0 99.0 400.3 125 525.3 125 4.5x 6.1x

ADS Waste Holdings Waste Management B2 B 1,950.0 300.0 1,650.0 450.0 99.0 475.0 125 600.0 422 3.9x 5.8x

DuPont Performance Coat. Coatings B2 B 2,900.0 400.0 2,500.0 400.0 425.0 99.0 450.0 125 575.0 619 4.7x 6.6x

Genpact Technology Ba2 BB+ 925 250 675 325.0 325.0 99.5 337.5 100 437.5 316 2.4x 2.4x

Hamilton Sundstrand Manufacturer of Pumps B2 B 1,850.0 300.0 1,550.0 375.0 99.0 375.3 125 500.3 337 4.6x 6.9x

Ferrara Candy Company Food & Beverage B/B2 NR 550.0 125.0 425.0 625.0 96.5 625.9 125 750.9 82 5.2x 5.2x

EP Energy Energy Ba2 BB- 3,550.0 800.0 2,000.0 527.0 754.0 100.0 754.0 - 754.0 1,305 1.5x 3.4x

Samson Invest. Co Energy Ba3 B+ 2,250.0 2,250.0 - - - - 1,011 1.1x 3.0x

Pharma Product Develop. Pharma research B1 B+ 1,625.0 175.0 1,450.0 550.0 575.0 97.0 575.8 150 725.8 314 3.9x 5.9x

Capsugel Healthcare B2 BB- 1,070.0 150.0 920.0 450.0 450.0 99.0 450.3 125 575.3 231 4.0x 6.2x

Autoparts Holdings Motor Parts B+ 730.0 50.0 680.0 425.0 500.0 99.5 500.1 150 650.1 145 3.7x 4.8x

Del-Monte Food & Beverage B2 B 3,250.0 750.0 2,500.0 225.0 300.0 99.0 300.3 150 450.3 635 4.1x 6.5x

Taminco Specialty Chemical B2 B+ 703.0 198.0 505.0 198.0 350.0 98.0 500.0 125 625.0 210 2.2x 3.9x

United Components Inter. Auto Supplier B2 B 375.0 75.0 300.0 450.0 400.0 100.0 400.0 150 550.0 158 2.7x 4.9x

J. Crew Apparel/Retailer B1 B+ 1,450.0 250.0 1,200.0 250.0 350.0 100.0 350.0 125 475.0 316 3.1x 4.9x

Commscope Technology B1 B+ 1,400.0 400.0 1,000.0 425.0 425.0 99.0 425.3 175 600.3 492 2.0x 5.0x

Syneverse Telecom B1 B+ 1,175.0 150.0 1,025.0 375.0 375.0 99.0 375.3 150 525.3 262 3.9x 5.7x

Bank Debt Structure

Risk Assessment Analysis

16

Check List : To Do to close new transaction

To Do Note Check

Get the new SUN Only in case of new customer

KYC (Prospect ? Full) Only in case of new customer

Get the CARS Number Before the closing, finish its Full KYC and obtain the CARS Number

Check the Term Sheet Check all items

Credit Application To CDAD - Obtain the approval

Commitment Application To PDAD - Obtain the approval

Submit the Admin Sheet from BCDAD Provide the form of Admin sheet with BCDAD

Send the Commitment Letter After obtaining the Credit Approval, get the signature from GM and Send to the Agent

Check the Credit Agreement ・Especially check the items described in the Term Sheet

・Check the funding condtion - Notice Time / Currency etc

Legal Check Request Legal Check of the Credit Agreement

Send the document to BCDAD BCDAD also has to check the document before its closing

Signing Check Sheet Circulate and submit the check sheet to SCAD / BCDAD also needs the approved check sheet

Send the Signature Page to the Agent ・Get the signature from GM and Send to the Agent

・Show the approval of 1. Credit Application 2. Commit Application 3. Legal Comment to GM

・Send the above 3 items to BCDAD

Closing Closing

Typical Internal Rating Analysis by each bank

Most banks’ internal ratings are in line with the Agencies’ external ratings, though the analysis is done independently. This analysis is based on two approaches:

Quantitative Analysis Qualitative Analysis

Risk Assessment Analysis

16

The Quantitative Analysis for establishing the Internal rating which measures the probability of default is based on the following parameters (each component is weighted at a specific level of importance):

Leverage Ratio - the relationship between debt and earnings (i.e. DEBT / EBITDA)

Capitalization Ratio – the relationship between the bank debt and the rest of the capital (Capital Leases, Bonds, Equity)

Coverage Ratio - Issuer’s Cash Flow covering it’s debt obligations (interest and principal payments)

Variance of Projections – based on the projections, the model typically assumes a certain haircut (10-30%) to the management’s projections and it tests it’s ability to pay its debt obligations.

The Quantitative approach adjusts up or down based on industry characteristics (Recession resistance, cyclical, or event driven).

The Qualitative Analysis is subjective based on each bank’s internal policy. The Analysis would include strength of management, support from the equity sponsor, recovery analysis (asset collateral) and outlook.

The Typical Scale is 1-10, 1 being with very limited risk to default and 10 the issuer being in bankruptcy with no chance of recovery

Risk Assessment Analysis

16

Commitment Application / Funding Check Sheet

Submit: (1)Commitment Application When the Credit Application is submitted (also attached with Credit Application) (2)Funding Check Sheet When the Document is circulated

Please fill in the white blanks Please fill in the correspond matrix by "1"Amount <50M =50M<200M =200M<

First Drawndown Date

Commitment due date for SMBC to the customer

Stamp : Necessary for Funding Check (Not Necessary for Commit Application)

Date

Please submit this in credit application

Commit Application / Funding CheckTotal facilityAmount

Lending BranchOfficer in charge

Booking BranchSame DayNotice

Including Other Currency

USD Only

Signing Date

Customer/ Project NameSUN

Details of the company or project(Line of business, location, main business etc)

Currency Available

SCAD Lending Branch

Risk Assessment Analysis

16

Facility Details * Add columns if more than 2 facilitiesFacility

Existing Facility amount (SMBC)

Total Facility amount (SMBC)Facility type Facility currencyAvailable currency (1) (2) (3) (4) (5) (1) (2) (3) (4) (5)

Choose one in the listIn case you choose "OTHER" above, please input Ccy manually

Time Zone

Available amount for same day notice

Syndicated Credit (Participation/ Agent)RAROC for the transactionSMVA fo the transaction (in USD)Customer's RAROC after the transactionCustomer's SMVA (in USD) after the transaction

Commitment FeeUpfront FeeOther fee (Funding Agent Fee etc.)

Drawdown Maturity ( YYYY/ MM )Base Rate + Spread

TD(NYC)Done or Not YetConfirmation by Fundng center TD(NYC)

* Describe shortest notice time

NOT accept: later than 1PM (To Agent) / 2PM (To SMBC)

Facility A

$0

Notice hour limit for the minimum dd notice days

**Same Day funding:

Facility B

$0

Minimum Drawdown Notice days

Type of Application (New/ Refinance)

Net increase with the applied facility (SMBC)

Remarks

Sublimit by Currency if any ( Available currency not described above)

Risk Assessment Analysis

16

Details of the deals or Description of profitability

Funding schedule(ie, anticipated drawdown date)

Imformation (Improvement from previous contract or Deposit from the costumer, etc)

Risk Assessment Analysis

16

Company A ($MM)12 mos 12 mos 12 mos 12 mos LTM 9 mos

INCOME STATEMENT Dec-06 Dec-07 Dec-08 Dec-09 Sep-10 Sep-09 Sep-10 ASSETS Dec-06 Dec-07 Dec-08 Dec-09Total Revenues - - - - - - - Cash - - - -

(% Growth) N/A #DIV/0! #DIV/0! #DIV/0! N/A N/A #DIV/0! Short-Term Investments - - - - COGS - - - - - - - Receivable - - - - Gross Profit - - - - - - - Inventory - - - -

(Gross Margin) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Prepaid Expenses - - - - SG&A & Depreciation - - - - - - - Future Income Tax - - - - EBITDA - - - - - - - Other Current Assets - - - -

(EBITDA Margin) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! CURRENT ASSETS - - - - Operating Income - - - - - - - PP&E - - - -

(Operating Margin) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!Interest Expense - - - - - - - Equity in Affiliates - - - - - - Goodwill - - - - Other Income (Exp) - - - - - - - Other Intangible - - - - Unusual Items (Exp) - - - - - - - Equity Investment - - - - EBT - - - - - - -

Income Tax - - - - - - - Minority Interest - - - - - - - Other Assets - - - - Other After-Tax Items - - - - - - - FIXED ASSETS - - - - Net Income - - - - - - - TOTAL ASSETS - - - -

Comment

Comment

CommentTotal Revenues - - - - - -

CASH FLOW Dec-06 Dec-07 Dec-08 Dec-09 Sep-10 Sep-09 Sep-10 CREDIT STATS Dec-06 Dec-07 Dec-08 Dec-09Net Income - - - - - - - EBITDA / Interest Exp. #DIV/0! #DIV/0! #DIV/0! #DIV/0!Deprec./Amort. - - - - - - - EBIT / Interest Exp. #DIV/0! #DIV/0! #DIV/0! #DIV/0!Future Income Taxes - - - - - - - PP&E / Debt #DIV/0! #DIV/0! #DIV/0! #DIV/0!Equity in Net Loss - - - - - - - Working Capital - - - - Non-Cash & Other Adj. - - - - - - - Total Debt / EBITDA #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Chg in Other Asset/Liab - - - - - - - FFO / Total Debt #DIV/0! #DIV/0! #DIV/0! #DIV/0!Funds from Operations (FFO) - - - - - - - Total Debt / Capitalization #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Chg in Working Capital - - - - - - - Tangible Net Worth - - - - Operating Cash Flow (OCF) - - - - - - - Debt / Tangible Cap. #DIV/0! #DIV/0! #DIV/0! #DIV/0!CAPEX - - - - - - - Receivable Days #DIV/0! #DIV/0! #DIV/0! #DIV/0!Dividends - - - - - - - Inventory Days #DIV/0! #DIV/0! #DIV/0! #DIV/0!Free Cash Flow (FCF) - - - - - - - Payable Days #DIV/0! #DIV/0! #DIV/0! #DIV/0!Other Investing Act. Asset Turnover #DIV/0! #DIV/0! #DIV/0! #DIV/0!Acquisitions - - - - - - - Total Adj. Debt / EBITDAR #DIV/0! #DIV/0! #DIV/0! #DIV/0!Divestitures - - - - - - - Investment - - - - - - - LIQUIDITY: MATURITIES:Other Investing Act. - - - - - - - Sep-10 Dec-09 Dec-09

Total Other Investing Act. - - - - - - - Credit Facilities Debt LeaseFinancing Activities Committed Facilities - 2010 - Incr./(Dcr.) Debt - - - - - - - (Usage) - LCs - 2011 - Share Issuance - - - - - - - (CP) - 2012 - Share Repurchase - - - - - - - Available Credit Fac. - 2013 -

Cash + ST Investments - 2014 - Other Financing - - - - - - - Total Liquidity - After - Total Financing Activities - - - - - - - Total - - FX Effects - - - - - - - Int. Disc. - - Change in Cash - - - - - - - Total - -

1

2

3

Know Your Customer- KYC Analysis

16

Date: 29-May-2013

Compliance Check Sheet

1) Section A: "Adverse Information"(*1) BorrowerShareholders % Chairman or CEO(more than 25%) %

%%

Others

Mandatory Check Sheet for "Adverse Information"Section Results Completed date

Adverse Information Yes

N.A. -

Target Parties

*1 Definition of " Adverse Information"

(REF)2011/2/25 CMDINB #15

1) Has any "Adverse Information" been released since the shorter of the past three years (in new obligor applications) or since the completed date of the latest compliance check sheet? If yes, all "Adverse Information Trigger Report(s)" shall be attached to the current compliance check sheet and included in the application, and discussed in the write-up.

2) Do the attached report (s) include new adverse information trigger report (s) being reported for the first time? If yes, make sure that you identify the report by highlightening the title, etc.

CDAD

1. The target is alleged to be connected with criminal action(s) or criminal organization(s).2. The target is engaged in business(es) or action(s) that result in negative attention from the media or general public opition.3. Negative information of the target is published by the government, municipality, or other agencies which have authority over the target's particular business/projects (mandatory trigger applicable to borrowers).4. Initiation of litigation over SMBC’s claim to the target or anticipation of such action (mandatory trigger applicable to borrowers).5. Any other negative information which indicates that the target is at risk to commit anti-social activities or has already done so.-> All such negative information should be provided at supervisor's discretion.(Additional definition in new obligor applications)6. “Debt forgiveness" or "Loss on loan sales when borrower's grading is CRC-A or below", "Write off of debt" in the past.7. Litigation against SMBC in the past.

1. Borrower (Including Guarantor), 2. Chairman/CEO, 3. Large(25%+) shareholder, 4.Others that can affect borrower's credit

A

Items Check point

This check sheet shall be attached to al l applications except change of conditions.

Know Your Customer- KYC Analysis

16

2) Section B&C: OthersVoluntary Check Sheet in obligor applicationsSection Results Completed date

Obligor Sheet N.A.

Voluntary Check Sheet in faciltiy applications

Commitment Lines N.A.

Conflicts of Interest N.A.

N.A.

Country Credit Limit N.A.

N.A.

Add Group registration in GCM after confirming any existent "same" "virtually same" "Affiliate" borrowers

(REF) 2004/1/29 CDINB #8, 2008/2/15 CIPD #115 (Revision)

Commitment application shall be reported to PDAD when one of below (a) to (c) is applicable(a) Multi-Currency, (b) total exp to THE CUSTOMER >=200MM (c) total exp to THE CUSTOMER >=100MM & Sameday funding applicable.

Commitment transaction shall be reported to GAD Tokyo - COI Group for managing conflict of Interest if one of below (a) to (d) is applicable.(a) Bilateral commitment transaction of $500mil or more, (b) Syndicated transaction which corresponds to all of three criteria (1) our commitment is $500mil or more (2) our share is 25% or more (3) our bank plays a role as a senior arranger, (c) One of multi-facility in M&A finance, (d) Fund will be clearly used for M&A purpose.

Securities acquired for loan substitutions shall be reported to PDINB.

BItems Check point

Securities Acquired for Loan

Social & Environmental Risk Assessment

(REF)2004/9/1 PDINB #68

(REF)2008/12/10 PDINB #120

Country Credit Limit Inquiry is required before the submission of applications to the credit department.

Social and Environment risk assessment is required if all of (a) to (d) are applicable (a) New LOC application equivalent to $25mil or more, (b) If purpose of fund is new development, expansion of physical project or asset, (c) Tenor: Over 1 year (Even though shorter than 1 year if it is bridge finance for Project Finance), (d) If sector of Project/Asset is Environmental Sensitive 22 Sector.

(REF)2010/9/28 EAD #1

(REF)2010/10/1 CMDINB #12

C

Risk Assessment Analysis

16

Lending Branch

SUN ID

CUSTOMER

CATEGORY

BASIC INFORMATION

Facility Type

Commit / Uncommit

Adjusted Obligor Grade

Base Risk Weight #N/A #N/A #N/A #N/A #N/A #N/A

LGD

EAD #N/A #N/A #N/A #N/A #N/A #N/A

AMOUNT

Initial Credit Amount ($K)

Current Credit Amount ($K)

Outstanding ($K)

Undrawn Portion ($K) 0 0 0 0 0 0

Risk Asset #N/A #N/A #N/A #N/A #N/A #N/A

Risk Weight (%) #N/A #N/A #N/A #N/A #N/A #N/A

FY2012 BIS-II Risk Weight Calc Sheet