Winners and Losers Commercial Lending Dynamics 02, 2017 · Winners and Losers Commercial Lending Dynamics AFS Best Practices Leadership Council ... Dec 2016 vs. Sep 2017 Bilateral

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November 2, 2017

Winners and LosersCommercial Lending Dynamics

AFS Best Practices Leadership Council Webinar Series Presents:

Special FeatureOptimizing Risk and Return Using

The AFS Pricing Dashboard

©2017 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary.2November 2, 2017

Achieving Success through Execution

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AFS Pricing Dashboard

The Industry Source for Commercial Lending Pricing Trends

Includes $1 trillion in commercial loan commitments, with 80,000 new or renewed loans added per quarter

Benchmarking of key loan pricing and volume growth metrics against market peers

Robust platform for analytics, reporting and monitoring

Metrics Spread Pricing Fees Balance Growth New/Renewed Volume

Northeast Region

Middle Atlantic Region

South Region

Eastern Midwest Region

Western Midwest Region

Southwest Region

West Region



Financial Market Overview

Source: U.S. Energy Information Administration (EIA)

Source: Federal Reserve Board – Statistical Releases

…Oil prices hovered around a spot price of $50, a higher price than seen a year ago…

The pace of annualized Real GDP growth held steady in 3Q17 at approximately 3%…

…The yield on 10‐year treasuries was up 57 bps in September when compared to the same month a year earlier…

Source: Bureau of Economic Analysis

0.00.51.01.52.02.53.0

10-Year Treasuries

010203040506070

Jan

2015

Feb

2015

Mar

201

5A

pr 2

015

May

201

5Ju

n 20

15Ju

l 201

5A

ug 2

015

Sep

2015

Oct

201

5N

ov 2

015

Dec

201

5Ja

n 20

16Fe

b 20

16M

ar 2

016

Apr

201

6M

ay 2

016

Jun

2016

Jul 2

016

Aug

201

6Se

p 20

16O

ct 2

016

Nov

201

6D

ec 2

016

Jan

2017

Feb

2017

Mar

201

7A

pr 2

017

May

201

7Ju

n 20

17Ju

l 201

7A

ug 2

017

Sep

2017

Oct

201

7

Cushing OK WTISpot Price FOB Dollars per Barrel

% Change Real GDPSeasonally Adjusted

Annual Rates



0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

10-Year Treasuries Fixed-Rate Loans >10 Years(AFS Pricing Dashboard)

One-Month LIBOR LIBOR-Rate Loans(AFS Pricing Dashboard)

5-Year Treasuries

Bank Pricing vs. Market Rates

Bank Pricing vs. Market Rates

Sources: AFS Pricing Dashboard – September 2017Federal Reserve Board – Statistical Releases

+54 BPS y/y

+70 BPS y/y

+64 BPS y/y

+57 BPS y/y

+62 BPS y/y



Agenda

September 2017 Market Review Balance Growth Line Utilization New/Renewed Volume Spread Pricing Fee Pricing

Special Topic: Optimizing Risk and Return Using the AFS Pricing Dashboard



100

150

200

250

300

350New Renewed 10-Year Treasuries

LIBOR-Equivalent Spread (in BPS) TrendAll Loan Types

$0$5

$10$15$20$25$30$35

New Renewed

New and Renewed Loans Trend ($ Billions)All Loan Types

Commercial Loan Market Overview: September 2017

Source: AFS Pricing Dashboard – September 2017

Sep 20120.39%

Sep 20131.40%

Sep 20141.80% Sep 2015

1.56% Sep 20160.23%

Sep 20170.20%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Perc

ent G

row

th

Growth in Outstandings - Quarterly Trend(Quarter-over-Quarter Growth Rates)

05

1015202530354045

2016* 2017*

Total Fees Upfront Fees

Total Fees Paid (in BPS) - Bilateral LoansYear-over-Year Comparison

* Based on Comparative Jan-Sep Periods



What Trump Bump? Businesses are Confident but They Aren’t Borrowing from Banks

“Since President Donald Trump’s election, bankers and investors predicted that pro‐business policies would lead to a surge in corporate borrowing, which would help bank profits.

Instead, the growth of loans to companies has dropped precipitously since last November.

But analysts say the prolonged slowdown in commercial‐loan growth may simply be a function of the metric returning to its normal level in recent decades. Growth in the category ran far above gross domestic product growth in the years following the financial crisis, a streak that is difficult to maintain for any prolonged period.

Lending profits at the banks largely depend on the dynamic between loan growth and interest rates. While recent increases in short‐term rates have made floating‐rate commercial loans more lucrative, the benefit has been limited by the fact that banks aren’t making many more loans.”

—Wall Street Journal, October 10, 2017



Balances for Both Bilateral Loans and Participations Were Up Modestly in 3Q17


-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%

Perc

ent G

row

th

Bilateral Loans Participations

Growth in Outstandings - Quarterly Trend)Quarter-over-Quarter Growth Rates(

-3.41%-1.84%

2.40%

7.26%

2.37%

-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

< $1M $1M to< $5M

$5M to< $25M

>= $25M CRE

Perc

ent G

row

th

Growth in Outstandings - Dec 2016 vs. Sep 2017Bilateral Loans

C&I BilateralLoans

-4.91%

-8.21%

1.82%0.60%

5.68%

-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

< $1M $1M to< $5M

$5M to< $25M

>= $25M CRE

Perc

ent G

row

th

Growth in Outstandings - Dec 2016 vs. Sep 2017Participations

C&I Participations



Participations Fueled CRE Balance Growth in 3Q17


-5.0%

0.0%

5.0%

10.0%

15.0%

Perc

ent G

row

th

Bilateral Loans Participations

Growth in Outstandings - Quarterly Trend - CRE(Quarter-over-Quarter Growth Rates)

-3.42%

0.34%2.69%

7.01%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

< $1M $1M to< $5M

$5M to< $25M

>= $25M

Perc

ent G

row

th

Growth in Outstandings - Dec 2016 vs. Sep 2017Bilateral Loans - CRE

-10.98%

5.14%1.28%

11.18%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

< $1M $1M to< $5M

$5M to< $25M

>= $25M

Perc

ent G

row

th

Growth in Outstandings - Dec 2016 vs. Sep 2017Participations - CRE



Participations Drive Total Balance Growth Over the Long Term


‐20%

‐10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Percen

t Growth vs. 201

2 Ba

seline

< $1M $1M to < $5M $5M to < $25M >= $25M CRE Participations

Growth in Outstandings ‐ December 2012 BaselineBy Loan Size

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ Bilateral Loans Only ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐



New York Ranks in the Top 5 for Both Bilateral Loans and Participations

Note: Geographic data refers to the location of the borrower, not necessarily the bank booking the loan. Source: AFS Pricing Dashboard – September 2017

9.5%4.8%

3.9%3.6%2.9%

2.0%-1.5%-2.0%

-3.6%-3.6%

-6.1%

Georgia

New YorkNorth Carolina

California

Florida

New Jersey

Pennsylvania

TennesseeColorado

Louisiana


Nat'l Avg

4.9%4.4%4.3%

2.3%2.1%0.8%

-1.8%-3.1%

-3.7%-4.3%

-6.3%

Georgia

North Carolina

New York

CaliforniaFlorida

Massachusetts

ColoradoMinnesota

TennesseeArizona

Growth in Outstandings - Dec 2016 vs. Sep 2017All Loan Types

Nat'l Avg

9.0%7.8%

6.0%3.0%2.8%

-2.2%-1.5%-1.6%

-5.7%-5.7%-5.7%

Maryland

North CarolinaNew Jersey

New York

Pennsylvania

CaliforniaTexasGeorgia

Massachusetts

Tennessee


Nat'l Avg



* Core Based Statistical Areas (CBSAs)Note: Geographic data refers to the location of the borrower, not necessarily the bank booking the loan.Source: AFS Pricing Dashboard – September 2017

Drilling Down to the CBSA* Level

2.90%

4.35%

0.15%

12.76%

0.62%

-0.32%-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Flor

ida

Mia

mi,

FL

Tam

pa, F

L

Orl

ando

, FL

Jack

sonv

ille,

FL

Nor

th P

ort-

Sar

asot

a, F

L

Per

cent

Gro

wth

Growth in Outstandings - BilateralFlorida

Dec 2016 to Sep 2017




Bilateral Loan Balances Up Year to Date Across Half of the States

Top 5 States1. California2. New York3. Georgia4. Florida5. North Carolina

Bottom 5 States1. Pennsylvania2. New Jersey3. Tennessee4. Colorado5. Louisiana

AL

ARAZ

CA CO

CT

DCDE

FL

GA

IA

ID

IL INKS KY

LA

MA

MD

ME

MI

MN

MO

MS

MT

NC

ND

NE

NH

NJ

NM

NV

NY

OH

OK

OR

PARI

SC

SD

TN

TX

UTVA

VTWA

WI

WV

WY

Growth in OutstandingsDec 2016 vs. Sep 2017

Bilateral Loans

Negative Growth$0 to $100M$100M to $250M $250M to $500M Greater-than $500MInsufficient Data




Participation Balance Growth Remains Heavily Concentrated Within a Small Number of States

Top 5 States1. New York2. Maryland3. New Jersey4. Pennsylvania5. North Carolina

Bottom 5 States1. Massachusetts2. Georgia3. California4. Texas5. Tennessee

AL

ARAZ

CA CO

CT

DCDE

FL

GA

IA

ID

IL INKS KY

LA

MA

MD

ME

MI

MN

MO

MS

MT

NC

ND

NE

NH

NJ

NM

NV

NY

OH

OK

OR

PARI

SC

SD

TN

TX

UTVA

VTWA

WI

WV

WY

Growth in OutstandingsDec 2016 vs. Sep 2017

Participations

Negative Growth$0 to $100M$100M to $250M $250M to $500M Greater-than $500MInsufficient Data



Finance & Insurance Drives Bilateral Balance GrowthParticipations Up Significantly in the Retail Trade Sector

Note: Industry categories based on North American Industry Classification System (NAICS).Source: AFS Pricing Dashboard – September 2017

4.7%4.6%

3.3%3.1%2.9%

0.8%-3.5%

-4.8%-6.9%

-9.7%-12.7%

Accommodation & Food Services

Finance & Insurance

Admin, Support, Waste Mgmt Public Administration

Health Care & Social Assistance

Manufacturing (Machinery, Elec)

Information Professional, Scientific, & Tech

Mining, Oil & Gas

Transportation (Air, Water, Truck)

Growth in Outstandings - Dec 2016 vs. Sep 2017All Loan Types

All Industries Avg

14.9%9.8%

4.0%3.9%3.7%

2.0%-1.5%

-3.6%-4.9%

-5.8%-6.1%

Utilities

Finance & Insurance



Public Administration

Retail Trade (Motor, Elec, Bldg)

Manufacturing (Wood, Chem) Professional, Scientific, & Tech

Transportation (Air, Water, Truck) Agriculture


All Industries Avg

7.8%6.9%6.6%6.3%

2.9%-2.2%

-7.6%-8.2%-8.3%

-9.8%-11.6%

Retail Trade (Motor, Elec, Bldg) Admin, Support, Waste Mgmt


Retail Trade (Hobby, General) Wholesale Trade

Manufacturing (Food, Bev, Apparel) Manufacturing (Machinery, Elec)

Information

Professional, Scientific, & Tech Mining, Oil & Gas


All Industries Avg



Note: Industry categories based on North American Industry Classification System (NAICS).Source: AFS Pricing Dashboard – September 2017

Drilling Down to the 6‐Digit NAICS Level

3.99%

2.73%

4.10%

7.97%

-0.34%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

72Accommodation& Food Services

722Food Services &Drinking Places

722513Limited-Service

Restaurants

722511Full-ServiceRestaurants

722320Caterers

Per

cent

Gro

wth

Growth in Outstandings - BilateralAccommodation& Food Services

Dec 2016 to Sep 2017



Balance Growth by State and Industry: Bilateral Loans

Note: Geographic data refers to the location of the borrower, not necessarily the bank booking the loan. Industry categories based on North American Industry Classification System (NAICS).Source: AFS Pricing Dashboard – September 2017

AL

ARAZ

CA CO

CT

DCDE

FL

GA

IA

ID

IL INKS KY

LA

MA

MD

ME

MI

MN

MO

MS

MT

NC

ND

NE

NH

NJ

NM

NV

NY

OH

OK

OR

PARI

SC

SD

TN

TX

UTVA

VTWA

WI

WV

WY

Growth in Outstandings - Predominant C&I Industries*Dec 2016 vs. Sep 2017

Bilateral Loans

Retail & Wholesale TradeHealth CareFinance & Management of CompaniesManufacturingMining and TransportationAccommodation, Entertainment, & FoodOther



Industry Classification

Industry Sector NAICSAccommodation, Entertainment, & Food 71 Arts, Entertainment, & RecreationAccommodation, Entertainment, & Food 72 Accommodation & Food ServicesFinance & Management of Companies 52 Finance & InsuranceFinance & Management of Companies 55 Management of Companies & EnterprisesHealth Care 62 Health Care & Social AssistanceManufacturing 31 ManufacturingManufacturing 32 ManufacturingManufacturing 33 ManufacturingMining and Transportation 21 Mining, Quarrying, & Oil & Gas ExtractionMining and Transportation 48 Transportation & WarehousingMining and Transportation 49 Transportation & WarehousingOther 11 Agriculture, Forestry, Fishing & HuntingOther 22 UtilitiesOther 51 InformationOther 54 Professional, Scientific, & Technical ServicesOther 56 Administrative & Support & Waste Management & RemediationOther 61 Educational ServicesOther 81 Other Services (except Public Administration)Other 92 Public AdministrationRetail & Wholesale Trade 42 Wholesale TradeRetail & Wholesale Trade 44 Retail TradeRetail & Wholesale Trade 45 Retail Trade



Balance Growth by State and Industry: Participations


AL

ARAZ

CA CO

CT

DCDE

FL

GA

IA

ID

IL INKS KY

LA

MA

MD

ME

MI

MN

MO

MS

MT

NC

ND

NE

NH

NJ

NM

NV

NY

OH

OK

OR

PARI

SC

SD

TN

TX

UTVA

VTWA

WI

WV

WY

Growth in Outstandings - Predominant C&I Industries*Dec 2016 vs. Sep 2017

Participations

Retail & Wholesale TradeHealth CareFinance & Management of CompaniesManufacturingMining and TransportationAccommodation, Entertainment, & FoodOther



GDP and Loan Growth: Is there a Correlation?

During every quarter since 2016, total commercial loan balance growth for the top 10 CBSAs* in terms of Real GDP outpaced the balance growth for all other geographic regions, sometimes substantially so.

* Top 10 Core Based Statistical Areas (CBSAs) based on contribution to total U.S. Real GDP. Geographic data refers to the location of the borrower, not necessarily the bank booking the loan. Source: AFS Pricing Dashboard – September 2017Real GDP data sourced from the Bureau of Economic Analysis

3.0%

4.8%5.5% 5.8%

6.3%

7.3%

8.4%

1.5%

2.8% 2.7% 3.0% 2.8% 3.0% 3.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017

% G

row

th

Growth in Outstandings - December 2015 BaselineTop 10 CBSAs vs. All Other Regions

Top 10 CBSAsAll Other Regions



Overall Line of Credit Utilization Remained Flat in September


20%

30%

40%

50%

60% Overall Line Usage < $1M $1M to < $5M $5M to < $25M >= $25M Participations

Line of Credit Utilization Rate - By Deal SizeRevolving Lines of Credit Only

49.4%47.3%46.2%

44.8%44.2%

38.4%31.8%31.0%

29.6%28.5%28.3%

UtahNew Hampshire

Kansas

Oregon

MissouriNorth Carolina

WashingtonRhode Island

Arizona

Top 5 / Bottom 5 States - Line Utilization Sep 2017 All Loan Types

South Carolina

Nat'l Avg

48.8%48.4%

45.3%44.8%

41.2%38.4%

32.6%32.5%32.2%

23.1%22.1%

Transportation (Postal, Courier)

Agriculture

Wholesale Trade Retail Trade (Motor, Elec, Bldg)

Other Services

Information

Retail Trade (Hobby, General)

Management

Educational Services Utilities

Top 5 / Bottom 5 C&I Industries - Line Utilization Sep 2017 All Loan Types

All Industries Avg



100

150

200

250

300

350


LIBOR-Equivalent Spreads (in BPS) TrendBilateral Loans

$0

$5

$10

$15

$20New Renewed

New and Renewed Loan Volume ($ Billions)Bilateral Loans

New and Renewed Bilateral Volume Down Year Over YearWith Loan Spreads Trending Beneath the Averages Seen a Year Ago




Volume vs. Spread Pricing: New/Renewed Bilateral LoansState and Industry Detail for the Most Recent 6‐Month Period


$27.3$13.2

$8.9$6.5

$5.7$5.5$5.0$4.7$4.4$4.0

California

New York

Texas

Florida

North Carolina

Pennsylvania

Ohio

New Jersey

Minnesota

Georgia

Top 10 States New/Renewed Volume Apr 2017 to Sep 2017 Bilateral Loans

$25.9$15.0

$8.7$6.5$6.3

$4.6$3.5$3.2$3.1$2.7

Finance & Insurance

Wholesale Trade




Professional, Scientific, & Tech

Other Services

Manufacturing (Wood, Chem)

Accommodation & Food Services Agriculture

Top 10 C&I Industries New/Renewed Volume Apr 2017 to Sep 2017 Bilateral Loans

220211224

185191

228270

226258

279235

Finance & Insurance

Wholesale Trade Manufacturing (Machinery, Elec)

Health Care & Social Assistance Retail Trade (Motor, Elec, Bldg)

Professional, Scientific, & Tech Other Services


Accommodation & Food Services Agriculture

Top 10 C&I Industries New/Renewed Volume - LIBOR-Equ. Spread Bilateral Loans

All Industries Avg

234237

269260

212228237243

225176

208

CaliforniaNew York

Texas

Florida

North Carolina

PennsylvaniaOhio

New Jersey

Minnesota

Georgia

Top 10 States New/Renewed Volume - LIBOR-Equ. Spread Bilateral Loans

Nat'l Avg



100

150

200

250

300

350


LIBOR-Equivalent Spreads (in BPS) TrendParticipations

$0

$5

$10

$15

$20New Renewed

New and Renewed Loan Volume ($ Billions)Participations

New Participation Volume Down from Last Year’s LevelsSpreads on New Participations Continued to Trend Downwards




Volume vs. Spread Pricing: New/Renewed ParticipationsState and Industry Detail for the Most Recent 6‐Month Period


$8.9$6.5$6.3

$3.4$2.9$2.8$2.6$2.5$2.0$1.9

Texas

California

New York

Pennsylvania

Florida

Georgia

Ohio

Massachusetts

Illinois

New Jersey

Top 10 States New/Renewed Volume Apr 2017 to Sep 2017 Participations

$10.0$5.4

$4.5$4.4$3.7$3.3$2.8$2.4$2.2$2.1

Finance & Insurance


Wholesale Trade

Information

Mining, Oil & Gas

Professional, Scientific, & Tech


Manufacturing (Food, Bev, Apparel)



Top 10 C&I Industries New/Renewed Volume Apr 2017 to Sep 2017 Participations

268219

184181

232209

184162

195224

254

Texas

California

New YorkPennsylvania

Florida

Georgia

OhioMassachusetts

Illinois

New Jersey

Top 10 States New/Renewed Volume - LIBOR-Equ. Spread Participations

Nat'l Avg

193197188183

330209

257171

153232

166

Finance & Insurance

Manufacturing (Machinery, Elec) Wholesale Trade

Information

Mining, Oil & Gas

Professional, Scientific, & Tech Manufacturing (Wood, Chem)

Manufacturing (Food, Bev, Apparel)

Accommodation & Food Services Retail Trade (Motor, Elec, Bldg)

Top 10 C&I Industries New/Renewed Volume - LIBOR-Equ. Spread Participations

All Industries Avg



Total Annualized Fee Performance in September Down Slightly from Same Period a Year Ago


05

1015202530354045

2016* 2017*

Total Fees Upfront Fees

Total Fees Paid (in BPS) - Bilateral LoansYear-over-Year Comparison


05

1015202530354045

East

ern

Mid

wes

t

Mid

dle

Atla

ntic

Nor

thea

st

Sout

h

Sout

hwes

t

Wes

t

Wes

tern

Mid

wes

t2016* 2017*

Total Upfront Fees Paid (in BPS) Year-over-Year Comparison - By Geographic Region


05

1015202530354045

Min

ing

Info

rmat

ion

Fina

nce

&In

sura

nce

Adm

in, S

uppo

rt,

Was

te M

gmt,

& R

emed

iatio

nPr

ofes

sion

al,

Scie

ntifi

c,&

Tec

h

Hea

lth C

are

and

Soci

al A

ssis

tanc

e

Art

s, E

nter

tain

men

t,an

d R

ecre

atio

n

Ret

ail T

rade

(Mot

or, E

lec,

Bld

g)

Educ

atio

nal

Serv

ices

Publ

icA

dmin

istr

atio

n

2016* 2017*

Total Upfront Fees Paid (in BPS) Year-over-Year Comparison - By Industry




Balance Growth: Industry Drivers by Geographic Region

The AFS Pricing Dashboard enables Users to pinpoint industry loan growth drivers across their unique geographic footprints.


6.2%

1.2% 1.7%1.9%

8.2%

1.3%

Finance& Insurance

WholesaleTrade

Health Care& SocialAssistance

Bilateral Participations

10.1%

2.4%1.2%

8.9%

‐0.5%

5.9%

Finance& Insurance

Health Care& SocialAssistance

Professional,Scientific,& Tech


2.8% 1.4% 2.8%3.2%

27.1%

1.0%

Finance& Insurance

Admin,Support,

Waste Mgmt

OtherServices




Balance Growth: Industry Drivers by Geographic Region


1.9%1.0% 1.2%

3.4%

9.3%

‐0.9%Health Care& SocialAssistance

Manufacturing(Machinery,

Elec)

Real Estate


9.6%

9.7%

5.4%

‐2.9%

2.9%4.3%

Finance& Insurance

Manufacturing(Machinery,

Elec)

Retail Trade(Hobby,General)


0.7%

‐0.4%

5.9%

‐0.6%

19.8%

6.9%

Real Estate WholesaleTrade

Admin,Support,

Waste Mgmt


2.0%9.2%

0.3%

44.0%

15.4%

16.5%

Real Estate Retail Trade(Hobby,General)

Agriculture


Special Topic:Optimizing Risk and Return Using the

AFS Pricing Dashboard

November 2, 2017©2017 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary.



How Do We Define “Best”?

Balance Growth Percent change in outstandings. Is there positive growth momentum in the industry? Are banks getting their fair share of wallet?

The three criteria listed below are used to evaluate industry performance in the database. Industries in the top quartile for all three categories represent sustainable growth opportunities for banks.

Pricing Is pricing above average for the industry, or is the sector showing signs of pricing compression?

Credit Risk Are default levels and projections trending downward for the industry?

Market Trend



Risk‐Return Profiles Vary Widely Across the Industry Spectrum

The Spread Per Unit of Risk is equal to the Weighted Average LIBOR‐Equivalent Spread divided by the Weighted Average Risk Rating.

61

51 51 49 49 49 48 47 47 46 46 46 45 45 44 44 44 43 42

3328

0

10

20

30

40

50

60

70

Spread

Per Unit o

f Risk

Risk and Return by IndustryC&I Loans ‐ Sep 2017

Industry categories based on North American Industry Classification System (NAICS).Risk ratings based on the RMA 10‐point obligor risk rating scale.



Balance Growth by Industry

Participations fueled balance growth in the Retail Trade industry, whereas balance growth in the Finance & Insurance sector was driven predominantly by bilateral loans.

‐1.0%

‐4.2%

2.8%4.2%

‐6.5%

‐10.0%

‐7.5%

‐5.0%

‐2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

AllIndustries

Manufacturing RetailTrade

Finance&

Insurance


Percen

t Growth

Growth in Outstandings ‐ Dec 2016 to Sep 2017C&I Loans

1.4%

‐0.8%

1.2%

9.5%

‐4.9%‐5.5%

‐7.8%

6.6%

‐3.2%

‐8.7%‐10.0%

‐7.5%

‐5.0%

‐2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

AllIndustries

Manufacturing RetailTrade

Finance&

Insurance


Percen

t Growth

Bilateral Loans

Participations


Industry categories based on North American Industry Classification System (NAICS).



Subsector Composition:Best Industries in Terms of Risk‐Return

Funds, Trusts, & Financial Vehicles

Securities & Commodity Contracts

Credit Intermediation

Other Finance & Insurance

Distribution of Outstandings ‐ Sep 2017Finance & Insurance

Computer Systems Design

Management & Technical Consulting

Architectural & Engineering

Services

Scientific R&D

Accounting & Tax

Preparation

Other Professional Services

Distribution of Outstandings ‐ Sep 2017Professional Services




Subsector Composition: Below‐Average Industries for Risk‐Return

Food Manufacturing

Computer & Electronic

Manufacturing

Chemical Manufacturing

Fabricated Metal

ManufacturingMachinery Manufacturing

Other Manufacturing

Distribution of Outstandings ‐ Sep 2017Manufacturing

Motor Vehicle & Parts Dealers

Gasoline Stations

Food & Beverage Stores

General Merchandise

Stores

Clothing Stores

Other Retail Trade

Distribution of Outstandings ‐ Sep 2017Retail Trade




Balance Growth by Subsector:Participations Drive Growth in Top Subsectors

For most of the top subsectors for balance growth, such as Food Manufacturing, participations outpaced bilateral loans in 2017.

‐1.0%

6.3%

0.7%

15.4% 16.3%

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

All Industries

FoodManufacturing

Motor Vehicle& PartsDealers Credit

Intermediation

Scientific R&D

Percen

t Growth


1.4% 1.6% 1.4%

12.9%

7.7%

‐5.5%

13.7%

‐3.3%

18.9%

23.4%

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

All Industries

FoodManufacturing

Motor Vehicle& PartsDealers Credit

Intermediation

Scientific R&D

Percen

t Growth

Bilateral Loans

Participations





Risk Rating Distribution by Industry

Compared with the risk profile for the Finance & Insurance industry, Professional Services is skewed more towards the riskier end of the standardized obligor risk rating scale, with a greater percentage of outstandings focused in risk band 06 (Low Pass).

0%

5%

10%

15%

20%

25%

30%

35%

40%

RR 03 RR 04 RR 05 RR 06 RR 07

% of O

utstan

dings

Distribution of Outstandings ‐ Sep 2017By Risk Rating

All C&I Industries Manufacturing Retail Trade Finance & Insurance Professional Services

Industry categories based on North American Industry Classification System (NAICS).Risk ratings based on the RMA 10‐point obligor risk rating scale.



Risk and Return by Micro Geographic Markets: Finance & Insurance

Atlanta, GA

Chicago, IL

Los Angeles, CA

New York, NYSan Francisco, CA

Geographic data refers to the location of the borrower, not necessarily the bank booking the loan. Industry categories based on North American Industry Classification System (NAICS).The Spread Per Unit of Risk is equal to the Weighted Average LIBOR‐Equivalent Spread divided by the Weighted Average Risk Rating.Risk ratings based on the RMA 10‐point obligor risk rating scale.

20

25

30

35

40

45

50

55

60

65

70

Nat'l Avg NewYork(NY)

Atlanta(GA)

Chicago(IL)

LosAngeles(CA)

SanFrancisco

(CA)Spread

Per Unit o

f Risk

Finance & Insurance



Risk and Return by Micro Geographic Markets: Finance & Insurance – Bilateral Loans vs. Participations

Atlanta, GA

Chicago, IL

Los Angeles, CA

New York, NYSan Francisco, CA

20

25

30

35

40

45

50

55

60

65

70


Atlanta(GA)

Chicago(IL)

LosAngeles(CA)

SanFrancisco

(CA)Spread

Per Unit o

f Risk

Finance & Insurance Bilateral Loans

Participations




Risk and Return by Micro Geographic Markets: Professional Services

Boston, MA

Los Angeles, CA

New York, NY

Washington DC

20

25

30

35

40

45

50

55

60

65

70

Nat'l Avg Boston(MA)

NewYork(NY)

NewYork(NJ)

WashingtonDC(VA)

LosAngeles(CA)

Spread

Per Unit o

f Risk

Professional Services




Risk and Return by Micro Geographic Markets: Professional Services – Bilateral Loans vs. Participations

Boston, MA

Los Angeles, CA

New York, NY

Washington DC

20

25

30

35

40

45

50

55

60

65

70


NewYork(NY)

NewYork(NJ)

WashingtonDC(VA)

LosAngeles(CA)

Spread

Per Unit o

f Risk

Professional Services Bilateral LoansParticipations




Risk and Return by Micro Geographic Markets: Manufacturing

Atlanta, GA

Boston, MA

Chicago, IL

Los Angeles, CA

New York, NY

20

25

30

35

40

45

50

55

60

65

70


NewYork(NY)

Atlanta(GA)

Chicago(IL)

LosAngeles(CA)

Spread

Per Unit o

f Risk

Manufacturing




Risk and Return by Micro Geographic Markets: Manufacturing – Bilateral Loans vs. Participations

Atlanta, GA

Boston, MA

Chicago, IL

Los Angeles, CA

New York, NY

20

25

30

35

40

45

50

55

60

65

70


NewYork(NY)

Atlanta(GA)

Chicago(IL)

LosAngeles(CA)

Spread

Per Unit o

f Risk

Manufacturing Bilateral LoansParticipations




Risk and Return by Micro Geographic Markets: Retail Trade

Atlanta, GADallas, TX

Houston, TX

Los Angeles, CA

New York, NY

20

25

30

35

40

45

50

55

60

65

70


Atlanta(GA)

Dallas(TX)

Houston(TX)

LosAngeles(CA)

Spread

Per Unit o

f Risk

Retail Trade




Risk and Return by Micro Geographic Markets: Retail Trade – Bilateral Loans vs. Participations

Atlanta, GADallas, TX

Houston, TX

Los Angeles, CA

New York, NY

20

25

30

35

40

45

50

55

60

65

70


Atlanta(GA)

Dallas(TX)

Houston(TX)

LosAngeles(CA)

Spread

Per Unit o

f Risk

Retail Trade Bilateral LoansParticipations




Thank You for Joining Us Today

A recording and a copy of this presentation will be made available by the end of this week.

Questions?

Doug Skinner+1 484‐875‐1562

[email protected]

Don Dougherty+1 484‐875‐1334

[email protected]

Jeremy Chalson+1 484‐875‐1546

[email protected]



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Additional Features:Delivering Market Data

©2017 Automated Financial Systems, Inc. All Rights Reserved. Confidential & Proprietary. November 2, 2017



Delivering Market Data: Simple Pricing Grid

AFS will work with the Bank to define the appropriate segmentation criteria and level of granularity. This can be used for integration into other systems at the Bank.

Min/Median/Max/Avg of Banks in Market

Segmentation Criteria

Sample data for illustration purposes only.

Region Collateral Pricing Index Product

New & RenewedFlag

Term Deal Size EL Number of Observations

Bank Minimum LIBOR

Equivalent Spread

Bank Medium LIBOR

Equivalent Spread

Bank Maximum LIBOR

Equivalent Spread

Market AverageLIBOR

Equivalent Spread

South Secured Re Prime Line of Credit New <= 1 Year $100,000‐$249,999 4.0% < 8.0% 42 3.58 3.70 4.01 3.70

Eastern Midwest Secured No Fixed Line of Credit New 2‐5 Years $5,000,000‐$24,999,999 4.0% < 8.0% 20 2.03 2.03 2.03 2.03

South Secured No Prime Line of Credit New 5‐10 Years <$100,000 4.0% < 8.0% 18 5.64 5.64 5.64 5.64

Eastern Midwest Secured No Fixed Line of Credit New 1‐2 Years $5,000,000‐$24,999,999 4.0% < 8.0% 16 2.16 2.16 2.16 2.16

Eastern Midwest Secured No Fixed Line of Credit New 2‐5 Years <$100,000 4.0% < 8.0% 15 2.09 2.09 2.09 2.09

Eastern Midwest Unsecured LIBOR Line of Credit New <= 1 Year $50,000,000+ 4.0% < 8.0% 14 2.50 2.50 2.50 2.50

South Secured No Fixed Term/Time Loan New 5‐10 Years <$100,000 4.0% < 8.0% 14 4.25 5.90 7.55 4.30

Middle Atlantic Secured Re Prime Line of Credit New <= 1 Year $100,000‐$249,999 4.0% < 8.0% 9 3.77 3.77 3.77 3.77

Eastern Midwest Secured No Fixed Line of Credit New <= 1 Year $5,000,000‐$24,999,999 4.0% < 8.0% 7 2.00 2.00 2.00 2.00

South Secured No Fixed Term/Time Loan New 2‐5 Years <$100,000 4.0% < 8.0% 7 4.03 4.03 4.03 4.03

South Secured No Prime Line of Credit New Unknown/ <$100,000 4.0% < 8.0% 7 5.85 5.85 5.85 5.85

Middle Atlantic Secured Re LIBOR Term/Time Loan New <= 1 Year $1,000,000‐$4,999,999 4.0% < 8.0% 6 4.00 4.00 4.00 4.00

South Secured Re LIBOR Term/Time Loan New 1‐2 Years $5,000,000‐$24,999,999 4.0% < 8.0% 6 3.50 3.50 3.50 3.50

Middle Atlantic Secured No Prime Line of Credit New 5‐10 Years <$100,000 4.0% < 8.0% 5 5.13 5.13 5.13 5.13

Western Midwest Secured Re Prime Line of Credit New <= 1 Year $250,000‐$499,999 4.0% < 8.0% 5 2.93 2.93 2.93 2.93



Upcoming Renewals Report

PDB View – Provides the Upcoming Renewals Report. Business Purpose – Provides actionable data to support pricing decisions on loans coming up for renewal.

Key Insights – Provides a total market equivalent price for each obligation based on shared loan characteristics. Allows the Bank to maximize the revenue on each deal while still maintaining its competitive advantage. From an accountability perspective, shows how the pricing of each individual obligation compares to external standards.

For the borrower circled below, the Bank can reprice at more advantageous terms while still undercutting its competitors.




Pricing Performance: Recent New and Renewed Deals

For enforcement of policy, reporting on all New and recently Renewed deals provides an audit of pricing exceptions.


Documents

Winners and Losers Commercial Lending Dynamics 02, 2017 · Winners and Losers Commercial Lending Dynamics AFS Best Practices Leadership Council ... Dec 2016 vs. Sep 2017 Bilateral