MITIGATING POTENTIAL CREDIT RISK

The Banc Investment Group ("BIG") is part of a bankers' bank. As such, our main goal is to provide wholesale products and services that allow independent banks to better manage risk and increase performance. One of our current concerns is loan performance. For those becoming worried along with us, we have an extensive suite of products to help protect banks. For starters, our Loan Pricing Model is one of the only risk-adjusted capital applications available that incorporates the latest in credit, interest rate and prepayment data. This tool permits lending officers to price and set reserves on all varieties of loan credits with increased granularity based on risk. With pricing covered, our Credit Stress Analyzer tips banks off to how much credit risk is embodied in their current portfolio. Concentration issues, reserves, earnings volatility and capital impact are all stressed against a series of possible downturns. This model answers the question whether a bank has the right mix, risk profile and capitalization. Banks seeking to change mix or diversify risk can take advantage of BIG's loan trading desk. This group stands ready to purchase, sell or participate loans to change concentration levels. As an added benefit, the group can purchase loans that are both performing and sub-performing. For banks where earnings are more important than growth, selling concentrations mitigates risk, increases ROE and demonstrates liquidity to the regulators. Banks seeking to restructure risk can swap construction loan concentrations for C&I in order to increase risk-adjusted earnings and dramatically lower risk. If growth is the main driver, then we can look at a variety of 1st loss/subordinated pieces, or credit insurance, to bolster the quality of an existing portfolio. Finally, we stand at the ready with a variety of capital alternatives. For banks happy with loan mix and reserves, increasing capital may be a prudent move to guard against a potential downturn. Our bankers' bank did this as part of a risk mitigation strategy recently, recognizing that the credit market appears poised to deteriorate. BIG can arrange trust preferreds, perpetual preffereds, holding company loans, lines of credit and common equity. Currently, a popular product bundle is a holding company loan and revolving line of credit (to solve short-term funding needs 4Ys and in) and trust preferreds to boost long-term capital. Prices range from Libor + 1.50% to 1.90% depending on credit and amount. All of our capital alternatives provide a flexible way to handle a variety of opportunities or credit shocks. BIG, in conjunction with our bankers' bank, has designed a complimentary product set to identify, prevent, validate and mitigate credit risk in a lending portfolio. Banks worried about a potential credit downturn, or focused on improving their risk/reward profile, should contact us toda. The time to mitigate potential risk is now, when banks can negotiate the best pricing and keep the greatest number of options open.