TARP, TALF, PPIP Opportunities

Steve Frambes (Managing Partner) Jim McKean (Managing Partner) + 01 (415) 690-0607 +01 (415) 373-9101 www.JacksonCG.net SFrambes@JacksonCG.net
September 9, 2009
Copyright 2001-2009, Jackson Consulting Group, LLC - One Embarcadero Center, 5th Floor, San Francisco, California 94111-3610. All rights reserved. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Jackson Consulting Group, LLC or any of their subsidiaries or affiliates to any registration or licensing requirement within such jurisdiction. This report is based upon public sources we believe to be reliable, but no representation is made by us that the report is accurate or complete. We do not undertake to advise you of any change in the reported information or in the opinions herein. This research was prepared and issued by Jackson Consulting Group to private client(s) for distribution to intermediate or professional customers. This report is not an offer to buy or sell any security, and it does not constitute invest tent, legal or tax advice. The investments referred to herein may not be suitable for you. Investors must make their own investment decisions in consultation with their professional advisors in light of their specific circumstances. The value of investments may fluctuate, and investments that are denominated in foreign currencies may fluctuate in value as a result of exposure to exchange rate movements. Information about past performance of an investment is not necessarily a guide to, indicator of, or assurance of, future performance. To our readers in the United States: Jackson Consulting Group is distributing this report in the United States and accepts responsibility for its contents. Any U.S. person receiving this report and wishing to effect securities transactions in any security discussed herein should do so only through their brokers. Jackson Consulting Group does not make a market in any securities.

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Summary of Opportunity !! !! TALF & TARP Program Highlights !! Credit Card & Mortgage Examples Private Equity, Other Commercial Banks

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Financial Advisory Services !! TARP/PPIP Evaluation !! !! !! !! !! LLP Pricing, Pooling, Modeling FAS 91 Opportunities

TALF Access, Evaluation & Pricing Strategic (incl. Federal Government Policy) Questions & Investments Private Equity, Institutional Funds, Banks and M&A Evaluation

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Capabilities, Experience & Professional Bios

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!! TARP/TALF !! New Product & Service Lines !! Loans & Pools, Non-Investment Grade Bonds, REITs !! CRE, REO !! Public/Private Equity Investment !! Mergers & Acquisitions
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Goods, Services or Cash Cash

Cash Cash

Customers

Originator

SPV

Underwriter

Investors

Customers Promises Promises of Future Pmts. Debt Securities

Tranches of Debt

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!! 2007 Q1 2009

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Public-Private Investment Program * 100 B of TARP Funds--$75 B to Legacy Assets and $25 B to TALF *Financing from Treasury and Guarantees by FDIC will create $500 B to $1 T in PP *Federal Reserve Leverage up to $1 T in Expanded TALF

Legacy Loans Program (PPIF) Investment *Private Capital *Treasury Capital ($/$ Match) Financing *Debt Guarantee Provided by FDIC (Up to 6-1)

Legacy Securities Program (PPIF) Investment *Private Capital *Treasury Capital ($/$ Match) Financing *Non-recourse Debt Offered by Treasury for 50-100% of Investment

Expansion of TALF Investment *Private Capital Financing *Non-recourse Debt Offered by Federal Reserve *Leverage Levels not yet Announced

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!! Legacy Loan Program (LLP)

!! Under Umbrella of TARP/PPIP !! According to SIGTARP, Legacy Loans are: Underperforming real estate-related loans held by a bank that it wishes to sell, but recent market disruptions have made difficult to price.

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!! Free Up Capital !! Exchange Similar Assets but now with Government Leverage !! Assets Prices are now Higher than in Future !! Due to Buyers Leverage !! Only Give Up 50% of Upside !! Completely Protected on Downside !! Fiduciary Responsibility
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Bank 1 to Sell Loans with Face Value $100 FDIC Determines (4)6-1 D/E is Appropriate @ Auction, Investor has a $60 Winning Bid W/FDIC (100% Guaranteed) Financing, the PPIF Gets a Loan for $51 Remaining $9 Split @ 50% by Investor & Treasury Bank 1 Receives $60 for Loans PPIF pay Interest on $51 Loan Investor & Treasury Split Profits/Losses @ 50%

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Bank 1 to Sell Loans with Face Value $100 FDIC Determines 6-1 D/E is Appropriate @ Auction, Investor has a $60 Winning Bid W/FDIC (100% Guaranteed) Financing, the PPIF Gets a Loan for $51 Remaining $9 Split @ 50% by Investor & Treasury Bank 1 Receives $60 for Loans PPIF pay Interest on $51 Loan Investor & Treasury Split Profits/Losses @ 50% up to $4.50 FDIC Assumes Remaining $51 Loss

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Auto Credit Cards Student Loans Equipment Leases Non-Auto Floorplans RMBS CMBS

Non-Recourse Loan

AAA Rated Tranches

AAA TALF Eligible Securities

Initial Margin, Haircut

NY Federal Reserve Bank

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Eligible Assets
!! See Following Slide

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Origination
!! All Securities Issues in 2009

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Rating
!! AAA

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Funding Rate
!! Libor + 50 to 100 bps

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Funding Source
!! New York Federal Reserve

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Term
!! Now 5 Years

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!! Auto Loans, Leases, Dealership Funding Programs

!! Autos, Trucks, Motorcycles, Recreational Vehicles

!! Student Loans !! SBA Loans

!! 7(a), 504

!! Credit Cards !! Vehicle Leases

!! Commercial, Government, Fork Lifts, Long-Haul Trucks
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!! Equipment Loans & Leases

!! Small: Phone systems, Computers, Copiers !! Large: Cranes, Excavators !! Agricultural: Harvesters, Specialty Equipment

!! Floorplans (Non-Auto)
!! Heavy & Light Equipment

!! RMBS !! CMBS

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TALF Term of Borrowing Cost of Borrowing Margin Amount Mark to Market Re-Margin Capital at Risk 3/5 Years Libor + 50 to 100 bps Fixed None No Margin

Traditional Varies Floating Varies Daily Yes Par

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3-Year AAA Prime ABS Cash on Cash Yield

Bond Spread vs. Libor 150 bps 200 250 300 350 Current

Credit Card Margin 6% Auto Loan Margin 8% 9.0% 17.3% 25.6% 33.9% Tighter by 125 bps 11.9% 17.4% 23.0% 28.5%

As of 5/15/09: Equip 400, Credit Cards 275, Auto 225, Student 130)

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!! No Pre-Determined Term (only one) !! Single Obligor 6 month

!! Scheduled Amortization or Revolving Period

!! Master Trust
!! Single Trust of Changing Pool of Receivables !! Each Series can Draw Upon CF of Pool of Securities !! Income Dist Pro Rata Based on Master Trust

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Consider the example structure represented below. An important feature is excess spread, reflecting the high yield on credit card debt. In addition, a financial guaranty is included as a form of credit enhancement given the low rate of recoveries and the absence of security on the collateral. Excess spread released from the trust can be shared with other series suffering interest shortfalls. Performance Analysis: The Delinquency Ratio is measured as the value of credit card receivables overdue for more than 90 days as a percentage of total credit card receivables. The ratio provides an early indication of the quality of the credit card portfolio. The Default Ratio refers to the total amount of credit card receivables written off during a period as a percentage of the total credit card receivables at the end of that period. Together, these two ratios provide an assessment of the credit loss on the pool and are normally tied to triggers for early amortization and so require reporting through the life of the transaction. The Monthly Payment Rate (MPR)4 reflects the proportion of the principal and interest on the pool that is repaid in a particular period. The ratings agencies require every non-amortizing ABS to establish a minimum as an early-amortization trigger.

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MBS sector is notable for the diversity of mortgage pools that are offered to investors. !! !! Portfolios can offer varying duration as well as both fixed and floating debt. Most common structure for agency-MBS is pass-through, where investors are simply purchasing a share in the cash flow of the underlying loans. Conversely, non-agency MBS (including CMBS), has a senior and a tranched subordinated class with principal losses absorbed in reverse order. Other notable difference between RMBS and CMBS is that the CMBS is a non!recourse loan to the issuer as it is fully secured by the underlying property asset. Consequently, the Debt Service Coverage Ratio (DSCR) becomes crucial to evaluating credit risk.

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Debt Service Coverage Ratio (DSCR) = Net Operating Income / Debt Payments and so indicates a borrowers ability to repay a loan with a DSCR of less than 1.0 meaning that there is insufficient cash flow generated by the property to cover required debt payments. Weighted Average Coupon (WAC) is the weighted coupon of the pool which is obtained by multiplying the mortgage rate on each loan by its balance. The WAC will therefore change as loans are repaid but at any point in time when compared to the net coupon payable to investors, give us an indication of the pools ability to pay. Weighted Average Maturity (WAM) is the average weighted (weighted by loan balance) of the remaining terms to maturity (expressed in months) of the underlying pool of mortgage loans in the MBS. Longer securities are by nature more volatile and so, a WAM calculated on the stated maturity date avoids the subjective call of whether the MBS will mature and recognizes the potential liquidity risk for each security in the portfolio. Conversely, a WAM calculated using the reset date will show the shortening effect of prepayments on the term of the loan.

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!! The Weighted Average Life (WAL) of the notes at any point in time is:
!! !! !! !! s = " t.PF(s) where PF(s) = Pool Factor at s t = actual/365. This is not a prepayment measure since credit cards are non-amortizing assets.

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!! The CPR approach is: !! CPR = 1-(1-SMM)12 !! where Single Monthly Mortality (SMM) is the singlemonth proportional prepayment. !! A SMM of 0.65% = approx 0.65% of remaining mortgage balance at the beginning of the month, less the scheduled principal payment, will prepay that month
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PSA = [CPR/(.2) (m)]*100 where m = # months since origination

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Summary of Performance Metrics

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!! Financial Advisory Services !! TARP/PPIP/TALF Modeling !! LLP Pricing, Pooling, Modeling !! ABS (Straight/Hybrid) Delinquency !! TALF Access, Evaluation, Pricing & Arbitrage
!! (TALF + FAS 91)

!! Strategic (incl. Federal Government Policy) Questions & Investments !! Private Equity, Institutional Funds, Banks and M&A Evaluation !! Capabilities, Experience & Professional Bios
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!! Legacy Loan Program Valuation Analysis

!! Model Commercial & Residential Real Estate Delinquencies, Foreclosures & Pre-Payments
!! Forecasting: Comprehensive and Successful Model which Utilizes all Credit Scoring Characteristics plus Additional/Specific Residential Property Characteristics !! Scenario/Decision Tree Analysis Requirements of Foreclosure Mitigation Plans !! Unanticipated Consequences of new Programs: Services & Homeowners will Quickly Determine (Default) Incentives

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!! Bank Incentivized Mortgage Workout !! PV & FV Analysis: !! Term !! Interest Rate !! Deferred Principal !! Recourse Adjustments !! Other Options !! REO !! Sell Mortgage Note !! Bundle Foreclosed Properties and/or Notes
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!! Government & Quasi-Governmental Loan Modification Program(s)

!! HMP, SMP, Hope Now & Making Home Affordable (PMMS + 250 bps) !! Treasury, FHA, FDIC, FHFA, HUD, FNM, FRE (agencies with policy reversals) !! Accounting Implications Related to FAS 91, 114, 140, and SOP03-03

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Term
BANK_ID SCORE MAX_DLQ_EVER NUM30P6M NUMCUR120PL NUMOPNREVHLIMIT NUMW90PLDPD RATBALHIGHREV

Term
LOAN_NUM APP_FICO MAX_FICO NUM606PM NUMCURR30DPD

Term
APP AVG_FICO MIN_FICO NUM90P3M NUMCURPD NUMTRDHM PUBREC SINCE60PL TRDVRF12MPREMCR D NUMREVOPN

Term
SCRORE_DT BILLED_FICO NUM3060DAT NUM90P6M NUMW120PLDPD NUMW30PLDPD RATBALHIGH SINCEDELQ

Term
SCORE_TIME DPD NUM30P3M NUMCUR120DPD NUMOPNREVHLIMIT NUMW60PLDPD RATBALHIGHBNKCRD TOTNOWPD

NUMSATPRMCRD PCTTRDNDELQ SINCDELQBNKCRD

TIMES30

TIMES60

NUMINQ

SATS12M

SATS6M

OLDREVOPEN

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!! What is Current Competitive Situation? (Present/Future/ Govt/Global Aspects)?

!! Competitor Analysis
!! Products & Services, Distribution, Mktg, Operations, R&D, Overall Costs, Financial, Organization, Mgmt, Corp Portfolio, Exit/Other(C/WM/WB

!! Societal Analysis (Government & Political) !! Strengths & Weaknesses Relative to Competitors

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!! What Should We Be Doing?

!! Tests of Assumptions and Strategy/Are We Current?

!! Strategic Alternatives/Which Options Are Feasible for Us?

!! Fragmented/Emerging/Mature/Declining/Global Industries

!! Strategic Choice
!! Which Strategic Alternative Best Relates Our Current Internal Situation with New External Opportunities and Threats !! Vertical Integration/Capacity Expansion/Entry/Exit Bus Lines
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!! Specific Questions
!! Should I Consider Selling/Buying into the LLP? !! What About Pooling Student Loans, Credit Card Accounts, SBA Loans? !! Which of My Competitors is Likely to Participate in LLP & What are Implications? !! Which of My Competitors is Gaining/Losing Competitive Advantage as Banks Close? !! Do I Know Which Banks are in Trouble and What Can I do to take Advantage of This? !! What is on My Competitors Balance Sheets and How Reliable is the Data?

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!! Specific Questions
!! What Opportunities do We have at the Moment and Which will we Have in Six Months?
!! Do We Have Capabilities to Pursue Current Opportunities Now (in House)?

!! Where are Our Five Closest Competitors Likely to be in 3/6/9/12 Months? !! Do Opportunities Exist in DIP/Retail/REIT/Commercial Financing? !! What are Implications of First Mover Advantage (Analysis) for Any of the Above? !! Do We Think Community Banking will look the Same in 5/10 yrs? !! Who Will be the Winners and Losers?

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!! Private Equity, Other Investors

!! New FDIC/FED Regulations & 6 Month Review
!! Outcomes & Implications

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Are We Prepared? Have We Considered All Options? Other Similar Deals? FDIC Asset Sales Terms

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!! Real Estate Property Valuation: Geography, Property Attributes, Multifamily, Comparables & Rentals, Individual Tenant Credit, Local Economy, Replacement Cost !! Immediate, Complete, Transparent Analysis, Valuation (Multiple Standard and Proprietary Methods) of Identified Assets

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!! Asset (Debt) Valuation

!! Effective Duration and Effective Convexity (Drift/Yield/ Maturity) !! Dollar Rolls & Synthetics (Reverse Repos Stripped MBS, Z Bonds, IOs, PACs) !! Advanced Analytics & Modeling - Option Adjusted Spread Analysis
!! Binomial & Trinomial Interest Rate Trees !! Maturity Gap and NII Sensitivity Analysis, Simulation Models

!! Hedging Strategies (Incorporating Observable Futures, Forwards, Interest Rate Floors/Caps and Compound Options)
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!! Asset (Debt) Valuation

!! Interest Rates/Principal/Interest Payments
!! Spreads, Yield Curve/Default, Prepayment/Floaters & Inverse Floaters

!! Redemption & Call Features (Mandatory, Optional, %, Cleanups) !! Compare Similar LLP Pools to Securities with Security Ratings, Individual Tenant Credit, Coverage Tests & Ratios
!! Collateral Quality Tests (Diversity, Rating Distributions) !! Weighted Average Coupon, Price, Life, Time, Recovery Rate

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Mr. Frambes (18 years) is a Managing Partner at Jackson Consulting Group. Previously, he was a Vice President at Shoreline Pacific Institutional Finance where he successfully completed numerous corporate finance and strategic engagements in the US, Europe, India and China. Earlier in his career, Mr. Frambes was a Director in the Global Capital Markets Group at CB Richard Ellis where he lead valuation teams focused on Financial Institutions and Real Estate (property and mortgage) Debt, Equity and Derivative Securities. Previously, Mr. Frambes began his career as a Convertible Securities Analyst at Robertson Stephens & Company. Mr. Frambes is a Graduate of the Stanford Executive Program (SEP) from the Graduate School of Business at Stanford University, earned an M.B.A. from the BI Norwegian School of Management and a B.S. from Clemson University.

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Mr.!McKean (18 years) is a Managing Partner at Jackson Consulting Group. His experience includes largescale business process re-engineering efforts at both Fannie Mae and Freddie Mac. He led systems development and integration of fixed-income and derivative valuation engines, development of risk management and risk reporting capabilities, development of internal controls framework and financial advisory services for the management and disposition of multiple government portfolios.# Previously, Mr. McKean held multiple management positions in the Diversified Product Division at Wells Fargo#for nine years. Mr. McKean holds a B.S. from the University of Maryland.

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Mr. Brennan (16 years) is a Partner at Jackson Consulting Group where he brings his combined experience in real estate and investment banking. Previously, Tom was a Vice President on the Equity Capital Markets team at Robertson Stephens &Company, where he was responsible for the marketing, pricing and allocation of the firms lead managed transactions. During his tenure he worked on over 230 deals in the emerging growth sectors, raising more than $17 billion. He was also a member of the firms Commitment Committee that determined which transactions the firm would commit its capital to. Tom began his career at Genesis Merchant Group as an Assistant Trader. He received an AB in Architecture from Princeton University.

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Ms. Pavlova (18 years) is a Partner at Jackson Consulting Group. Previously, Ms. Pavlova was the Head of Google Strategic Partnerships in Russia and prior to Google, Ms. Pavlova served as a Managing Director at Shoreline Pacific Institutional Finance and as a Portfolio Manager at Wentworth, Hauser and Violich where she focused on Real Estate and Debt securities. Ms. Pavlova has an M.B.A. from Stanford University, an M.A. and B.A. from Moscow University and is a Chartered Financial Analyst (CFA).

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Mr. Ellis (17 years) is a Partner at Jackson Consulting Group. Mr. Ellis is an expert in commercial real estate finance with a concentration in multifamily mortgage finance valuations over the last 9 years. #Mr. Ellis has specialized in underwriting and originating Fannie Mae, Freddie Mac and HUD loans and has lead transactions totaling roughly $2 Billion. Mr. Ellis has concentrated on market-rate multifamily transactions but has also closed student housing, seniors housing, manufactured housing, bond financing and tax-credit affordable as well as numerous large asset/mortgage backed credit facilities. Mr. Ellis is a graduate of the University of Maryland, a member of the Mortgage Bankers Association and is active in several Washington D.C. based real estate finance consortiums.

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Mr. Backe (11 years) is Partner at Jackson Consulting Group and brings broad experience in portfolio design, financial modeling and fixed income asset/risk management. Previously, Mr. Backe worked for Morgan Stanley & Co advising management teams, owners, investment companies and pension funds on equities, debt, hedging and derivative instruments as well as broader capital markets. Prior to this he held similar positions at DnB NOR (Norway) and at JCG designing Business Process Models in Norway & India. He also worked as a Flight Operations Assistant in the Norwegian Air Force. He has an M.B.A and BSc in International Management from the BI Norwegian School of Management.

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Mr. Johnson (15 years) is a Senior Adviser to Jackson Consulting Group and is a Public Affairs Professional focused on political campaigns and helping clients interact with local, state and the federal government.# On the campaign side he has worked with candidates including Jack Kemp, John McCain, Newt Gingrich, Mitt Romney and Haley Barbour mostly in a fundraising capacity.# Most recently, he has formed his own firm to give strategic counsel to corporations and associations representing financial services, insurance, pharmaceutical and the tobacco industries.# Alex serves on the Board of the American Council of Young Political Leaders and is a frequent political contributor on MSNBC, CNBC and Fox Business.

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Mr. Ahmad (35 years) is a Senior Adviser to Jackson Consulting Group. Previously, he was a founding partner of Palo Alto Capital Advisors, a silicon-valley based firm which provides advisory services to institutional investors, venture capital firms, and companies. Prior to his role as an institutional investor, he was a venture capitalist and earlier the founder of a venture backed software company. Mr. Ahmad has a B.S. degree from the Massachusetts Institute of Technology, an M.S. degree in Computer Systems from Stanford University, and an M.B.A. degree from Stanford University.

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