Financials Sector Presentation MIKE RAINEY MITCH SALSBERY MIKE SHAVER MADDIE SHIRK

Financials: Overview

Overview Industries: Banks Insurance 3.91T 1.33T Capital markets Consumer Finance 251.54B Diversified Financial Services 533.60B Insurance 1.33T Mortgage REITs 69.34B Thrifts & Mortgage Finance 93.00B

Financials Overview Market Cap: 7.56T % of S&P 500: 14.01% SPY 1 year: +13.54% Financials 1YR: +12.61%

Largest Companies Berkshire Hathaway Citigroup 471.65B 170.284B Goldman Sachs Group JP Morgan Chase & Co 83.163B 366.134B American Express Bank of America Corporation 83.421B 296.679B US Bancorp Wells Fargo and Company 81.844B 268.398B

Diversified Financial Services Performance YTD 1 Year 3Year 5 Year Financials -1.71% +12.99% +35.61% +71.86% Banks -2.18% +15.34% +35.58% +80.88% Capital Markets +3.58% +20.75% +27.31% +71.54% Consumer Finance -2.70% +19.78% +14.94% +38.66% Diversified Financial Services -3.85% +11.42% +40.01% +83.93% Insurance -5.01% -1.04% +22.34% +53.26% S&P 500 ® Index +3.75% +14.00% +32.06% +69.23%

1 Year vs S&P500 5 Year vs S&P500 Financial Sector

Financials: Business Analysis

Business Cycle Financials show top performance during growth and maturity phases High interest rates improve outlook As cycle progresses, financials lose due to lower spending

Porter’s 5 Forces Barrier to Entry Moderate Difficult to raise necessary capital to gain entry Highly supervised Small banks able to offer more Supplier Power Policy has large impact Customer can change very easily Buyer Power Buy and supplies capital As rates increase, may increase power due to more competition for money Substitution Many small companies taking aim at segments Increased competition and low rate products Rivalry High Highly competitive Small banks have different regulations Fees a big topic Similar products

Supply/Demand Consumers are people, companies, governments Drivers: Interest rates Inflation Economic conditions Government regulations Overall financial sector is second largest

Financials: Economic Analysis

Factors of High Influence Economic Conditions in US (S&P 500) Interest Rates Consumer Confidence US Gross Domestic Product Unemployment Regulations, Policy and Taxes

A strong economy drives personal and business investing

Interest Rates Changes in interest rates drive how investors function Increased rates are good for lenders

High confidence leads to more investing and purchasing Consumer Confidence High confidence leads to more investing and purchasing

Economic growth trends towards more lending and borrowing GDP Economic growth trends towards more lending and borrowing

Unemployment A fully staffed workforce means increased business investment Historically low rates raise questions on the trend’s outlook

Analysis and Projections S&P 500 = Financials Interest rates = Financials Consumer confidence = Financials GDP = Financials Unemployment = Financials

Financials: Financial Analysis

Financial Projections

Key Financial Overview – Income Statement

Key Financial Overview – Balance Sheet

Key Financial Overview – Balance Sheet

Key Financial Overview – Cash Flows

Key Drivers of Financial Performance ● Tax law changes ● Interest rates ● Frank Dodd executive action

Financials: Valuation Analysis

S&P 500 vs. S5FINL

S&P 500 vs. S5FINL

Sector Valuation

Industry Valuation

Portfolio Breakdown

Recommendation Recommendation is to remain “neutral” Current position is overweight Previously underperformed the S&P… BUT Current relative multiples are lower than their median Current S&P multiples are higher than their median Expect the financial sector to outperform S&P moving forward