Welcome to Acadia Bank Presented by Team 1 Jennifer Copenhaver Cheryl Kleiman Kelly Peck Darby Sinding Sample pages from report.

William Ortiz Borrower Information Borrower Information 13 years Business Experience 13 years Business Experience Graduate Degree Graduate Degree Booming Economic Times Booming Economic Times Loan Information Loan Information Full Value: $2,400,000 Full Value: $2,400,000 Foreclosure Value: $1,750,000 Foreclosure Value: $1,750,000 Default Value: $480,000 Default Value: $480,000

Foreclose or Workout? It is our responsibility to decide whether to attempt a workout with Mr. Ortiz, or foreclose the loan. If the workout succeeds: $2,400,000.. (100%) If we foreclose: $1,750,000.……….... (73%) If the workout fails : $480,000……... (20%) % of Full Value

Bayes’ Theorem We must consider all three criteria, We must consider all three criteria, P(S|Y ∩  T ∩  C ) P(S|Y ∩  T ∩  C ) To do this we use Bayes’ Theorem. To do this we use Bayes’ Theorem. P(S|Y ∩ T ∩ C ) = P(S|Y ∩  T ∩  C ) = P(F|Y ∩ T ∩ C ) = P(F|Y ∩  T ∩  C ) = We must first show: P(Y∩T∩ C|S ) = P(Y∩  T∩  C|S ) = P(Y∩ T∩ C|F ) = P(Y∩  T∩  C|F ) =

Expected Value with Mr. Ortiz’s Criteria The random variable, Z, now takes into consideration all three criteria. The random variable, Z, now takes into consideration all three criteria. When we compare this Expected Value of Z to our other values, we find that it is $48,669 less than our known Foreclosure Value, and only 71% of the Full Value of the loan. E(Z ) = Full Value P(S|Y ∩ T ∩ C ) E(Z ) = Full Value P(S|Y ∩  T ∩  C )+ Default Value P(F|Y ∩ T ∩ C ) Default Value P(F|Y ∩  T ∩  C ) E(Z ) = $1,701,331

What If ??? Throughout our experimentations with the criteria, we have come across discrepancies that significantly affect the expected value of our loan workout, and consequently, our decision to foreclose or workout. What if we changed some of the criteria? Lets take a look… Lets take a look…Lets take a look…Lets take a look…

Workout!!Workout!! By increasing the years of experience to include a range of 10 to 13 years, the expected value of our loan workout increased to $1,769,992. of 10 to 13 years, the expected value of our loan workout increased to $1,769,992. When taking into consideration these newly computed values, we have concluded that a workout would be the best decision for Mr.. Ortiz’s Loan.