Where are we now? (Sample Presentation) Rural Bank of XYZ Strategic Planning-Workshop

Financial and Operational Analysis

Financial Performance (Last 3 Years) Year 1Year 2Year 3 Total Assets 79,109, ,197, ,979,762 Annual Growth Rate19%32%-0.2% 3-Year Average16.9% Total Loan Portfolio (Gross) 68,579,492 89,408,314 75,831,355 Annual Growth Rate23%30%-15% 3-Year Average13% As % of Total Assets87%86%73%

Financial Performance (Last 3 Years) Breakdown of Gross Loan Portfolio Current 58,086,487 80,780,947 62,984,424 Past Due 9,556,797 8,114,487 12,461,699 LIL 936, , ,232 As % of Gross Loan Portfolio Current Loans85%90%83% Past Due14%9%16% LIL1% Past Due Ratio 15%10%17%

Total DepositsYear 1Year 2Year 3 Active Savings (Ordinary) 29,444,182 39,503,989 37,942,840 Special Savings (Time Deposit-Passbook based) 25,369,764 29,317,426 38,399,151 Time Deposit 2,128,923 3,205, ,677 Special Savings + Time Deposits 31,573,105 42,709,971 38,330,517 Total Deposits 61,017,287 82,213,960 76,273,357 Annual Growth Rate19%35%-7% 3-Year Average15% Financial Performance (Last 3 Years)

Deposit Mix (High cost vs. Low cost) Active Savings48% 50% Special Savings + Time Deposits52% 50% Deposit to Loan Ratio89%92%101%

Financial Performance (Last 3 Years) Total BorrowingsYear 1Year 2Year 3 Local Banks 6,256,750 9,644,400 4,110,891 Others 1,500,000 7,953,169 8,406,775 7,756,750 17,597,569 12,517,666 Annual Growth Rate166%127%-29% 3-Year Average88%

Financial Performance (Last 3 Years) Year 1Year 2Year 3 Total Liabilities 67,314,750 91,424,448 90,838,470 Annual Growth Rate20%36%-1% Liability Structure (% Share) Deposits47% 42% Borrowings12%19%14%

Financial Performance (Last 3 Years) Year 1Year 2Year 3 Total Net Worth (Equity) 11,795,046 12,772,628 13,141,292 Annual Growth Rate16%8%3% 3-Year Average9%

Year 1Year 2Year 3 Total Operating Income 11,265,236 16,337,445 19,269,808 Total Operating Expenses 9,646,067 14,550,407 18,561,947 Net Operating Income 1,619,169 1,787, ,861 Growth in Total Income30%45%18% Growth in Net Income241%10%-60% Financial Performance (Last 3 Years)

Expense & Net Income as % of Total IncomeYear 1Year 2Year 3 Total Expense86%89%96% Net Income14%11%4%

Financial Performance (Last 3 Years, in % of Total Expense) Expense Item Analysis Year 1Year 2Year 3 Interest on Deposits42%41%35% Interest on Borrowed Funds4%12%10% Others (Banking Fees)0.3% 0.2% Finance Charges0.0%0.1%0.2% Compensation/Fringe Benefits33%31% Mgmt & Other Prof Fees33%31% Fines, Penalties & Other Fees0.1%0.0%0.1% Taxes & Licenses2% Insurance2%1% Depreciation/Amortization3%4%7% Litigation/Acquired Assets Other Expenses16%18%16% Provisions0%2%5%

Selected Ratios Return on Assets (ROA)Year 1Year 2Year 3 2% 0.68% Net Income-Taxes 1,619,169 1,787, ,861 Avg. Assets 72,726,019 91,653, ,088,419 Return on Equity (ROE)15% 5% Net Income-Taxes 1,619,169 1,787, ,861 Avg. Equity 10,989,511 12,283,837 12,956,960

Selected Ratios Year 1Year 2Year 3 Portfolio Yield 18%21%23% Total Operating Income 11,265,236 16,337,445 19,269,808 Avg. Gross Portfolio 62,262,467 78,993,903 82,619,834 Debt to Equity Liabilities 67,314,750 91,424,448 90,838,470 Equity 11,795,046 12,772,628 13,141,292

Selected Ratios Year 1Year 2Year 3 Financial Expense Ratio (Blended Cost) 19%12% Interest Expenses on Deposits and Borrowed Funds 4,047,000 5,955,176 6,401,648 Avg. Deposit + Avg. Borrowings 21,125,620 49,818,697 55,577,862 Financial Expense Ratio-Deposits 23.1%11.3%11.2% Interest Expenses on Deposits 3,649,759 4,193,758 4,555,054 Avg. Deposit 15,786,552 37,141,538 40,520,244 Financial Expense Ratio-Borrowings 7%14%12% Interest Expense on Borrowed Funds 397,240 1,761,418 1,846,594 Avg. Borrowings 5,339,068 12,677,159 15,057,618

Selected Ratios Operating Expense Ratio to Avg. Gross Portfolio8%9%12% Operating Expense 5,201,827 6,790,591 10,279,818 Avg. Gross Portfolio 62,262,467 78,993,903 82,619,834 Operating Expense as % of Total Operating Income86%89%96% Operating Income as % of Total Operating Income14%11%4%

Selected Ratios

Loan Product Analysis

Selected Ratios Loan Portfolio Quality

Results of Other Assessment Focus Group Discussion Results Customer Satisfaction survey Client Exit survey Competitors analysis

Growth Drivers Additional Branches are source of increase business opportunities (loans and deposits) Microfinance is the major source of growth in portfolio, active clients and revenue

Strategic Issues and Concerns (Areas for Improvement) Financial Performance ROA is below standard of 2% or higher ROE is below industry standard Past Due Ratio is consistently a double-digit level Portfolio-At-Risk Ratio does not meet accepted standards Deposit mix leans toward the more expensive source which is time deposit Income and expense ratio is very lopsided at 10% - 90% of total gross income No business planning template Market Focus Low portfolio outstanding and number of clients per account officer 2-year holding period (non- withdrawal) of contractual savings in MF loans Clients complain of going to the bank to pay loan; want pick-up like what other providers do Bank do not offer incentives to long-time clients Bank does not offer a current/checking account Some loan product procedures are cumbersome to the clients

Strategic Issues and Concerns (Areas for Improvement) Business Processes/ Operations No standardized manuals of operations People/ Structure Inadequate training of staff especially on credit evaluation, loan appraisal and sales skills Inadequate computers to prepare credit evaluation report