2. Emerging From The Financial Crisis Fernando A. Capablanca WSG Annual Meeting 2009 San Jose, Costa Rica November 12, 2009 2

3. Industry Trends 3 ucbmiami.com

4. Industry Trends – Real Estate 4 ucbmiami.com

5. Industry Trends – Lending 5 ucbmiami.com

6. Industry Trends – Lending 6 ucbmiami.com

7. Industry Trends – Lending 7 ucbmiami.com

8. Industry Trends – Net Income 8 ucbmiami.com

9. Industry Trends – Retained Earnings 9 ucbmiami.com

10. 10 ucbmiami.com Industry Trends – Capital

11. Industry Trends – Bank Failures (2000 -2009) 11 ucbmiami.com

12. Regulatory Reform – What to expect in 2010 and beyond 12 ucbmiami.com

13. Overview of Current Programs Troubled Asset Relief Program – Generally available to healthy institutions until December 31, 2009 / new monies may be available to banks who qualify Legacy Loan Program – Public/Private Investment Program First one closed August 31, 2009 Really just a mechanism to participate in LLCs with FDIC that will hold assets of failed institutions Not really a mechanism to buy bad assets from “troubled banks” Extension of $250,000/Unlimited Deposit Insurance Continues Sheila Bair has taken to YouTube to assure the public With the 1989 banking crisis – over 500 banks Temporary Liquidity Guarantee Program $329.5 billion issued 13 ucbmiami.com

14. Sweeping Reform Obama Administration White Paper - Issued June 17, 2009 and includes plan for reform of the U.S. financial and securities markets President Obama has described the proposed reforms as a “sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.” June 15 th op-ed piece in The Washington Post, Treasury Secretary Timothy Geithner and National Economic Council director Lawrence Summers wrote that the reforms will help to create a “more stable, flexible and effective regime that guards the system against its own excess” 14 ucbmiami.com

15. Obama Administration White Paper White Paper sets out five key objectives of the restructuring proposal: promoting robust supervision and regulation of financial firms; establishing comprehensive supervision and regulation of financial markets; protecting consumers and investors from financial abuse; improving the ability to manage financial crises; and enhancing international regulatory standards and cooperation. 15 ucbmiami.com

16. 6 Essential Elements of Proposal 1.Creating a Consumer Financial Protection Agency to protect consumers, funded by assessments on the institutions it regulates; 2.Imposing higher capital standards, calling for a “fundamental reassessment” of regulatory capital requirements for banks and bank holding companies (BHCs); 3.Granting new regulatory authority to the Federal Reserve, including the supervisory responsibility for all “systemically significant firms,” regardless of whether they are or are owned by BHCs; 16 ucbmiami.com

17. 6 Essential Elements of Proposal 4.Building a way to wind up nonbank financial institutions the failure of which threatens the stability of the system; 5.Establishing a single supervisor for all national banks, the National Bank Supervisor, an agency with separate status within the Treasury; and 6.Creating a Financial Services Oversight Council intended to prevent regulatory gaps, coordinate regulation and identify risks in the activities of financial firms and markets. 17 ucbmiami.com

18. Other Aspects of Proposed Reforms Office of National Insurance; Securitization markets; Hedge funds; Derivative markets; Financial crisis management; and International supervision. 18 ucbmiami.com

19. Four Principal Specific Proposals Consumer Financial Protection Agency (CFPA) Executive Compensation National Bank Supervisor Systemic Risk 19 ucbmiami.com

20. CEPA Authority -The CFPA would be the primary regulator for federal financial consumer protection laws. - Will have authority to gather information, require reports and perform examinations. - Would have jurisdiction over anyone who provides financial products or services, or who provides material services to such a person, not just to traditional banks. Much of this authority is now in the hands of the Federal Trade Commission. - Probably will have authority to require financial reporting by firms that do not report to other federal agencies - Would like not pre-empt state laws except if state laws are weaker than the newly proposed Federal laws 20 ucbmiami.com

21. Executive Compensation This has been area which has had most developments since proposal Draft legislation was presented in July by White House The proposed bill targets compensation committees and say-on-pay provisions TARP had strong provisions on executive compensation with significant limitations on bonuses and golden parachutes FDIC and other federal banking regulators are taking a very aggressive approach to golden parachute and severance arrangements Federal Reserve’s issuance last week 21 ucbmiami.com

22. Compensation Committees Legislation requires that public company compensation committee meet strict new standards for independence Compensation committees have the authority and funding to hire independent compensation consultants, outside counsel and other advisers who can help ensure that the committee bargains for pay packages in the best interests of shareholders. If the compensation committee decides not to use an independent compensation consultant, it must explain that decision to the shareholders While these provisions are not applicable to non-public banks – there is such a movement to lower compensation of bank executives – this could very well be imposed upon banks To the extent a bank is analyzing executive compensation, Board would be well-served to use this legislation as guide, including use of independent consultants 22 ucbmiami.com

23. Systemic Risk Regulation Bill The Obama administration delivered its next piece of draft reform legislation to Congress on July 22, 2009. The proposal called for strong and consolidated supervision and regulation for financial firms. The legislation was designed to put into place a “regulatory regime” that would monitor, mitigate and respond to risks in the financial system. 23 ucbmiami.com

24. Key Provisions The proposal included a number of key provisions. The draft legislation would: Create a Financial Services Oversight Council that would facilitate the coordination of financial regulatory policy and resolution of disputes and identify emerging risks in financial markets; Subject financial firms that are found to pose a threat to U.S., designated as Tier 1 financial holding companies (FHCs), to “strong, consolidated supervision and regulation” by the Fed, regardless of whether they own insured depository institutions; Require Tier 1 FHCs to be well-capitalized and well-managed and on a consolidated basis in order to significantly raise capital standards; Close loopholes in the Bank Holding Company Act; 24 ucbmiami.com

25. Require federal bank regulators and the SEC to issue regulations providing that the securitizer of an asset-backed security must retain 5 percent of the credit risk of the underlying assets; Give the Fed Reserve strong statutory authority to oversee systemically important payment, clearing and settlement activities and systems; and Require prior written approval of the Treasury Secretary for lending by the Federal Reserve under its emergency lending authority. Key Provisions (continued) 25 ucbmiami.com

26. We wish to acknowledge the help provided by Dr. Alcides Avila of the law firm Avila Rodriguez Hernandez Mena & Ferri LLP in Coral Gables, FL in the preparation of this presentation. Acknowledgement: 26 ucbmiami.com