1. AIM2 Credit Relationship, Loan & Collateral Analysis Software September 20091Copyright 2009, Encierro Solutions

2. The Need and Challenge Banks need to respond to regulatory requests for Lending Limits and Loan Portfolios, and need the same information for lending operations and management The challenge is to build and analyze relationship related information based on core banking data in an easy, effective, collaborative way that facilitates understanding both simple and complex relationships of entities (credit, loan, collateral and customer) that change over time September 20092Copyright 2009, Encierro Solutions

3. Relationships can be simple Guarantor / Signatory Loan Credit Relationship Collateral September 20093Copyright 2009, Encierro Solutions

4. Relationships can be complex Guarantor / Signatory Loan Credit Relationship Collateral September 20094Copyright 2009, Encierro Solutions

5. Relationships can be very complex Guarantor / Signatory Loan Credit Relationship Collateral September 20095Copyright 2009, Encierro Solutions Loan

6. Collateral can be complex Pledged to multiple loans Multiple different positions Lien holders Appraisers, Appraised value, Appraisal methods, Appraisal Date Commercial Real Estate / Construction –Units –Phase of development, sale, occupation Changing values due to economic conditions September 2009Copyright 2009, Encierro Solutions 6

7. AIM2 Solution Whether simple, complex or very complex, whether static or changing, banks need to –understand their exposures –the ranking, size and classification of those exposures –the requisite policies and capital needed to run the bank safely and profitably AIM2 provides the data modeling, views, tools and reports to capture, analyze and understand the bank’s relationship exposures September 2009Copyright 2009, Encierro Solutions 7

8. Backup September 2009Copyright 2009, Encierro Solutions 8

9. AIM2 and Relationships AIM2 allows banks to separate the basic elements –Credit Relationship (CR), Loan, Collateral and Signatories/Guarantors are all separate AIM2 allows banks to relate the basic elements in arbitrary ways –Each CR can be linked to one or more Loans –Each Loan can be linked to one or more Signatories/Guarantors –Each Loan can be linked to one or more Collateral AIM2 allows banks to identify the complex relationships and consider lending law limits September 20099Copyright 2009, Encierro Solutions

10. Legal Lending Limit If the bank is a national bank, the applicable law is 12 USC 84. If the bank is state-chartered, state law will be applicable. Then, you simply follow the formula contained in the statute. For example, the basic lending limit for national banks is described as follows: The total loans and extensions of credit by a national banking association to a person outstanding at one time and not fully secured, as determined in a manner consistent with paragraph (2) of this subsection, by collateral having a market value at least equal to the amount of the loan or extension of credit shall not exceed 15 per centum of the unimpaired capital and unimpaired surplus of the association. There are many qualifiers, however. Depending upon the type of collateral, for example, a loan may not need to be counted toward the lending limit, or may yield an increased lending limit. September 200910Copyright 2009, Encierro Solutions

11. Legal Lending Limit for National Banks 15% of capital and surplus: PART 32--LENDING LIMITS--Table of Contents Sec. 32.3 Lending limits. (a) Combined general limit. A national bank's total outstanding loans and extensions of credit to one borrower may not exceed 15 percent of the bank's capital and surplus, plus an additional 10 percent of the bank's capital and surplus, if the amount that exceeds the bank's 15 percent general limit is fully secured by readily marketable collateral, as defined in Sec. 32.2(n). To qualify for the additional 10 percent limit, the bank must perfect a security interest in the collateral under applicable law and the collateral must have a current market value at all times of at least 100 percent of the amount of the loan or extension of credit that exceeds the bank's 15 percent general limit. September 200911Copyright 2009, Encierro Solutions