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Drew Bonus Material

Drew Bonus Material. Goal: Assist Participants with UBPR Analysis for Project. May 31, 2013. Drew H. Boecher, CFA Managing Director. Historical Fed Funds Effective Rate. Rate cycles from 1960 to present. Last 5 full rate cycles in blue Average rate 5.5% since 1960 Historic lows

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Drew Bonus Material

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  1. Drew Bonus Material Goal: Assist Participants with UBPR Analysis for Project May 31, 2013 Drew H. Boecher, CFA Managing Director

  2. Historical Fed Funds Effective Rate Rate cycles from 1960 to present Last 5 full rate cycles in blue Average rate 5.5% since 1960 Historic lows ZIRP since 2009 500bp below 2007 600bp below 2000 1000bp below 1989 1900bp below 1981 Which way next?

  3. Enterprise Risk Management (ERM) Analysis Framework Traditional CAMELS framework… Financial Risk Silos Operational Risk Silos Liquidity Risk “L” IRR Market Risk “S” Credit Risk “A” Operational Risks “M”     Earnings - “E”  Capital – “C”

  4. Drew Analysis Communication Framework Analysis considers all financial facts and assembles toward clearly communicated strategic conclusions Humility Specifics Analysis Confidence Conclusion General Communication Specific Specifics

  5. Ratio Analysis 3 key questions as look at UBPR and financial ratios Level Trend Why?

  6. Ratio Analysis Thinking through numerator and denominator…judging good or bad… Cats Dogs = OAR (Ratio)

  7. Drew Structured Approach to Bank Analysis Developing and revising expectations as analysis goes deeper… • First, analyze the balance sheet: • Asset mix & trends • Liabilities mix & trends • Growth rates • Targeted analysis of risks & revise expectations. • Credit • Interest Rate Risk (IRR) • Liquidity Form preliminary expectations of risk levels and earnings based on the balance sheet. • Are expectations fulfilled? Potential problems? • Earnings – compensation enough for risks? • Capital – buffer adequate for risks? Credit risk (asset quality) deeper analysis and conclusions Earnings (confirm or revise expectations) Liquidity deeper analysis and conclusions Interest rate risk deeper analysis and conclusions Final Earnings & Capital conclusions

  8. Analysis Information Sources • Balance Sheet Mix & Trends • Preliminary Asset Quality assessment • Earnings Expectation Confirm/Refute • Liquidity preliminary expectations • IRR preliminary expectations • Capital preliminary analysis • Analysis Objective • UBPR, SNL, FDIC SDR, SEC10k • Loan Review Reports, Reg Reports • Budget & Strategic Plan, SEC 10k • Liquidity Report & ALM model • ALM model, IRR model • Capital Plan, Integrated Stress Testing • Executive Management Discussions • Other Information Sources

  9. UBPR Drew Logical Analysis Order • Asset Size – what size bank? • Balance sheet overview and form preliminary risk expectations • Loan mix • Investment mix • Dollar Balance Sheet & OBS • Preliminary Asset Quality assessment • Earnings Expectation Confirm/Refute • Liquidity preliminary expectations • IRR preliminary expectations • Capital preliminary analysis • Objective • Cover (pg 1) or UBPR page 4 (pg 5) • UBPR page 6 (pg 9) • UBPR page 7A & 7B (pg 11 & 12) • UBPR page 10A (pg 17) • UBPR page 4, 5, 5A (pg 5, 6, & 7) • UBPR page 7, 8, & 8A (10, 13, & 14) • UBPR page 1, 3, & 2 (2, 4, & 3) • UBPR page 10, 4 (16, 5, & 6) • UBPR page 9 (pg 15) • UBPR page 11, 11A (pg 18 & 19) • UBPR Page (& hard copy page of 26)

  10. Drew Analysis Communication Framework Analysis considers all financial facts and assembles toward clearly communicated strategic conclusions Humility Specifics Analysis Confidence Conclusion General Communication Specific Specifics

  11. UBPR Drew Logical Analysis Order • Asset Size – what size bank? • Balance sheet overview and form preliminary risk expectations • Loan mix • Investment mix • Dollar Balance Sheet & OBS • Preliminary Asset Quality assessment • Earnings Expectation Confirm/Refute • Liquidity preliminary expectations • IRR preliminary expectations • Capital preliminary analysis • Objective • Cover (pg 1) or UBPR page 4 (pg 5) • UBPR page 6 (pg 9) • UBPR page 7A & 7B (pg 11 & 12) • UBPR page 10A (pg 19) • UBPR page 4, 5, 5A (pg 5, 6, & 7) • UBPR page 7, 8, & 8A (10, 13, 14, 15) • UBPR page 1, 3, & 2 (2, 4, & 3) • UBPR page 10, 4 (17, 5, & 6) • UBPR page 9 (pg 16) • UBPR page 11, 11A (pg 20 & 21) • UBPR Page (& hard copy page of 29)

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