The Bank of MoultonThe Bank of Moulton

StrategyStrategy

► Community Cosumer Bank:Community Cosumer Bank: Local DepositsLocal Deposits Local Loans servicing consumer and small business Local Loans servicing consumer and small business

lendinglending► Service all customers while concentrating on loans to Service all customers while concentrating on loans to

Retail clients with deposits from both commercial and Retail clients with deposits from both commercial and retail clients, and increase Branchingretail clients, and increase Branching

Trust, Fin’l ServicesTrust, Fin’l Services► Use Jumbo CDs to strategically to finance specific needs Use Jumbo CDs to strategically to finance specific needs

Financial SlackFinancial Slack► Rely on core deposits to finance bank, make loans and Rely on core deposits to finance bank, make loans and

hold investment portfoliohold investment portfolio

►Concentrate on being profitable, NOT BIG!Concentrate on being profitable, NOT BIG!

Strategy Levers and Strategy Levers and PerformancePerformance

► Move out of Jumbo CDs, use for strategic Move out of Jumbo CDs, use for strategic needsneeds 1.4 Assets $4.90 billion 1.4 CDs $950 million 1.4 MM Svgs $1.7 billion

2.4 Assets $3.96 billion Less CDs: 2.4 CDs $87.1 million Sold RE Portfolio 2.4 MM Svgs $1.92 billion & Synd Loans

3.4 Assets $5.11 billion 3.4 CDs $719.5 million Lns $3.5b $2.2b 3.4 MM Svgs $2.16 billion Secs. $1b

$2.5b

Strategy Levers and Strategy Levers and PerformancePerformance

► Move out of Jumbo CDsMove out of Jumbo CDs

► Shift focus to High, Medium and Consumer Shift focus to High, Medium and Consumer LoansLoans Effec Int Rates vs. Spd + COF indicates High, Effec Int Rates vs. Spd + COF indicates High,

Med Med 70-30 Target 70-30 Target 25% 25% in Desired; 25% in Desired; 25% in Undesired; in Undesired; Reduce R/E Holdings to lower fund’g, but Svc!Reduce R/E Holdings to lower fund’g, but Svc! Reduce Synd as not Local Business loansReduce Synd as not Local Business loans 1.4 1.4 3.4 R/E -78%, Prime -22%, Synd -89%3.4 R/E -78%, Prime -22%, Synd -89% 1.4 1.4 3.4 H -18%, M -6%, Cons. -2%, CC -13% 3.4 H -18%, M -6%, Cons. -2%, CC -13% Watch PLL vs. Charge-OffsWatch PLL vs. Charge-Offs

Effective Loan Rate - (COF+4%)

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.1 2.3 3.1 3.3

Quarter

Diff

eren

ce

P

H

M

S

R

C

CC

25.0%

35.0%

45.0%

55.0%

65.0%

75.0%

1.4

2.1

2.2

2.3

2.4

3.1

3.2

3.3

3.4

Desired Loans

UndesiredLoans

PLL% vs. Chg-Off%

0.60%

0.70%

0.80%

0.90%

1.00%

1.10%

1.20%

1.30%

1.40%

1.4 2.1 2.2 2.3 2.4 3.1 3.2 3.3 3.4

PLL %

Chg-Off %

Strategy Levers and Strategy Levers and PerformancePerformance

► Move out of Jumbo CDsMove out of Jumbo CDs

► Loans to Desired Customers (H, Med and Loans to Desired Customers (H, Med and Cons.)Cons.)

► Concentrate on being profitableConcentrate on being profitable ROE slows into ROA as Lev dropping.ROE slows into ROA as Lev dropping.

► ROE in the 20-25% rangeROE in the 20-25% range► Lev dropping due to Earnings; Cap Adeq at 1.40Lev dropping due to Earnings; Cap Adeq at 1.40

ROA Inc’gROA Inc’g► ROA in 1-2% rangeROA in 1-2% range

Adjmt. To RE and Futures shows Hedging, Adjmt. To RE and Futures shows Hedging, but also timing errorsbut also timing errors

0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%

1.4 2.2 2.4 3.2 3.4

0.000%

0.500%

1.000%

1.500%

2.000%

2.500%

ROE

ROAPeak, SoldFut. WhenInt. Rts.

C/A =5.5%

C/A = 7%

-40

-30

-20

-10

0

10

20

30

40

50

2.2 2.3 2.4 3.1 3.2 3.3 3.4

Dol

lars

& #

Cnt

s in

100

's

Adjtmt to R/E

# Short Fut

A/T Futures

Peak

Trough

Components of ROA

-4.000%

-2.000%

0.000%

2.000%

4.000%

6.000%

ROA

Spread

Burden

Other Things

Sold R/E

Loss on Futures

Components of Spread

-6.000%

-4.000%

-2.000%

0.000%

2.000%

4.000%

6.000%

8.000%

10.000%

1.4 2.1 2.2 2.3 2.4 3.1 3.2 3.3 3.4

0.000%

0.500%

1.000%

1.500%

2.000%

2.500%

3.000%

3.500%

4.000%

4.500%

5.000%

Loans Securities Deposits Spread

Components of Burden

-6.000%

-4.000%

-2.000%

0.000%

2.000%

4.000%

Burden S/C & Fees Non-Interest Expense

Components of Non-Interest Expense

-4.000%

-3.000%

-2.000%

-1.000%

0.000%

1.4 2.1 2.2 2.3 2.4 3.1 3.2 3.3 3.4

Salaries Occup Exp Bus Dev Other Exp

Components of Other Expense

-4.000%

-3.000%

-2.000%

-1.000%

0.000%

1.4 2.1 2.2 2.3 2.4 3.1 3.2 3.3 3.4 Other Exp

Temp Emp

CC Prcsg

All Rest

Fin'l Svcs.

Profitability of Fee Services

-0.10%

0.00%

0.10%

0.20%

0.30%

1.4 2.1 2.2 2.3 2.4 3.1 3.2 3.3

CC Prcsg

All Rest

Fin'l Svcs.

Trust

Plans for the FuturePlans for the Future

► Concentrate on Spread & BurdenConcentrate on Spread & Burden Stay away from expensive funds and reconsider Invmts. Consumer Loans and Svcs. (40 Branches 50 by 5.4)

► Watch Temporary Employee Expense! ► Work on CC Procssg.

Focus on Provision for Loan Losses (Loan Policy)(Lately PLL/Lns < ChgOff/Lns!)

► Continue to attract Consumer Loans, but don’t Continue to attract Consumer Loans, but don’t lose all Comm’l customers (Loans and Core Dep.)lose all Comm’l customers (Loans and Core Dep.)

► Continue to consider rate diff. in fund’g and invmt.Continue to consider rate diff. in fund’g and invmt.► Repurchase more Equity/Cap Nts. to manage Repurchase more Equity/Cap Nts. to manage

Capital Adequacy and Leverage: Cap Adeq 1.15, Capital Adequacy and Leverage: Cap Adeq 1.15, C/A=6.7%.C/A=6.7%.