David E' Abshier, Senior Managing Consultant

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EMERGING ISSUES AND MARKET TRENDS ? ? ? ?
? Presented to 2007 CSBS Annual Conference
June 1, 2007 Coeur d Alene , Idaho
By David E. Abshier, Senior Managing
Consultant The Secura Group, an LECG Company
550 S. Hope Street Suite 1645 Los Angeles, CA
90071 Tel [phone] Fax (213) 629-
7420 Email DAbshier_at_securagroup.com Website
www.securagroup.com
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Summary

• Background
• Emerging issues and Expectations
• General Banking Trends
• Conclusion

DAbshier_at_securagroup.com www.securagroup.com
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Background

• Securas market coverage is nationwide. Types of
  engagements includeStrategic and Financial
  Advisory, ERM, Credit Risk, BSA/AML, Compliance
  Risk Management, ALM/Market Risk, Basel II, Fair
  Lending, Capital Requirement/Allocation and
  others.
• Secura was recently acquired by LECG. LECG is a
  global expert services firm with over 1,000
  experts and professionals in 13 countries. The
  firm provides independent expert testimony,
  original authoritative studies, and strategic
  advisory services to clients including Fortune
  Global 500 corporations, major law firms, and
  local, state, and federal governments and
  agencies around the world.

DAbshier_at_securagroup.com www.securagroup.com
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Emerging Issues and Expectations

• Enterprise Risk Management (ERM).
• Generally Accepted as Best practices.
• Develop a Frame-work or Methodology Functional
  Criteria
• Tailor Key Risk factors to your Business Model
• Identify Efficiencies/Tangible benefits
• Corporate Governance and Board Reporting
• Contingency Planning

DAbshier_at_securagroup.com www.securagroup.com
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Emerging Issues and Expectations

• Subprime Non-prime and ALT A Lending
• Credit Risk
• Buybacks/Repurchases
• Increase in delinquencies and foreclosures
• ALLL (accounting risk as well)
• Concentrations
• Compliance Risk
• Unfair and Deceptive Acts/Predatory lending
• High Cost Mortgages/Disclosure Requirements

DAbshier_at_securagroup.com www.securagroup.com
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Emerging Issues and Expectations

• Human Capital Risk.
• Qualified Management and Staff.
• Identification/Retention/Development
• Ethics and Standards
• Training
• Pro-active, Ongoing and Bank-wide.
• Documented
• Validate/test Effectiveness

DAbshier_at_securagroup.com www.securagroup.com
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Emerging Issues and Expectations

• De Novo Banks
• Identification and Retention of Qualified
  Management.
• Corporate Governance Regulation O concerns.
• System of Controls/Infrastructure.
• Capital Pressure to generate assets/grow to
  critical mass.
• Competition for Core Deposits.

DAbshier_at_securagroup.com www.securagroup.com
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General Banking Trends
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General Banking Trends (cont.)
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General Banking Trends (cont.)
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General Banking Trends (cont.)
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General Banking Trends (cont.)
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General Banking Trends (cont.)
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General Banking Trends (cont.)
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General Banking Trends (cont.)

• The Big Picture.
• NIM tightening loan volume erosion of credit
  standards.
• National market slowdown in real estate the
  market is working.
• Feds survey of senior loan officers 40 said
  they had tightened Standards.
• Subprime/Non-prime loan delinquency and
  foreclosures rate are up significantly.
• Overall loan delinquency and non-performers are
  up modestly, but not severely.
• Gradual Erosion of credit process/standards and
  loan covenants over time.

DAbshier_at_securagroup.com www.securagroup.com
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Conclusion

• As I mentioned, we have been busy around the
  country reviewing ERM, credit risk management,
  ALM, strategic plans, etc
• Human capital risk identification, sourcing and
  retention of qualified management and staff.
• Credit Risk - review of credit risk ratings,
  ALLL, loan review function, staffing and
  training.
• Enterprise wide Risk Management - be ready for
  opportunities to improve efficiencies and
  maximize shareholder value!

DAbshier_at_securagroup.com www.securagroup.com
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• THANK YOU!

DAbshier_at_securagroup.com www.securagroup.com