Your Own Personal Stock Market

Your Own Personal Stock Market

Caryn Feinberg Senior Vice President and Head of the Community Bank

Market, SecondMarket, Inc.

10:45 AM - 11:35 AM

Jeremy Smith Chief Strategy Officer, SecondMarket, Inc.

On Demand Passcode: CAMELBACK Twitter Hashtag: #AOBA13 Wireless Passcode: AOBA2013

Member FINRA | MSRB | SIPC © 2012 SecondMarket Holdings, Inc.

Completed over 1,000 transactions

representing more than $1.6 billion of private company stock

MORE THAN $558 MILLION In completed private company transactions in 2011

SEC AND FINRA REGULATED Registered broker-dealer Registered alternative trading system (ATS) for private company stock

MARKET EXPERTISE Team of over 100 professionals, including legal, compliance and operations specialists

PLATFORM FOR ALTERNATIVE INVESTMENTS Private companies, community banks, fixed income, and bankruptcy claims CAPITAL

SOLUTIONS FOR COMMUNITY BANKS

01 SECONDMARKET OVERVIEW


02 PUBLIC MARKETS LESS ATTRACTIVE FOR SMALL CAP. COS.

Systemic changes made the public equity markets inhospitable for companies with less than $1 billion market capitalization.

IPO

Vol

ume1

> $50MM < $50MM Emergence of Online Trading

High Frequency Trading

Sarbanes-Oxley Act

Sellside Research Decimated

1 Source: Dealogic, Capital Markets Advisory Partners, Ernst & Young.

Post-Bubble Bubble


03 PUBLIC MARKETS LESS ATTRACTIVE FOR COMMUNITY BANKS

Liquidity in bank stock generally declines with the size of the bank.

Source: SNL Financial; reflects trading volumes during 2012 for banks listed on the NASDAQ, NYSE, and NYSE MKT.

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2012

Sto

ck T

urno

ver R

ate

Timeline of Events 1997: Emergence of Online Trading 1998: High Frequency Trading 2002: Sarbanes-Oxley Act 2003: Sellside Research Decimated

Bank Stock Turnover by Asset Size


04 HOW DO BANK STOCKS TRADE TODAY: OVER THE COUNTER

Sample: Community Bank Stock Price (Pink Sheet)

Source: Google Finance

Spend time and money to register for perceived liquidity Volatile stock price Minimal volume Broader market movements may influence stock price Bid/Ask spread influenced by market maker


05 HOW DO PRIVATE BANK STOCKS TRADE: MANAGEMENT INVOLVEMENT

Seller calls C-

level

Do you know any buyers for

my shares?

C-level

Buyer list

Stuck on price

You want my shares?

Call to C-level by buyer and/or seller

PRICING GUIDANCE


06 VULNERABILITIES OF LACKING LIQUIDITY

Increased demand for liquidity from aging shareholders and early investors

Pressure to provide liquidity driving the timing of and ultimate strategic decision for banks (e.g. remain independent, IPO, merger, sale)

Trouble attracting primary capital investors as they are concerned about lack of liquidity

Illiquid bank stock not attractive as acquisition currency

Inability to use bank stock to attract talent

Community banks are telling SecondMarket that the lack of liquidity for their shares has adverse consequences on their business.


07 SECONDMARKET SOLUTION FOR COMMUNITY BANKS

By working with SecondMarket to create a bank-controlled secondary market

for its shares, you can attain more liquid stock and

better position itself for growth.


08 WHY SECONDMARKET IS GOOD FOR BANKS

Response to shareholder demand

for liquidity

Improve ability to raise outside

capital

Mitigate administrative burden of share

transfers

Provides liquidity to aging shareholders Aggregates sellside demand for buyers who desire meaningful ownership

Attracts primary capital investors because of the ongoing exit option Allows management to operate for the long-term

Enables management to focus on core business Ensures share transfers are properly facilitated

Problems Solved


Approve buyers and sellers

Control frequency of trading (liquidity windows)

SecondMarket gives banks full control over the liquidity programs.

Limit the amount of equity bought or sold

Provide adequate disclosure

Customize sale format with all pricing mechanisms leading to one price per liquidity window

09 CONTROLLED MARKET PARAMETERS


10 BUYER LIMITS

The community bank determines the most desirable configuration for its liquidity program. SecondMarket will assist on devising the best strategy for the bank.

0% 100%

How much

Buyer Location

U.S.A. In my state

Buyer Type*

9.9%

Current

24.9%

* Individual investors must be accredited

Name by name Individuals Institutions

And / Or


Robust levels of information to create a more transparent market.

11 CONTROLLED MARKET PARAMETERS

Two (2) years of consolidated audited financials Interim financials General business description Risk factors Capitalization table Articles of Incorporation

Company by-laws Shareholder agreement(s) Historical trades / valuations Investor presentation Management webinar to prospective buyers

Required disclosure (additional disclosure required for affiliate purchases and sales)


SecondMarket has invested years into the development of a secure, online auction platform.

In addition, our market specialists maintain a high-touch approach to ensure everything runs smoothly and to your specifications.

12 SECONDMARKET LIQUIDITY PROGRAM PLATFORM


13 WHAT YOU GET WHEN YOU LIST ON SECONDMARKET

SecondMarket is with you every step of the way with dedicated teams to partner with you and assist your shareholders.

Configure Meet your objectives

Communicate Engage shareholders

Transact Secure online

platform

Settlement Structured process

Markets Team

Member Services Team

Client Services Team

Settlement Team

Devise optimal participant list Bank-approved communications Online trading platform SM collaborates w/transfer agent

Establish buy / sell limits Step-by-step instructions Shareholdings securely presented Physical or book-entry shares

Comply with Fed / State laws Secure document center Clear order execution process Transaction documents posted


14 PILOT PROGRAM 2012 SERVING BANKS NATIONWIDE 2013

4 pilot banks – 6 liquidity windows completed

Limited pilot banks to Texas, New Jersey and Pennsylvania

3 of 4 pilot programs executed (4th bank to run February 2013)

All programs run as modified-dutch auction with individual seller reserve prices

Pilot program banks represent:

Established / de novo

Bank holdings companies / bank institutions

No current trading program / OTCBB

< $500mm asset / > $500mm asset

Shareholder range of 125 → > 500 shareholders

Ownership concentrated / diversified

Physical certificates and/or street name shareholders

SecondMarket buyer outreach to both individual and instit. / bank only buyers


JEREMY A. SMITH Executive Vice President

[email protected] +1 212.668.5296

CARYN P. FEINBERG

Sr. Director, Community Bank Market [email protected]

+1 212.668.3911

15 QUESTIONS AND ANSWERS


This document is intended for those with an in-depth understanding of the high risk nature of alternative investments and these investments may not be suitable for you. This document may not be distributed in either excerpts or in its entirety beyond its intended audience and SecondMarket will not be held responsible if this document is used or is distributed beyond its initial recipient or if it is used for any unintended purpose. This document is not a solicitation for an order, and there is not enough information contained in this message in which to make an investment decision and any information contained herein should not be used as a basis for this purpose. This document and relevant pages are subject to change without notice; directed solely at eligible institutional buyside and/or sellside clients, qualified purchasers, qualified institutional brokers and other professional clients; and not directed at, may not be suitable for, and should not be relied on by, general retail clients, and to the best of our knowledge current as of the date of distribution. SecondMarket does not: produce in-house research; make recommendations to purchase or sell specific securities; provide investment advisory services; conduct a general retail business. Neither SecondMarket, its affiliates, nor any of its directors, officers, employees or agents shall have any liability, howsoever arising, for any error or incompleteness of fact or opinion in it or lack of care in its preparation or publication, provided that this shall not exclude liability to the extent that this is impermissible under securities laws. The SecondMarket logos, graphics, icons, trademarks, service marks and headers appearing herein are service marks, trademarks (whether registered or not) and/or trade dress of SecondMarket Holdings, Inc. (the “Marks”). All other trademarks, company names, logos, service marks and/or trade dress mentioned, displayed, cited or otherwise indicated herein (“Third Party Marks”) are the sole property of their respective owners. The Marks or the Third Party Marks may not be copied, downloaded, displayed, used as metatags, misused, or otherwise exploited in any manner without the prior express written permission of SecondMarket or the owner of such Third Party Marks.

16 IMPORTANT DISCLOSURES

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Your Own Personal Stock Market