Monthly Alco Package July 2010

www.pcbb.com www.bancinvestment.com

MONTHLY ALCO PACKAGEJULY 2010

BANK ACTIVITY

1 of 18

Economy The dog days of summer, so far have been filled with weakening economic data and consternation around financial regulatory reform. Both have caused heartache for bankers and both are causing bankers to relook at their 2010 budget and decide what will become of 2011. For the markets in general, equities continue to be more upsetting than US’s World Cup performance, as the DOW fell 2.49% for the month and the S & P dropped 3.74%. Fixed income continued its bubble as yields fell some 30bp on average across the bank-related curve. For the economy, consumer confidence fell by a whopping 9.8 points in June to 52.9%.The 3rd revision of 1Q GDP dropped by 0.3%, which was the second downward revision and now puts annualized GDP for the year a little above 3% which is a far cry from the 5.2% once hoped for at the end of 2009. Construction spending fell by 0.2% in May, distancing itself from its 30.6% peak in March ’06. Finally, the month wrapped up with a jobs report that had unemployment falling to 9.5%, its lowest level since June 2009 and better than expectations. While this would be a data point to rejoice on, the drop was associated with a huge downward change in the labor force. Adjusting for that correction, household employment fell sharply during the month. Consequently, the drop in the unemployment rate is not the positive news it would have been if jobs were being created more quickly than the labor force was growing. Nearly 1.3mm new jobs have been created in this survey since the beginning of the year. Nevertheless, 14.6mm people are still officially unemployed. In addition, there are another 5.9mm people who say they want a job but are not currently looking for one. In addition, another 8.6mm people are working part-time because of slack economic conditions. It will take many years before "full employment" is re-attained. On the strategic front, the month of June has marked a time when more banks than ever have decided that their long run objectives will be to sell or merge. If you run simulations for an average bank, 5Y returns come out to single digits because of the following factors: the economy that will not show strong growth until 2012; higher FDIC insurance assessments; and, regulatory pressure for greater liquidity, higher capital/reserves, and lower leverage. Add to that core set of assumptions $115k+ of additional compliance costs and 15% lower revenues due to new financial regulations, and it is hard to see how this is an industry that will make good use of hard-to-attract capital for some time. If that seems like a couple paragraphs of doom and gloom, it is, but there is hope. More than half the banks have given up hope or are operating as if it was business as usual. With half the year gone, smart banks are recommitting themselves to restructuring their deposit base to bring in higher DDA balances and less interest rate sensitive customers by expanding cash management services, while focusing on acquiring more profitable customers. These banks that continue to manage asset quality (an area where bankers have made impressive strides), but start working on customer profitability strategies, can now increase market share for those customers that really drive profit. Banks that can shift mix from 10% to 20%+ high-value customers, can move their bank back to double digit returns despite all the above mentioned headwinds. While the tendency in hard times is to focus on the next 6-month period, banks that devote more resources and effort to the 3Y horizon will find that moral will improve and the return on that effort will be fruitful. Chris Nichols President & CEO

BANK ACTIVITY

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Lending Activity Deposit inflows and shrinking loans continue to put pressure on banks to invest. Most community banks have paid down large amounts of higher cost deposits. Many larger community banks are also close to stabilizing their nonperforming loan portfolio. With capital bolstered and reserves padded, the lack of loan volume continues to be a substantial drag on income. We believe that commercial credits are likely to start to accumulate inventories and boost capital expenditures and this should soon lead to higher external financing needs (leading to more loan demand). Competition for credit is fierce, especially for larger sized loans ($1mm plus) and non-real estate centered credits. Banks that cannot price credit on risk-adjusted and overhead-adjusted bases are at a real disadvantage. With interest rates falling throughout the month of June, five year fixed rate loans are competitively priced at approximately 4.75% to 5.25% and 10 year fixed rate loans at are competitively priced at approximately 5.75% to 6.25%. Banks targeting high quality credits must be able to match this pricing in order to gain loan business. Banks have been telling us that they are fearful that FASB will move GAAP to require fair value for banks’ loans and deposits. If FASB is successful in this endeavor, most banks would cease extending fixed rate loans beyond two years without the use of hedging instruments. Speaking of hedging, while the financial regulatory reform has not yet been signed into law, the proposed changes are intended to make basic hedging more onerous on banks that use simple swaps, caps and floors. Banks using hedges on their own balance sheet may see increased requirement for capital, reporting and documentation. Our BLP program offers a simple solution and a viable alternative to banks that do not want derivatives on their balance sheet. Ed Kofman Managing Director - Derivatives Desk

BANK ACTIVITY

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Certificate of Deposit Issuance Historically, activity heightens in the brokered CD market during quarter-end months, but this has not been the case the past few quarters. Overall issuance in the brokered CD market is down roughly 50% from a year ago. Though the number of banks utilizing brokered deposits may be down, there remains very strong demand from retail, and rates continue to trade at historical lows. Further deterioration in the equity market and lower fixed income investment yields will keep this trend going for July. The combination makes this market an excellent time to issue to the extent you have use and room for wholesale funds. Additionally, the vast majority of banks are extending out the curve, 2yrs and out, as bankers are becoming more and more opportunistic. Step-up callable issues, whereby the bank retains the option to call if rates further fall or funding is no longer needed, continue to garner more interest from banks. This tactic efficiently manages convexity, as it allows liability extension while protecting net interest margin. Also, the premium for the call option is negligible, as investors are less concerned about these deposits being called. We expect issuance in these liability structures to become more prevalent as bankers are becoming more comfortable with these deposits. Lastly, we anticipate rates to tick back up a bit come mid to late July as banks get the quarter behind them and start to jump back into our market. Don Saunders Managing Director - Brokered CD's

BANK ACTIVITY

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Fixed Income

Historical and current spreads vs. Treasuries for MBS and Agencies are listed below:

MBS Agencies 15Y 30Y 2Y 5Y 10Y 30Y 5YR High 312 238 182 159 175 168 5YR Low 72 59 -16 2 -5 32 5YR Avg 118 125 37 46 46 51 1YR High 153 107 31 50 47 57 1YR Low 97 59 -16 2 -5 32 1YR Avg 121 81 12 22 27 42 90 Day 132 93 31 37 44 50 90 Day Low 100 60 9 2 30 33 90 Day Avg 115 75 21 13 36 41 30 Day 127 89 27 37 36 50 30 Day Low 106 67 13 9 30 44 30 Day Avg 116 78 21 24 33 46 Last 121 82 13 33 31 44 Data Source: Bloomberg

Fixed Income: June was quite a busy month, as we saw more MBS pass-through buyers wade back into the market. Their wait for higher yield levels never seemed to materialize. The dovish policy statement from the latest FOMC meeting helped nudge investors off their beach chairs into the MBS pool party, as it appears the Fed will be on hold for a while. We also saw quite a bit of selling take place as clients looked to boost loan loss reserves and book gains to improve short-term performance for the quarter. Our bankers continued to report deposit growth outpacing loan growth as well as receiving a constant stream of cashflows from their called agencies bonds. Despite the low yield levels and lofty premiums, investors also focused on short-duration agency CMOs and replaced called collateral with short-locked out callable agencies. Treasury yields tanked vs. the prior month as the European debt crises, losses in the equity markets and concerns of slower global growth weighed on Treasuries. The 2Y yield fell 17bp vs. the prior month and reached an all time low (in the past 5Y) of 0.60%. The 5Y and 10Y yields dropped 32bp and 36bp respectively. The 10Y yield fell below 3.00% to 2.93%, a low last seen in April ’09. The 30Y yield fell as well by 32bp. Agencies performed well due to limited supply. Spreads tightened by 13bp, 4bp and 2bp respectively in the 2Y, 10Y and 30Y part of the curve. The 5Y spreads however widened by 24bp. MBS pass thrus held their ground as well, with the 15Y sector tightening by 6bp and 30s coming in 2bp. Looking ahead, we expect mortgages to continue to perform well as bank demand increases due to limited loan opportunities and foreign investors’ sponsorship remains strong. Prepayments speeds should not pick up any time soon despite the lower rate environment due to these factors deterring homeowners from refinancing: 25% of mortgage holders are upside down on their notes, tighter underwriting standards, higher refinance fees and weak job growth. Maxine Lew Director - Fixed Income

BANK ACTIVITY

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Credit & Risk Management Credit Risk: Payment and loss given defaults continue to advance in most regions of the country. Loan stress and ALLL models should be updated to reflect the changing landscape of both elevated default rates as well as changing loss given default rates.

0

5

10

15

20

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

Atlanta Chicago Dallas Kansas City

New York San Francisco

Total CRE Payment Default Rate by FDIC Region

C&D CRE/Mult

0

2

4

6

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09



Non‐Real Estate Payment Default Rate by FDIC Region

C & I Consumer

0

10

20

30

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09



CRE Loss Given Default Rate by FDIC Region

C&D CRE/Mult

0

20

40

6031

‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09

31‐Dec‐07

31‐Dec‐08

31‐Dec‐09



Non‐Real Estate Loss Given Default Rate by FDIC Region

C & I Consumer

Rate Risk: The efficiency of deposit funding has improved since the implementation of the national rate cap program. ALM modeling assumptions should be reviewed and changes made if applicable.

(0.30) (0.20) (0.10) ‐ 0.10 0.20 0.30 0.40 0.50

MMDA

3 Mo. CD

6 Mo. CD

12 Mo. CD

Funding Efficiency (National Rates vs Libor Curve)

Current Q1‐2010 Q4‐2009 Q3‐2009 Q2‐2009

Doug Hensley Managing Director

BANK ACTIVITY

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Funding How is a bank supposed to take care of its “good” customers with today’s low interest rates? Most banks are working hard to maintain pricing discipline and bring their funding costs down as much as possible. Every basis point reduction represents additional income for your bank. Let’s say your bank has set its deposit rates where it thinks appropriate. How does it handle the situation when a deposit customer asks whether you can “do any better” than what they see on the rate board? Some banks will match the rates of a competitor or will pay whatever they think is necessary to win the customer’s deposit. Another tactic is to exercise control over the process to prevent the bank’s employees from being overly generous with rate matching. A bank may give its sales staff discretion to pay a pre-determined rate bump over the bank’s posted rate. Some reserve this for only the “good” customers. Typically, the pre-set rate bump is 25 bps – some bumps are even higher. Unfortunately, there are some flaws with this practice. The first is banks do not typically do a very good job of defining what a “good” customer is which can result is the exception becoming the rule. The second is failing to recognize the proportionality of the rate bump. What sounds worse, a 25 bps rate bump, or paying 150% of the bank’s posted rate? In some instances, there is no difference between the two. Would you consciously instruct your sales staff to pay 150-125% of the bank’s posted rates to its customers? Your bank may be doing this right now.

Rate Bumps and Bonus Percentages

0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

0.75 1.25 1.75 2.25 2.75 3.25 3.75 4.25 4.75 5.25

50% 25% 17% 13% 10% 8% 7% 6% 6% 5%

Combined Rate, and Rate Bump as Percentage of Base Rate

Base Rate 25 bps Rate Bump

A 25 bps rate bump may have been a reasonable pricing variance with a 4.50% deposit product, but it may be excessive at today’s interest rate levels. The 12 month FDIC national average CD rate is .74% currently, and shorter-term products are even lower. When we work with our Coach clients, we help them review their current pricing practices to ensure they are positive, and do not result in unintended consequences. Further, we also help them develop pricing, training, and marketing strategies which have proven to be successful when adopted by our other clients – and we measure the progress and effectiveness of the strategies over time. How is your bank doing? Greg Judge Liability and Strategic Consulting

BANK ACTIVITY

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Loan Pricing and Customer Profitability With the prohibition of paying interest on business checking accounts close to being repealed, prepare for significant changes and opportunities in the deposit gathering business. While the rate environment and economic outlook will play a large role in the speed at which changes and opportunities will occur, the following are few things to expect:

- Decline in off balance sheet sweeps and repo sweeps – Sweeps have typically existed for two reasons. First, it serves as a mechanism for a bank’s customer to earn interest while having the liquidity privileges of a checking account. Secondly, customers have swept their funds to an off balance sheet or repo in a desire to mimic the perceived increased safety of a money fund or the collateral of a repo. While it is difficult to estimate how much in total swept funds are done simply to earn a return, we estimate that at least 50% - 60% of all swept funds would come back on the balance sheet if this rule passes.

- Significant variations in pricing strategies – Expect some institutions to pay high rates

in an attempt to attract new funds that have historically only resided in money funds - Relationship based pricing – Look for banks to implement a relationship based pricing

approach where the interest rate paid and the service charge assessed is based on the overall relationship and not simply one product.

- Increased use of data mining and sensitivity scoring – Combined with a relationship

based pricing approach, expect to see programs base pricing on the sensitivity of the customer to changing interest rates. Doing so, will provide for more accurate pricing on a per relationship basis.

The business checking account has historically been the most profitable product at most banks. Banks will need to implement strategies to ensure that the profits from this account are protected while concurrently seizing upon the opportunity to attract funds that have historically resided outside the banking system. Under the current proposed legislation, banks would be permitted to pay interest on business in a year. Our advice: Start planning now. Put it as a topic on your ALCO or New Product Committee as the year will go by quickly. Kim Jackson Managing Director Mike Middleton Managing Director Loan Pricing and Customer Profitability

BANK ACTIVITY

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BIG Metrics - 1Q Performance Summary

Michael Stinson Vice President – BIG Metrics

INTEREST RATE RECAP06/30/10 05/28/10 4/30/10 6/30/09

SHORT RATES Now Prior Change Prior Change Now ChangeFed Funds 0.25% 0.25% 0.00% 0.25% 0.00% 0.25% 0.00%Prime 3.25% 3.25% 0.00% 3.25% 0.00% 3.25% 0.00%1M Libor 0.35% 0.35% 0.00% 0.28% 0.07% 0.31% 0.04%2M Libor 0.43% 0.43% 0.00% 0.32% 0.11% 0.41% 0.02%3M Libor 0.53% 0.54% 0.00% 0.35% 0.19% 0.60% -0.06%4M Libor 0.60% 0.60% 0.00% 0.40% 0.20% 0.78% -0.18%5M Libor 0.67% 0.67% 0.00% 0.46% 0.21% 0.96% -0.29%6M Libor 0.75% 0.75% 0.00% 0.53% 0.22% 1.11% -0.36%1Y Libor 1.17% 1.20% -0.03% 1.02% 0.16% 1.61% -0.44%

TREASURY RATES2Y Note 0.61% 0.77% -0.16% 1.02% -0.42% 1.11% -0.50%3Y Note 0.97% 1.23% -0.27% 1.57% -0.60% 1.61% -0.64%4Y Note 1.43% 1.75% -0.32% 2.13% -0.70% 2.11% -0.68%5Y Note 1.78% 2.09% -0.32% 2.55% -0.78% 2.54% -0.77%7Y Note 2.41% 2.75% -0.34% 3.28% -0.87% 3.21% -0.79%10Y Note 2.93% 3.29% -0.36% 3.83% -0.90% 3.53% -0.59%30Y Bond 3.89% 4.21% -0.32% 4.71% -0.82% 4.33% -0.44%

SWAPS FIX VS. 3M LIBOR2Y Swap 0.97% 1.23% -0.26% 1.19% -0.22% 1.53% -0.56%3Y Swap 1.33% 1.66% -0.33% 1.81% -0.48% 2.14% -0.81%4Y Swap 1.71% 2.06% -0.35% 2.31% -0.60% 2.62% -0.92%5Y Swap 2.05% 2.43% -0.38% 2.73% -0.68% 2.96% -0.92%7Y Swap 2.34% 2.93% -0.60% 3.32% -0.99% 3.42% -1.08%10Y Swap 2.56% 3.37% -0.81% 3.82% -1.26% 3.77% -1.22%15Y Swap 3.00% 3.75% -0.75% 4.26% -1.26% 4.06% -1.05%

Month to Month Treasury Yield Change

-0.32%

-0.36%

-0.34%-0.32%-0.32%

-0.27%

-0.16%

-0.40%

-0.35%

-0.30%

-0.25%

-0.20%

-0.15%

2Y Note 3Y Note 4Y Note 5Y Note 7Y Note 10Y Note 30Y Bond

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PROJECTED FEDERAL FUNDSSurvey Date: 6/9/2010

Dealer Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011Action Economics 0.25% 0.25% 0.75% 1.50% n/a n/aBank of America* 0.25% 0.25% 0.25% 0.25% 0.50% 0.50%Bank of Montreal 0.25% 0.25% 0.75% 1.25% 1.50% 2.00%Barclays Capital * 0.25% 0.25% 0.25% 0.75% 1.25% 1.75%BOT-Mitsubishi 0.50% 1.00% 1.50% 2.00% 2.50% 3.00%CIBC World Markets 0.25% 0.25% 0.50% 1.00% 1.50% 2.25%Credit Suisse FB * 0.25% 0.25% 0.50% 1.00% 1.25% 1.50%Danske Bank 0.25% 0.25% 0.50% 1.00% 1.50% 2.00%Deutsche Bank * 0.25% 0.75% 1.25% 1.75% n/a n/aFannie Mae 0.25% 0.25% 0.25% 0.25% 0.75% 1.00%First Trust Adv. 0.25% 0.25% 0.50% 1.00% 1.75% 2.50%Goldman Sachs Group 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%ING Barings 0.25% 0.75% 1.25% n/a n/a n/aJanney Montgomery 0.25% 0.25% 0.25% 0.75% 1.25% 1.50%Moodys Capital Markets 0.25% 0.25% 0.50% 1.00% 1.50% 2.00%JP Morgan Chase * 0.25% 0.25% 0.25% 0.50% n/a n/aMorgan Stanley * 0.25% 0.25% 0.50% 1.50% 2.00% 2.50%Nomura Securities 0.25% 0.25% 0.25% 0.50% 0.75% 1.00%Raymond James 0.25% 0.25% 0.25% 0.50% 1.00% 1.50%Scotia Capital 0.25% 0.25% 0.75% 1.25% 1.75% 2.25%Standard Chartered 0.25% 0.25% 0.25% 0.25% n/a n/aState Street Global 0.25% 0.25% 0.25% 0.25% 0.25% 0.50%UBS 0.25% 0.50% n/a n/a n/a n/aWells Fargo & Co 0.25% 0.25% 0.25% 0.50% 1.50% 2.00%

Median 0.25% 0.25% 0.50% 0.88% 1.38% 1.88%

Average 0.26% 0.33% 0.52% 0.86% 1.26% 1.67%

High 0.50% 1.00% 1.50% 2.00% 2.50% 3.00%

Low 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%

*Primary Dealers

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SHORT TERM MARKET EXPECTATIONSFEDERAL FUNDS FUTURES

Jul-10 0.25Aug-10 0.25Sep-10 0.25Oct-10 0.25Nov-10 0.25Dec-10 0.25Jan-11 0.25Feb-11 0.25Mar-11 0.25Apr-11 0.50

May-11 0.50

EURODOLLAR FUTURES

Sep-10 0.66Dec-10 0.77Mar-11 0.84Jun-11 0.94Sep-11 1.09Dec-11 1.29Mar-12 1.49Jun-12 1.72Sep-12 1.95Dec-12 2.19Mar-13 2.40Jun-13 2.61

PRIME RATE FUTURES

Sep-10 3.36Dec-10 3.47Mar-11 3.54Jun-11 3.64Sep-11 3.79Dec-11 3.99Mar-12 4.19Jun-12 4.42Sep-12 4.65Dec-12 4.89Mar-13 5.10

Prime Rate Futures

3.36

3.99

4.65

5.10

3.25

3.75

4.25

4.75

5.25

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Federal Funds Futures

0.25

0.500.50

0.250.25

0.00

0.25

0.50

0.75

1.00

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb-

11

Mar

-11

Apr

-11

May

-11

Eurodollar Futures

0.66 0.84

1.95

1.09

2.40

0.50

1.00

1.50

2.00

2.50

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

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LONG TERM MARKET EXPECTATIONSTREASURIES NOW as of 7/01/2010

1YR 0.322YR 0.64 3.303YR 1.015YR 1.8110YR 2.95

TREASURIES 1Y FORWARD as of 7/01/2010

1YR 0.972YR 1.353YR 1.785YR 2.4910YR 3.27

TREASURIES 2Y FORWARD as of 7/01/2010

1YR 1.742YR 2.183YR 2.605YR 3.1710YR 3.53

Current Treasury Curve

2.95

0.640.32

1.81

1.01

0.30

1.05

1.80

2.55

3.30

1YR 2YR 3YR 5YR 10YR

1Y Forward vs. Now

2.95

1.81

1.010.64

0.32

3.27

2.49

1.78

1.35

0.97

0.30

1.05

1.80

2.55

3.30


2Y Forward vs. Now

3.53

3.17

2.60

2.18

1.74

2.95

1.81

1.01

0.64

0.320.30

1.15

2.00

2.85

3.70


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OTHER IMPORTANT DATA

1YR 2YR 3YR 5YR 10YRLIBOR 6M Forward 0.93 1.28 1.68 2.37 3.20LIBOR 1Y Forward 1.22 1.65 2.05 2.68 3.39LIBOR 2Y Forward 2.08 2.48 2.81 3.26 3.75

LIBOR MARKET EXPECTATIONS

BALTIC DRY INDEX - 1 YEAR HISTORY

2Y Forward vs. 1Y Forward vs. 6M Forward

1.68

0.93

3.20

2.05

1.22

3.39

2.81

2.08

3.75

0.50

1.25

2.00

2.75

3.50

4.25


LIBOR 6M ForwardLIBOR 1Y ForwardLIBOR 2Y Forward

Last Price High 11/19/09Average Low 9/24/09

2406466131332163

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UNEMPLOYMENT RATE (JOBS PICTURE) - 5 YEAR HISTORY

OIL PRICES (INFLATION) - 5 YEAR HISTORY


9.710.16.24.4


75.63145.2974.1133.87

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1 MONTH LIBOR (APPROX. BANK FUNDING COSTS) - 5Y HISTORY

GDP (UNDERLYING ECONOMIC GROWTH) - 5Y HISTORY

Last Price High 12/31/09 Average Low 03/31/09

3.05.61.3-6.4

Ask price High 9/07/07 Average Low 3/01/10

0.0351255.823753.142290.22813

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BOND YIELD FORECASTMarket Yield Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q2 2011

US 3 M Libor 0.53 0.59 0.74 1.05 1.43 1.83

Market Yield Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011Fed Funds Target 0.25 0.25 0.25 0.50 1.00 1.25

Market Yield Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011US 10Y 2.94 3.48 3.70 3.89 4.08 4.37

US 2Y 0.64 1.16 1.44 1.73 2.10 2.47spread 2.52 2.56 2.48 2.33 2.12 1.93

US 3M Libor

1.43

0.740.53

1.83

0.35

0.70

1.05

1.40

1.75

2.10

Market Yield Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q2 2011

Fed Funds Rate

0.25

0.50

1.00

1.25

0.25

0.50

0.75

1.00

1.25

1.50


10Y VS 2Y

4.37

3.893.48

2.942.47

2.10

1.44

0.640.50

1.50

2.50

3.50

4.50


US 10Y US 2Y

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KEY UPCOMING DATES

01/28/09 0.00- 0.25% Risk to Growth 1 Ben Bernanke (Chairman)03/18/09 0.00- 0.25% Risk to Growth 2 James Bullard04/29/09 0.00- 0.25% Risk to Growth 3 William Dudley06/24/09 0.00- 0.25% Risk to Growth 4 Elizabeth Duke08/12/09 0.00- 0.25% Risk to Growth 5 Thomas Hoenig09/23/09 0.00- 0.25% Risk to Growth 6 Donald Kohn11/04/09 0.00- 0.25% Risk to Growth 7 Sandra Pianalto12/16/09 0.00- 0.25% Risk to Growth 8 Eric Rosengren01/27/10 0.00- 0.25% Risk to Growth 9 Daniel Tarullo03/16/10 0.00- 0.25% Risk to Growth 10 Kevin Warsh04/29/10 0.00- 0.25% Risk to Growth06/24/10 0.00- 0.25% Risk to Growth08/12/10 1 Christine Cumming09/23/10 2 Charles Evans11/04/10 3 Richard Fisher12/16/10 4 Narayana Kocherlakota01/26/11 5 Charles Plosser

Date Indicator Date Indicator7/1/2010 Construction Spending MoM 7/16/2010 Consumer Price Index7/1/2010 ISM Manufacturing & Prices Paid 7/19/2010 NAHB Housing Market Index7/1/2010 Vehicle Sales 7/20/2010 Building Permits & Housing Starts7/1/2010 Pending Home Sales 7/22/2010 Leading Indicators7/2/2010 Employment Report 7/22/2010 Existing Home Sales7/8/2010 Consumer Credit 7/22/2010 House Price Index7/9/2010 Wholesale Inventories 7/26/2010 New Home Sales7/13/2010 Monthly Budget Statement 7/26/2010 Chicago Fed Nat Activity Index7/13/2010 Trade Balance 7/27/2010 S&P/ Case Shiller Home Price Ind7/14/2010 Advance Retail Sales 7/27/2010 Richmond Fed Manufact. Index7/14/2010 Business Inventories 7/27/2010 Consumer Confidence7/14/2010 Import Price Index 7/28/2010 Durable Goods Orders7/15/2010 Empire Manufacturing 7/30/2010 GDP Price Index7/15/2010 Producer Price Index 7/30/2010 Personal Consumption7/15/2010 Industrial Production 7/30/2010 Chicago Purchasing Manager7/15/2010 Capacity Utilization 7/30/2010 NAPM-Milwaukee7/16/2010 U. of Michigan Confidence 7/30/2010 Core PCE QoQ

KEY UPCOMING ECONOMIC DATA

FOMC VOTING MEMBERSFOMC MEETING DATES

FOMC ALTERNATE MEMBERS

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Source for data is Bloomberg, dealer provided documents and proprietary calculations or research. Thispackage is created specifically for independent banks as an added monthly service and provided bySteve Brown, Chris Nichols and the rest of the team at Banc Investment Group.

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Economy & Finance

Monthly Alco Package July 2010