Municipal Bond Research Services For Community Banks And Thrifts

1. Municipal Bond Research Services For Community Banks And Thrifts AXIOS ADVISORS LLC

2. The Rising Need For Objective, Independent Municipal Credit Research • With the demise of most municipal bond insurers since 2008, the tax-exempt market has become de-commoditized. Without the perceived credit and liquidity enhancement historically provided by the insurers, most municipal bonds must now be evaluated and traded based on the creditworthiness of the underlying issuers. Many of these issuers have never been rated on their own merits. • The Great Recession has decimated State budgets and eroded the tax base of many municipalities around the country. • While no widespread default is forecast, many local issuers are expected to struggle financially, leading to increasing credit volatility. • The traditionally iron-clad G.O. and Revenue Bond pledges are being legally challenged in bankruptcy court (e.g. Jefferson County) • “Willingness to pay”, not just “ability to pay”, is becoming an issue.

3. Bank Regulators Are Focusing On Municipal Credit Risk While Discouraging Reliance On Agency Ratings • The Dodd-Frank Wall Street Reform and Consumer Protection Act requires all regulatory agencies to remove all requirements of reliance on credit ratings and replace them with appropriate standards of creditworthiness. • “The OCC expects national banks and Federal savings associations to conduct an appropriate level of due diligence (…). This may include consideration of internal analyses, third party research and analytics including external credit ratings, internal risk ratings, default statistics, and other sources of information as appropriate for the particular security.” (“OCC Guidelines on Due Diligence Requirements In Determining Whether Investment Securities Are Eligible For Investment”, November 2011)

4. Community Banks And Thrifts Are Under The Spotlight • Municipal bonds represent between 15 to 35% of the typical bank investment portfolio, second only to Agencies. Many banks have recently increased their participation in this market as a result of incentives created by the American Recovery and Reinvestment Act of 2009 (ARRA). • The “Bank Qualified” sector is no longer the safety haven it used to be. BQ issues are by definition smaller issuers which are not well understood and lack liquidity. While attractive opportunities abound, increased due diligence is also critical. • O.T.T.I. analysis is important, particularly for banks located in fiscally-stressed States such as Illinois, California, Nevada etc… • It is usually not economical for many community banks and thrifts to staff up internally to meet the new due diligence requirements.

5. Help Is On The Way! • Axios Advisors, LLC is an independent research service specializing in municipal bonds. Our analysts average more than 25 years of institutional experience spanning both research and portfolio management. • In partnership with major institutional broker-dealers, we offer a full suite of third party municipal research services designed to assist community banks and thrift organizations in assessing the actual level of credit risk in their municipal bond portfolio and in monitoring such risk on an ongoing basis.

6. An Experienced, Independent Research Team • Axios was founded in 2002 by Triet Nguyen, a veteran of the fixed-income markets and a municipal bond credit expert.  Over his 32 year career, Triet has designed, marketed and managed every type of buy side investment products, from mutual funds (open and closed-end) to managed accounts and hedge funds.   • Trietis the author of “Investing In The High Yield Municipal Market”, to be published in June 2012 by John Wiley/Bloomberg Press.  He also moderates the Municipal Credit Research Forum on LinkedIn.  • Before Axios, Mr. Nguyen was a Senior Vice President at B.C. Ziegler, where he traded tax-exempt high yield and taxable municipal bonds (including Build America Bonds).  From January 2004 to January 2008, he was a Managing Director of Saybrook Capital, LLC, managing one of the first ever municipal hedge funds dedicated to a credit strategy.  Prior to 2004, he was a Vice President and Portfolio Manager of the John Hancock Funds and a Senior Portfolio Manager of the Putnam Funds. Earlier in his career, Triet was a member of the Underwriting Committee for MBIA and a former President of the Hartford Municipal Analysts Society. He started his career at the Harris Bank in Chicago. • Triet received a B.A. in Economics and an M.B.A. in Finance and Accounting from the University of Chicago.

7. Our Services Municipal Bond Portfolio Review An in-depth snapshot of all your municipal bond holdings. Deliverables include: • Individual credit reports for all municipal bond holdings in your portfolio. Length will vary from one to two pages, depending on credit complexity. Each report will include 3-5 years of financial information and relevant financial ratios. • Risk ranking for each line item in your portfolio, based on the following system: Category 1: Strong investment grade, with low risk of interest or principal payment default Category 2: Medium investment grade, with low risk of interest or principal payment default but with notable credit issues requiring ongoing monitoring Category 3: Weak investment grade, with low current risk of interest or payment default but on a clear declining trend Category 4: Below investment grade, with recognized moderate risk of interest of principal default • Relative liquidity score (also referred to by regulators as “marketability”) assigned to each line item in your portfolio, on a scale from 1 to 5 (with “1” as exhibiting the best liquidity characteristics). • A breakdown of your portfolio by sector and geographic concentrations, with our insights and commentary on your current risk profile.

8. Our Services (Continued) Municipal Bond Portfolio Surveillance An ongoing subscription service, with a two year initial term and automatic quarterly renewal therafter, cancellable at least 30 days before the end of any quarter. Deliverables include: • An initial benchmark Municipal Bond Portfolio Review • Quarterly updates of the initial benchmark Review • Interim notification by e-mail of any significant change or development affecting any of your holdings • Quick one-page pre-screening of new credits contemplated for purchase • Periodic commentary pieces on significant developments in the tax-exempt market • Up to 5% of number of portfolio holdings may be substituted without charge . New line items above 5% variance subject to additional charge • Pre-Bank examination briefing and consultation available at an additional cost.

9. Pricing Municipal Bond Portfolio Review • $250-$750 per line item, depending on credit grade and quality of disclosure Municipal Bond Portfolio Surveillance • Annual subscription fee customized to the size and composition of your portfolio. Please contact us for an estimate. Ongoing Consultation Services available on an hourly fee basis

10. The Axios Advantage • A cost-effective third party municipal credit research solution to complement and guide your portfolio investment strategy. • True municipal market insiders with intimate knowledge of market structure and an extensive network of contacts within the tax-exempt bond industry. • Credit risk rankings based on good old-fashioned fundamental research, from the perspective of the bondholders and in accordance with their own investment policy. No “one size-fits-all” automated credit scoring system. • “Relative liquidity” ranking for each holding. Given the recent decline in dealer participation in the tax-exempt market, it is more important than ever for any institutional investor to gauge the potential marketability of their holdings (most critical for Bank Qualified debt). • Credit reviews meet and exceed the risk assessment standards currently being proposed by the Office of the Comptroller of the Currency (OCC) and other regulatory agencies, in compliance with the requirements of the Dodd-Frank legislation.

11. Don’t Wait For The Bank Examiner. Contact Us Today! Axios Advisors LLC 1665 Cornell Ct Lake Forest, IL 60045 508-509-8742 (Direct) 847-735-0024 (Fax) info@axiosadvisors.com www.axiosadvisors.com