1. The Current State
of the Capital Markets
Breakfast Forum
September 10, 2010

2. www.boyarmiller.com
Equity and the
Public Markets
Andrew D. Kanaly – Kanaly Trust
Chairman & CEO

3. 2010 Market Performance
Index Performance as of July 31, 2010
EQUITIES July YTD 12 Months
S&P 500 7.0 (0.1) 13.8
DJIA 7.2 1.9 17.3
Nasdaq 6.9 (0.1) 15.0
Russell 2000 6.9 4.8 18.4
MSCI EAFE 9.5 (4.7) 6.7
MSCI Emerging Mkts 8.4 1.8 20.2
FIXED INCOME
BarCap US 1-3yr Govt 0.3 2.2 2.9
BarCap Int Govt/Credit 1.1 5.7 8.0
BarCap High Yield 3.6 8.2 23.7
BarCap 5yr Muni 1.5 4.0 6.5
ALTERNATIVES
HFRI Global Hedge Fund 1.2 0.0 5.8
DJ Wilshire REIT 9.9 15.7 54.9
DJ UBS Commodity 6.8 (3.5) 6.3
Gold (4.9) 7.7 26.4
Crude Oil 4.4 (0.5) 17.9

4. Copyright 2010 Kanaly Trust. All rights reserved.
4
Recession Ends?

5. Inventory Rebuilding
• The “V”-shaped recovery was driven by inventory rebuilding
• What will drive sustainable growth from here?

6. Unemployment is a Lagging Indicator?
• After 2001 recession, unemployment continued to rise until early 2003
• Stocks did not sustain a recovery employment stabilized in 2003

7. Initial Claims Signal a Double Dip?
• Initial Claims Stay in Recession Levels

8. Lack of Credit Prevents Robust Recovery
• Credit is the lifeblood of economic growth
• The largest banks have reduced lending by over 25%

9. Housing Market Not Out of the Woods
• Monthly Resets on troubled mortgages will pressure housing for two more
years
Source: Credit Suisse
$B

10. After Gov’t Program Ends..Home Sales Decline

11. Too Much Debt is the Long-term Problem

12. Copyright 2010 Kanaly Trust. All rights reserved.
12
Where does the stimulus come from if the Gov’t is tapped out?

13. Key Economic Issues in 2010
Markets are anticipating continued improvement in the economy, which likely
hinges on a recovery in business spending and employment. Some of the key
economic issues to watch include:
• Withdrawal of fiscal and monetary stimulus programs
• Efforts by China to slow economic growth
• Potential for mortgage resets, commercial real estate troubles, and
sovereign debt to create fresh credit concerns
• Continued deleveraging of consumer balance sheets
• Tax increases coming at both federal and local levels
• Potential for higher interest rates to entice investors to buy Treasuries

14. Earnings Estimates Likely to Come Down
S&P 500 Annual Operating Earnings
38.23
45.17
52.00
47.24
54.15
67.01
87.72
82.54
49.51
81.32
95.59
62.20
77.08
44.23
39.56
0
20
40
60
80
100
120
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010E
2011E

15. The “BUBBLE” is Likely in Bonds….

16. ……….Not in Stocks

17. Back to the 1970s?
Source: Strategas Research

18. Investment Strategy
Portfolios should be geared more toward capital preservation to manage
significant downside risks:
• Pursue ultra-diversification, utilizing traditional asset classes as well as
alternative investment strategies (stocks & bonds are not the only choices)
• Actively manage the asset mix, and look for opportunities to hedge
• Equity exposure should focus on high quality global businesses trading at
attractive valuations (bias to large caps, emerging markets)
• Be highly selective with fixed income: avoid high yield debt, and invest in
only the most creditworthy municipal issuers
• Add to inflation protection when it is cheap

19. Current Allocations
Traditional 30% Equity
60% Equity 30% Fixed
ASSET CLASS 40% Fixed 40% Alts
Large Cap Equity 30.00% 8.50%
Small Cap Equity 15.00% 6.25%
Micro Cap Equity 3.25%
International Equity 10.00% 8.00%
Emerging Markets 5.00% 4.00%
Fixed Income 40.00% 30.00%
Liquid Alternatives 11.00%
Hedged Equity 6.00%
Commodities 5.00%
MLPs 5.00%
REITs 3.00%
Managed Futures 10.00%
Expected Return 7.60% 8.60%
Standard Deviation 10.74% 8.16%
Sharpe Ratio 0.34% 0.56%

20. Kanaly Trust Investment Model Performance – 2010
2010 YEAR TO DATE MODELS INVESTMENT PERFORMANCE as of 7/31/2010
(Equity/Fixed Income/Alternatives/Cash)
Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Year to Date
Balanced Models
Growth (35/25/33/7) -0.6% 0.9% 2.8% 1.4% -3.6% -1.0% 3.2% 2.9%
Growth - Taxfree FI (35/25/33/7) -0.9% 1.3% 2.6% 1.3% -3.6% -1.3% 3.3% 2.6%
Balanced MF Portfolio (30/30/33/7) -0.6% 0.9% 2.5% 1.4% -3.3% -0.8% 2.9% 3.0%
Balanced MF Portfolio - Taxfree FI (30/30/33/7) -0.9% 1.3% 2.2% 1.2% -3.1% -1.1% 3.0% 2.6%
Conservative (15/50/24/11) 0.1% 0.7% 1.5% 1.3% -2.0% 0.1% 2.0% 3.7%
Conservative - Taxfree FI (15/50/25/11) -0.6% 1.2% 1.1% 1.0% -1.7% -0.6% 2.0% 2.4%
Small Model - Aggressive -2.5% 5.3% 2.6%
Small Model - Balanced -1.1% 4.8% 3.6%
Small Model - Conservative 0.8% 3.7% 4.5%
Small Model - < $25K -0.5% 5.5% 4.9%
Equity Only -3.2% 2.2% 6.4% 1.2% -8.3% -3.7% 6.9% 0.6%
Fixed Income - Taxable 1.6% 0.0% 0.7% 1.4% -0.5% 1.4% 1.3% 5.8%
Fixed Income - Tax Free 0.2% 0.5% -0.5% 0.5% 0.3% -0.2% 0.7% 1.5%
ALTs - No MLPs -0.7% 2.0% 1.0% 1.0% -1.8% -0.3% 1.4% 2.6%
ALTs - With MLPs -0.5% 1.2% 1.4% 1.9% -2.2% 0.5% 2.2% 4.5%
S&P 500 (60%) / Intermediate Taxable (40%) -1.6% 2.0% 3.5% 1.3% -4.3% -2.6% 4.5% 2.6%
S&P 500 (60%) / Intermediate Muni (40%) -1.9% 2.2% 3.4% 1.2% -4.5% -3.0% 4.7% 1.6%
S&P 500 Index -3.6% 3.1% 6.0% 1.6% -8.0% -5.2% 7.0% -0.1%
Barclays Aggregate Bond Index 1.5% 0.4% -0.3% 0.9% 1.2% 1.5% 0.8% 6.1%
BarCap 1-10Yr Muni Index 0.6% 0.8% -0.6% 0.7% 0.7% 0.3% 1.2% 3.7%
* The asset allocation models above represent an approximation of how the portfolios perform; actual results may differ from the models. Returns are shown before fees and are not
AIMR/GIPS compliant. The return information provided above represents past performance and is not necessarily indicative of future results. Further, specific client portfolio(s)
investment returns and results may vary from figures noted above based on account-specific circumstances.

21. Equity and the Public MarketsSeptember 10, 2010

22. www.boyarmiller.com
Private Equity and
Mergers & Acquisitions
David W. Sargent – Growth Capital Partners
President & CEO

23. 23
I. GCP’s View of the U.S. Economy and Capital Markets
II. Private Equity
III. Debt Markets
IV. Mergers & Acquisitions
V. Conclusions
Table of Contents

24. GCPGCP’’ss View of theView of the
U.S. Economy and Capital MarketsU.S. Economy and Capital Markets

25. Sept 7
Federal takeover of
Fannie Mae and
Freddie Mac
Sept 14
Merrill Lynch is sold
to Bank of America
Sept 15
Lehman Brothers
files for bankruptcy
Sept 17
Federal Reserve
injects $85 billion
into AIG
Sept 18
$700 billion
emergency bailout
bill is proposed
Sept 19
Federal Reserve
guarantees money
market funds
Sept 25
Washington Mutual is
seized by FDIC; assets are
sold to JP MorganChase
Sept 29
Citigroup Inc. to
acquire Wachovia
SEPTEMBER 2008,SEPTEMBER 2008, AA SEPTEMBER TO REMEMBERSEPTEMBER TO REMEMBER
Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke tell key
legislators: "If we don't do this, we may not have an economy on Monday."

26. 26
 Slow growth economy “new normal” (1% to 2% growth vs. 3% to 5%)
 Historically high employment will last for several years
 “Deleveraging” the financial system will take time
 Record deficits and low interest rates leave fewer traditional “tools” for the government and
Federal Reserve to accelerate the U.S. economy
 Demographics also add to U.S. growth challenges
 Higher taxes, healthcare costs and "reregulation" will add additional head winds to the U.S.
economy
 Consumer related businesses will continue to face challenges (except Apple!)
 Global growth will partially offset a slow growth U.S. economy
 Several industries can grow faster than projected U.S. GDP, including energy, infrastructure,
security, business services, food, healthcare and technology
 Texas economy continues to fare better than those of many other states . Texas has an ideal
combination of low taxes, diversity of economy, low cost of living and above vs. average
population growth
GCP’s View of the U.S. Economy

27. 27
 Investors/lenders/buyers will not need a dramatically improving economy to make
investment/acquisition decisions but will need to be convinced that the economy has bottomed out
and stabilized – started to happen in early 2010
 Strategic buyers (primarily public companies) will be compelled to complete acquisitions to offset
slow organic growth
 Substantial amounts of committed, but un-invested, private equity capital are finding ways to
participate in the current market environment
 Baby boomer entrepreneurs are anxious to realize liquidity and will not miss the next opportunity
 Smaller transactions (lower middle-market) have begun to represent a larger portion of overall
M&A activities
GCP’s View of the Capital Markets

28. 28
 The spread between the 3-Month LIBOR and 3-Month Treasury bills often suggests the perceived credit risk
in the general economy.
1. The 3-Month Treasury Bill rate is regarded as risk-free.
2. The 3-Month LIBOR rate reflects the credit risk of lending to commercial banks.
 The long-term average spread between the 3-Month LIBOR and 3-Month Treasury is between 30 to 50 basis
points. In October of 2008, the spread rose above 300 basis points indicating a wide-spread fear of an
economic meltdown.
Source: Federal Reserve
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Spread(percent)
LIBORandTreasuryRate(percent)
3-Month LIBOR 3-Month Treasury Spread
Record High
Interest Rates

29. 29
Sources: U.S. Department of the Treasury, Federal Reserve Board
U.S. Federal Debt as Percent of GDP and U.S. Household Debt as Percent of Disposable Personal
Income, 1980–2008 and Projected 2010
 The federal public debt totals $8.2 trillion today, and it's headed toward $20.3 trillion in 2020, according to
CBO's deficit estimates. That figure would equal 90% of the estimated gross domestic product in 2020, up
from 83% at the end of fiscal 2009.
 U.S. household debt as a percent of disposable personal income has doubled since the early 1980’s. In late
2007, household debt was $12.5 trillion, which was 133% of disposable income.
20
40
60
80
100
120
140
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
?
(inpercentages)
US Federal Debt as % of GDP U.S. Household Debt as % of Disposable Income
122% of
Disposable
Income
94.3% of GDP
U.S. Federal and Consumer Debt

30. 30
Source: Capital IQ
S&P 500 Aggregate Cash and Cash Equivalents Balances (1994 – June 2010) ($ in Billions)
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
($inbillions)
Record
Level at
$1.6 trillion
 S&P 500 companies are holding a record amount of cash totaling a record $1.6 trillion. During the same
period, the debt to equity ratio for those S&P 500 companies is down to the 2000 level of 1.3x from a peak of
1.9x in 2008.
Strategic Buyers – Record Amount of Cash on the Sidelines

31. Private EquityPrivate Equity

32. 32
 The proliferation of institutional private investment funds has continued to create a significant buildup of
un-invested capital as a result of record fund raising in 2007 and 2008 combined with suppressed deal
activity during the credit crisis.
 In the near term, reduced fund raising, combined with an accelerated investing environment and higher
equity contributions, will diminish the build up of private equity overhang.
Source: PitchBook Data, Inc.
Private Equity Raised and Overhang ($ in billions)
$0
$100
$200
$300
$400
$500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Q2
2010
Cumulative Overhang Equity Raised Equity Invested
Private Equity Environment

33. 33
Source: PitchBook Data, Inc.
Years to Invest Dry Powder at Annual Rates (Cumulative Overhang / Annual PE Capital Investment)
 At levels of investment similar to 2009, the current private equity overhang would take 11 years to invest.
 Most private equity capital has a 5-year investment period, meaning the capital will have to be invested at a
faster rate than 2009 or private equity firms will have to return un-invested capital to investors.
 With the record un-invested private equity overhang and challenging bank lending environment, many
traditional LBO/majority recapitalization investors are seeking more creative ways to deploy capital,
including over-equitizing the capital structure, investing in smaller transactions and seeking minority and
growth capital investments.
8.4
4.3
3.3
2.7
1.9
0.7
3.0
11.0
4.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2002 2003 2004 2005 2006 2007 2008 2009 Annualized
2010
Private Equity Environment

34. 34
American Central Gas Technologies, Inc. – Range of Indications of Interest
 Through GCP’s aggressive sale process, we received a high level of interest and were able to significantly
ratchet up the final price to $240 million.
 Of the four top bids, three were financial sponsors, which illustrates the growth in private equity that has
resulted in higher than normal valuations paid by private equity groups.
Indications of Interest ($ in millions)
$210.0 $207.5
$180.0 $175.0
$160.0
$151.0 $150.0 $150.0
$140.0 $137.5
$125.0 $120.0
$94.0
$225.0 $220.8
11.1x
10.3x 10.2x
7.4x
4.6x
5.9x6.2x
6.8x6.9x
7.4x7.4x
7.9x
8.6x8.9x
10.9x
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
A B C D E F G H I J K L M N O
EnterpriseValue
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
EBITDAMultiple
Financial Buyer Strategic Buyer
GCP Case Study

35. 35
Debt MarketsDebt Markets

36. 36
 The average debt multiple for LBO loans declined from 2007 through 2009, with Total Debt/EBITDA for
transactions with companies below $50 million of EBITDA at 3.4x at the end of 2009, down from 5.3x at the
beginning of 2008 and 4.4x at the beginning of 2009. Debt multiples have shown an increase this year as of
June 30, 2010.
Average Pro Forma Adjusted Credit Statistics
of Middle-Market LBO Loans (EBITDA <$50 million)
Sources: Dealogic, William Blair & Company, and S&P LCD
3.8x
4.0x
3.6x 3.5x
3.9x
4.1x
4.4x
5.0x 4.9x
5.3x
4.4x
3.4x
4.2x
3.1x 3.2x
3.0x
3.3x 3.4x
2.4x
3.9x
4.4x
4.8x
4.6x
3.3x
3.1x 3.0x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 6/30/10
Total Debt / EBITDA Senior Debt / EBITDA
Middle-Market Credit Statistics

37. 37
($ in thousands)
3.0x 4.0x 5.0x
Valuation:
TTM EBITDA $10,000 $10,000 $10,000
Valuation Multiple 5.0x 6.6x 8.3x
Enterprise Value $49,816 $66,421 $83,026
Sources & Uses:
Debt $30,000 $40,000 $50,000
Equity $19,816 $26,421 $33,026
Total Capitalization $49,816 $66,421 $83,026
Equity Returns with
7.5% Annual Growth 25.0% 25.0% 25.0%
Equity Returns at
$83MM Valuation
with Less Debt 14.6% 19.0% 25.0%
Required Annual
Growth to Satisfy Min
25% Equity Returns 19.2% 13.8% 7.5%
Total Leverage
2x
Additional
Leverage
67%
Increase in
Enterprise
Value
Use of Leverage in Recapitalization (Example)

38. 38
 Syndicated loans have decreased dramatically from the 2006/2007 time period.
 The bond market, in particular the high-yield market, has rebounded strongly as investors are seeking
higher yields in the historic low interest rate environment.
U.S. High-Yield Debt Issuance ($ in billions)
Source: Thomson Reuters
($ in billions)U.S. Syndicated Loans and Bonds
$1,673 $1,687
$764
$531
$1,191
$137 $136
$648
$-
$400
$800
$1,200
$1,600
$2,000
2006 2007 2008 2009
$inBillions
SyndicatedLoans Bonds
$34
$78
$57
$131
$138
$96
$146
$136
$43
$147
$104
$0
$20
$40
$60
$80
$100
$120
$140
$160
2000 2001 2002 2003 2004 2004 2006 2007 2008 2009 1H
2010
Debt Markets

39. Mergers & AcquisitionsMergers & Acquisitions

40. 40
 Although larger transaction volume was down considerably in 2009, transaction volume began rebounding
in the later months of the year and is up significantly through June 2010.
 Overall, the lowest end of the middle-market showed the most strength in the 2nd half of 2009.
 This trend has been primarily driven by the lack of syndicated financing for large size deals, making it easier
to finance smaller middle-market deals.
Sources: Dealogic and William Blair & Company
U.S. Middle-Market M&A Activity
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2007-2009
% Change
6/30/09
YTD
6/30/10
YTD
6/30/09 - 6/30/10
YTD % Change
< $50 MM 4,524 3,396 4,686 3,317 2,827 2,846 2,895 2,757 2,695 2,535 3,102 3,021 19.2% 1,531 2,487 62.4%
$50-$250 MM 1,446 1,419 1,581 1,009 889 1,064 1,216 1,266 1,292 1,327 1,190 775 (41.6%) 341 494 44.9%
$250-$750 MM 429 527 512 296 289 314 403 425 533 624 417 267 (57.2%) 107 192 79.4%
Total Deals 6,399 5,342 6,779 4,622 4,005 4,224 4,514 4,448 4,520 4,486 4,709 4,063 (9.4%) 1,979 3,173 60.3%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 6/30/09
YTD
6/30/10
YTD
#ofTransactions
< $50 MM $50-$250 MM $250-$750 MM
60%
Increase
Middle-Market M&A Activity

41. 41
 During the first two quarters of 2010, the market displayed a heightened appetite for lower middle-market
transactions as made evident by increased deal volumes.
 M&A activity outlook over the next 6 to 12 months is expected to be positive due to:
1. Resurgence in financial sponsor activity (to avoid return of un-invested funds).
2. Corporations seeking growth through acquisitions.
3. Increasing Debt/EBITDA multiples.
Sources: Dealogic and William Blair & Company
U.S. M&A Activity ($ in Billions)
$226
$181
$137
$157
$209
$274
$337
$353
$219 $209
$211 $159
$0
$50
$100
$150
$200
$250
$300
$350
$400
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 6/30/09
YTD
6/30/10
YTD
AverageDealValue
DealVolume
> $750MM Middle-Market Undisclosed Average Deal Value
25%
Decrease in
Avg. Deal
Value
U.S. M&A Activity

42. 42
Sources: William Blair & Company
Valuation Multiple -- Strategic vs. Financial Buyers
 EV/EBITDA multiples were driven up in 2007 because buyers were able to maintain targeted returns with
the use of leverage.
 The 2009 M&A environment saw tighter credit conditions which forced buyers to use higher equity
contributions in transactions – lowering valuation multiples.
Strategic Peak: 12.6x in
Q3 2007
Financial Peak: 13.1x in
Q4 2008
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2006 2007 2008 2009
Strategic Financial
Strategic vs. Financial Buyers – Valuation Multiple

43. 43
Sources: William Blair & Company, PitchBook
% of M&A Deal Value -- Strategic vs. Financial Buyers
 Strategic buyers have increased their acquisition activity relative to financial groups.
88% 88% 87%
82%
64%
81%
93% 95% 91%
12% 12% 13%
18%
36%
19%
7% 5% 9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 6/30/09 YTD 6/30/10 YTD
Strategic Financial
Strategic vs. Financial Buyers – M&A Activity

44. ConclusionsConclusions

45. 45
Representative Recent Transactions

46. 46
U.S. economic challenges are
structural vs. cyclical
Deleveraging process takes time
Formidable global competition
Demographics
Smaller is better
Easier to finance
Less “strategic” risk for buyer
Less integration risk for buyer
M&A activities (assuming no major
economic shock) will accelerate
Overhang of private equity
Strategic buyers (with record amounts of cash) will
need acquisitions to offset slower organic revenue
growth
Demographics
Be prepared
Easier to slow process down than speed process up
React quicker to strategic or private equity inquiry
Audits, management, ownership transfers
Conclusions

47. www.boyarmiller.com
Real Estate Finance
Thomas J. Melody – Jones Lang LaSalle
Managing Director / Co-Head Capital Markets
Real Estate Investment Banking

48. US Debt & Equity
September 2010

49. • It’s all about the banks (50%) and CMBS (20%)
• Significant gap between bid and asking prices
• 80% reduction in transaction volume (institutional
sales and financings) 2007-2010
• Loan defaults/delinquencies continue to increase
• Delays in working through distressed situations,
especially on large loans…restructures
• Note Sales (performing/non-performing loans
and auction process) are increasing
How has the recession impacted the overall
availability of capital for commercial real estate?
Commercial
Banks, 51%
CMBS & CDO,
21%
Life Companies,
9%
Agency / GSE
Portfolios, 9%
State & Federal Gov’t, 5%
Finance Companies, 5%
REITs, 1% All Other, 2%
$3.4 trillion

50. Distressed property levels are high
Net growth in level of outstanding troubled properties has at least temporarily
stalled as lenders boost pace of workouts
Source: Real Capital Analytics, Jones Lang LaSalle
• Troubled deals are in “limbo”…owners cannot respond to tenants needs (new leases, TI’s, Commissions)
• The Restructured loans are primarily short term solutions and not a “fix”
• Financial Institutions do not want to foreclose
$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
billions
Troubled REO Restructured

51. Deleveraging has forced recapitalization
2004 – 2007
• Value changes reflect NCREIF data
(adjusted 4 quarters to account for the lag
in the index)
2010
• 100% of the Equity & Mezz and $21.6 MM
of the B-Note of the 2007 deal is wiped
out, as prices return to 2004 levels
• Borrower needs to invest 1.2x their
original equity in order to refinance asset
ADDITIONAL EQUITY
TO REFI DEAL: $5.0 MM
Source: Jones Lang LaSalle
$160 MM
$100 MM
2004 DEAL: $100.0 MM 2007 DEAL: $152.2 MM
LOST VALUE: $52.2 MM
EQUITY: $7.6 MM
NEW EQUITY: $5.0 MM
DEBT: $70.0 MM
B-NOTE: $42.6 MM
MEZZ: $22.8 MM
EQUITY: $25.0 MM
DEBT: $75.0 MM
EQUITY: $25.0 MM
A-NOTE: $79.2 MM
LOST VALUE: $52.2 MM
EQUITY: $7.6 MM
NEW EQUITY: $5.0 MM
DEBT: $70.0 MM
B-NOTE: $42.6 MM
MEZZ: $22.8 MM
EQUITY: $25.0 MM
DEBT: $75.0 MM
EQUITY: $25.0 MM
A-NOTE: $79.2 MM
2010 DEAL: $100.0 MM
• Recapitalization is a loan restructure, refinance and/or sale… 2004-2010!
• 35-40% value loss… depending when existing debt was placed, may not be possible to sell or refinance
• The issue: “value” has been the problem, not capital availability… hard to sell or refinance
• Today: “Tale of Two Cities”… Core assets in D.C., SF, NY, Boston and Houston faring very well thank you!

52. Source: Morgan Stanley, MBA, FDIC, FFIEC, Intex, PPR, and Jones Lang LaSalle
Commercial real estate debt maturities by lender
Bank maturities dominate landscape and will be most challenged
• There is about $1.5 trillion of debt maturing in the next 3 years, $1 billion of which is banks debt
• Life Companies ($40 billion annually) and the GSE’s ($50 billion annually) will account for less than 20%
• There will be no option other than foreclosure or loan restructuring/modification for many loans
• GOOD NEWS: There is a lot of inexpensive debt/equity (L+ 250 or fixed at sub 6%) available with LTV up to 75%
-
100
200
300
400
500
600
2010 2011 2012 2013 2014
($Billions)
Life Insurance Companies
GSEs
CMBS
Others (including pension funds)
Banks (construction loans)
Banks (income-producing
properties)

53. How and why are loans being restructured?
Source: Jones Lang LaSalle
• Start the process of talking with lenders well before problems occur!
• It depends on the lender: banks, life companies and CMBS (master/special servicers)
• Success in restructuring/modifying loans depends on a number of factors:
• Is the loan non-recourse or recourse?
• Is the loan “current”?
• How is the owner/sponsor viewed by the lender?
• What is the owner/lender relationship (bank lines or one off)?
• What is the owner/sponsor ability to “share in the pain”?
• What is the “size” of the loan and “magnitude” of the problem?
• Strategic Defaults: Borrowers with lots of cash option to default because it makes business sense

54. • Cost of Capital: pricing is as aggressive as it has ever been with fixed rate loans as low as
3.5% (5 year term) and LIBOR floaters at L+175
• Leverage: debt levels up to 85% LTV…depends on product, sponsor and market
• Capital Provides:
• Life companies/pension funds: Met Life, Cornerstone, TIAA
• German Banks: Deutsche Bank, West Immo, Helaba Bank
• Domestic Banks: Wells Fargo, JP Morgan, Bank of America
• Agencies: Fannie Mae and Freddie Mac, HUD
• Private Equity Funds: Blackstone, Blackrock, Fortress
• REITs: KBS, Starwood, Dividend Capital
• CMBS: Goldman Sachs, Barclay’s, Morgan Stanley
• Other: GE Capital, Mesa West, Apollo
Who are the lenders?

55. • Equity markets are “open” and off the sidelines…belief we are at the bottom
• Low cost of capital (debt and equity) “drives” value
• Roughly $250 billion of equity earmarked for real estate
• Everyone chasing CORE assets in select markets, and “distressed” asset plays with very high
yields and low cost per pound
• Capital is tired of yielding less than 1%
• Institutional equity moves in “herd mentality”, and the herd is moving
What is happening in the equity markets?

56. Source: Bloomberg, Jones Lang LaSalle
0
200
400
600
800
1,000
1,200
1,400
7/6/07
8/17/07
9/28/07
11/9/07
12/21/07
2/1/08
3/14/08
4/25/08
6/6/08
7/18/08
8/29/08
10/10/08
11/21/08
1/2/09
2/13/09
3/27/09
5/8/09
6/19/09
7/31/09
9/11/09
10/23/09
12/4/09
1/15/10
2/26/10
4/9/10
5/21/10
7/2/10
AAA 10-Year CMBS REIT Senior Debt
A 10-Year Corporate
Rational pricing returning to market
• There has been a huge “spread” compression and this continues today
• Concern: money gets impatient when it is not deployed…are investors investing to invest or is there good reason?
• If spreads rise again there will be significant losses…cap rates definitely follow cost of debt
• Bank of America recently claimed that the 10 year treasury will be around 1.75% for a couple years

57. CMBS market slowly reemerging
2010 issuance already exceeds 2009 with several deals upcoming
Source: Commercial Mortgage Alert, Jones Lang LaSalle; 2010 issuance is estimated
• CMBS was the “engine” that drove the
RE market
• The banks and CMBS were part of an
“assembly line”…CMBS stopped; the
banks were left with the product
• The CMBS engine is again starting
• The deliverability of a CMBS loan is still
less than other sources
• “The light at the end of the tunnel”…
Goldman’s bonds were over-subscribed
and traded at spreads lower than
expected
• The emergence of new vintage CMBS results in the reduction in
overall credit spreads
• Delinquency rates, according to Trepp LLC, rose to almost 9% in July
2010, the highest rate in the history of the CMBS industry
CMBS Issuance 1996 - 2010
$0
$23,500
$47,000
$70,500
$94,000
$117,500
$141,000
$164,500
$188,000
$211,500
$235,000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
(millions)

58. Commercial RE Transaction volumes down 89% in 2009 from peak
Volumes through first half of 2010 are well ahead of 2009 pace
Source: Real Capital Analytics, Jones Lang LaSalle
• Still a “product-starved” market
• Lots of debt and equity for CORE markets, stabilized product and/or great opportunities
• The market needs balance which will happen when RE is in new hands of new ownership
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
TransactionVolumeinBillions

59. Cap rates have returned to 2004/2005 range
Outlook is for bifurcated market with primary markets leading the charge
Source: Real Capital Analytics, Bloomberg, Jones Lang LaSalle
• Cap rates are declining and are very low for the top markets and the CORE product
• June 2010 market wide Cap rates were at 7.62%, well above the 6.39%of June 2007
• Note, there have been Cap rates/trades in the low 5% range & high 4% for CORE product
• Not likely that Cap rates will drop much further for CORE but may for other product
• RE fundamentals (consumer confidence and retail sales) declined in the second quarter
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
9.50%
10.00%
10.50%
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Apartment Industrial Office Retail
• Cap rates declined
from 2001-2007,
increasing RE value
without improved
fundamentals
• Cap rates rose steadily
over the past two
years, however, we
really do not know how
high they went since
very few trades

60. Bank charge-off rates: commercial vs. residential
Charge-off rates for CRE loans have now surpassed those at height of the S&L crisis
Source: Federal Reserve, Jones Lang LaSalle
• As you would suspect, “charge offs” with banks are climbing with increasing troubled assets
• A “charge off” is the first step toward balancing the asset/building’s capital structure to reflect the current
marketplace
• Once this balancing occurs, the asset /building hold/sell/recapitalization decision is rational and “deal” will flow back
into the marketplace
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
1991Q4
1992Q2
1992Q4
1993Q2
1993Q4
1994Q2
1994Q4
1995Q2
1995Q4
1996Q2
1996Q4
1997Q2
1997Q4
1998Q2
1998Q4
1999Q2
1999Q4
2000Q2
2000Q4
2001Q2
2001Q4
2002Q2
2002Q4
2003Q2
2003Q4
2004Q2
2004Q4
2005Q2
2005Q4
2006Q2
2006Q4
2007Q2
2007Q4
2008Q2
2008Q4
2009Q2
2009Q4
2010Q2
Overallcharge-offrate,allcommercialbanks(%)
Residential Charge-Off Rate Commercial Charge-Off Rate

61. • According to the WSJ (Sept. 1, 2010), more than 10% of US banks remain at risk of failure
• Banks won’t sell until they have accumulated enough reserves to withstand the losses they
will incur and stop “extending and pretending”
• Small banks have more exposure to commercial RE with 40% of their bank loans
• Until the FDIC and the OCC are comfortable that the banking system can withstand the
losses, they will continue to kick the can down the road
• Banks 2nd quarter profits totaled $22 billion, as compared to $4 billion in 2009…balance
sheets have stabilized?
• Banks are willing to sell “distressed” assets, non-performing notes and smaller unattractive
REO since values have bounced back from their lows
• The larger the loss, the longer the bank will try to extend
• Banks are utilizing the “Auction” process (JLL/REOs)
Source: July 2010 Commercial Markets: Publication 1941
When will banks begin to foreclose on their “broken” real estate
loans and sell back to the market?

62. Take Aways:
Source: Federal Reserve, Jones Lang LaSalle
• Lots of capital for stabilized RE
• Declining fundamentals in second quarter
• Increasing values have resulted from low cost of capital
• Debt restructurings will continue
• Banks will begin to sell more notes and take losses

63. About Jones Lang LaSalle
JLL is in business to develop enduring client relationships built on
quality service, collaboration and trust. JLL creates and delivers real
value for clients, shareholders and our own people.
• JLL is a financial and professional services firm specializing in real estate services and
investment management.
• JLL has more than 30,000 people in 750 locations in 60 countries serve the local, regional and
global real estate needs of clients.
• JLL assembles teams of experts who deliver integrated services built on market insight and
foresight, sound research and relevant market knowledge.
• Real Estate Services: Agency Leasing, Consulting, Corporate Capital Markets, Investment
Sales and Acquisitions, Real Estate Investment Banking, Project and Development Services,
Property and Asset Management, Research, Tenant Representation, Valuation, Value
Recovery Services

64. About Jones Lang LaSalle Capital Markets
JLL Capital Markets is a full-service global provider of
capital solutions for real estate investors and occupiers
• JLL has in-depth local market and global investor knowledge — whether a sale, financing,
repositioning, advisory or recapitalization execution.
• JLL Capital Markets completed more than $143 billion of transactions globally. In the last
three years, JLL’s Capital Markets team comprises approximately 700 specialists, operating
in 180 major markets worldwide.

65. About JLL Real Estate Investment Banking (REIB)
JLL REIB is a trusted advisor who helps owner clients navigate
the capital markets in order to ensure that clients make
informed decisions as it relates to best capital solutions
• JLL REIB offers expertise in:
• Debt and equity capital raising
• Restructuring and recapitalization strategies
• Distressed asset workouts
• Valuation and strategic advisory
• Programmatic and asset specific joint ventures
• Equity “Fund” raising via JLL Securities
• Note sales
• Investment Sales
• Auction capabilities
• JLL REIB is headquartered in Houston with offices in New York, Washington D.C., Chicago, Los
Angeles and Miami

66. www.boyarmiller.com
Commercial Banking
Steve Stephens – Amegy Bank of Texas
President

67. 2010 Amegy Bank N.A. Member FDIC.
• FINANCIAL REFORM ACT IS THE PRICE FOR
GOVERNMENT SUPPORT YET A HINDRANCE TO
GROWTH
• MONEY TO LEND BUT LESS WILLING AND QUALIFIED
TAKERS
• SMART TO BE CAUTIOUS, DANGEROUS TO BE
OVERLY PESSIMISTIC

68. 2010 Amegy Bank N.A. Member FDIC.
FINANCIAL REFORM ACT IS THE PRICE FOR
GOVERNMENT SUPPORT YET A HINDRANCE TO
GROWTH
• The key implications of the Frank-Dodd Financial Reform Act are growth
limits on the largest banks, less leveraging of industry, increased
regulatory compliance burden, new consumer protection laws, and better
FDIC insurance coverage.
• Outside reform act, the national and state regulatory agencies continue to
examine banks’ credit quality and require adequate capital and loss
reserves. To date, the large banks have received the most scrutiny.
• All banks are in various stages of recovery from credit problems. The good
news is most banks have built up meaningful loss reserves from
operations and capital markets to offset growing losses and resume lending.

69. Dodd-Frank Wall Street Reform and Consumer Protection Act
2010 Amegy Bank N.A. Member FDIC.
• New Financial Stability Oversite
Council created
• Designates “systemically important”
financial companies
- Automatic for all BHCs of
$50+ B assets*
- Non-bank financial
companies specifically
identified
• Federal Reserve assesses “systemic
regulation fees”
* Includes off-balance sheet assets
• Federal Reserve required to
establish enhanced risk-based capital,
leverage, liquidity, overall risk
management requirements, credit
exposure reporting for systemically
important firms.
- Must be more stringent than
standards applicable to non-
systemically important firms.
- Fed is permitted to require
“contingent capital”
- Firms must have Resolution
Plans (“Living Wills”)
- Firms must have “Risk
Committee of the Board
Systemic Risk Regulation

70. 2010 Amegy Bank N.A. Member FDIC.
• Prohibits any banking entity from
engaging in proprietary trading, or
sponsoring or investing in a hedge
fund or private equity fund.
• Exceptions:
- Treasuries, Agencies, Munis
- Risk-mitigating hedging
- Trades “on behalf of customers”
- SBIC investments
- Selling or securitizing loans
• Establishes current bank capital
standards as statutory “floors”
• U.S. regulators could not implement any
Basel III standards that are less
stringent
• Potentially higher capital requirements
for firms with significant volumes of
derivatives activity, securitized products,
and assets for which reported values are
model-based
• Hybrid capital, e.g., trust preferred
securities disallowed as Tier 1 capital for
BHCs of >$15B in assets. Existing
TRUPS phased out 2013-2016.
The Volker Rule Bank Capital (Collins Amendment)

71. 2010 Amegy Bank N.A. Member FDIC.
• New Executive Compensation requirements
– All Comp Committee members must be independent
– Stricter determination of comp consultant independence
– Pay and Performance disclosure: Disclose relationship between a company’s
executive compensation actually paid and its financial performance
– Internal Pay Equity disclosure: Disclose median compensation of all employees
(ex-CEO) compared to CEO
– Broker discretionary voting eliminated for directors, exec comp or any other
“significant matter” as determined by SEC
– Say on Pay and Say on Golden Parachutes: non-binding shareholder votes
required
– Clawback: required disclosure of incentive compensation based on publicly
reported financial results, and pay clawback policies following restatement
– Financial institutions: additional statutory compensation disclosures (appear to
be similar to what already is required by TARP and Fed)
Investor Protection

72. 2010 Amegy Bank N.A. Member FDIC.
• Assessment based on assets minus
tangible equity, rather than deposits
(shifts burden toward larger banks)
• Minimum FDIC reserve ratio
increased to 1.35% of insured
deposits (up from 1.15%).
• Effect of increased assessments
must fall on banks larger than $10 B
in assets.
• Maximum deposit insurance amount
permanently increased to $250,000.
• Non-interest bearing transaction
account balances fully insured up to
any amount through 2012.
• Counter-cyclical capital and leverage
requirements: banking regulators must
require higher capital in times of
economic expansion and lower capital in
times of economic contraction.
• Expansion of nationwide deposit cap:
10% cap is now based on all insured
depository institutions.
• New liability concentration cap: No
financial company can acquire another if
its resulting total consolidated liabilities
would exceed 10% of aggregate
liabilities of all financial companies.
• “Source of Strength” doctrine: now
established by statute.
FDIC Insurance Reforms Regulation of Bank...Institutions

73. 2010 Amegy Bank N.A. Member FDIC.
• New Federal agency with very broad powers and a substantial budget
– Within the Federal Reserve, but completely autonomous
– Exclusive rulemaking, examination and primary enforcement authority under
Federal consumer financial law for banking organizations with assets > $10 B
– For smaller institutions, prescribes rules, may participate in examinations, but
has no enforcement authority
– Budget = 10% of Fed’s total operating budget, plus an additional $200 million if
the Bureau Director determines that it is inadequately funded
• Rules may only be set aside by 2/3’s vote of 15 person Financial Stability
Council (Chair is this Bureau is one of the 15)
• OCC Federal preemption of state consumer laws is weakened.
• States attorneys-general may bring civil action against national banks to enforce
regulations prescribed by the Bureau
• Bureau is authorized to prohibit or limit mandatory pre-dispute arbitration
provisions
Bureau of Consumer Financial Protection

74. 2010 Amegy Bank N.A. Member FDIC.
• Interchange fee regulation: Federal Reserve must prescribe regulations
requiring that interchange transaction feed must be “reasonable and proportional
to the cost of the card network’s expense for processing the transaction, include
the cost of fraud to card issuers.
• Paying interest on commercial DDA accounts will become legal.
• Rating Agency ratings: appears to direct bank regulatory agencies to develop
credit standards that do not reference rating agency ratings, but the summaries
that we have are not clear.
Other Notable Provisions

75. 2010 Amegy Bank N.A. Member FDIC.
All FDIC Insured Institutions

76. 2010 Amegy Bank N.A. Member FDIC.
Reserve Coverage
Ratio*
2007-2010
*Loan-loss reserves to
noncurrent loans.
The industry's
"coverage ratio" of
reserves to
noncurrent loans
improved for a second
consecutive quarter,
from 64.9 percent to
65.1 percent, as the
decline in noncurrent
loans outpaced the
reduction in loss
reserves.
All FDIC Insured Institutions

77. 2010 Amegy Bank N.A. Member FDIC.
MONEY TO LEND BUT LESS WILLING AND QUALIFIED
TAKERS
• Broad financial deleveraging combined with regulatory impact create
significant loan and fee revenue pressure for banks.
• Bank credit is contracting at an unprecedented 15% annual rate as
lenders sit on a record $1.3 trillion of cash.
• Banks are anxious to lend money. Yields on investment securities are
unattractive and, contrary to public perception, it is punitive for banks to
invest deposits in fed funds at .25% when their direct costs are well in
excess of that.
• Banks’ enthusiasm to lend is tempered by more restrictive underwriting
tests to prove cash flow capacity to service debt.

78. 2010 Amegy Bank N.A. Member FDIC.
Problem C&I Loans by Market Segment
Includes loans rated special mention, substandard, doubtful and loss

79. 2010 Amegy Bank N.A. Member FDIC.
• 707 financial institutions received TARP funds.
• $245 billion in TARP funds were distributed to banks in FY2009.
• Through May, 2010, TARP repayments totaled about $194 billion, surpassing the
outstanding TARP funds by $4 billion.
• The projected lifetime cost of the TARP program has decreased by $11.4 billion to
$105.4 billion since the FY2011 President's Budget.
Troubled Asset Relief Program (TARP)
TARP
Funds
Loans Outstanding
Loans Repaid
$190 billion
$194 billion

80. 2010 Amegy Bank N.A. Member FDIC.
Federal Deposit Insurance Corporation
Equity Capital
FDIC-Insured Commercial Banks
United States (50 states and DC)
Balances at Year End, 1966 - 2009
(Dollar amounts in thousands)
$1,135,571,9237,2832007
$1,147,063,9447,0862008
$1,303,870,8216,8392009
Total Equity CapitalNo. of InstitutionsYear

81. 2010 Amegy Bank N.A. Member FDIC.
SMART TO BE CAUTIOUS, DANGEROUS TO BE
OVERLY PESSIMISTIC
• Unlike the 1980s, Houston is relatively well-positioned to withstand
economic stress. Two of the primary reasons are a quicker rebound of
energy prices in this cycle and a faster and more successful response by
the business community to changing conditions.
• Similar to the 1980s, Real Estate exposure is biggest concern in banks,
yet better contained.
• The business community must strive for a good balance between caution
about the economy and confidence to invest and expand. Money velocity
(the average frequency of money spent) must increase by private sector to
avoid inflationary surplus money supply, or worse, a downward
deflationary spiral.

82. 2010 Amegy Bank N.A. Member FDIC.

83. Questions & Answers