L a r g e Banks: 2Q Result s

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1 L a r g e Banks: 2Q Result s j a n n e y corporat e credit Another quarter, another stronger dollar: some banks benefited from the volatile markets, while others waited eagerly for higher rates. Jody Lurie Corporate Credit Analyst jlurie@janney.com 2Q results for US banks were a bit choppier this quarter, with 10 out of the 15 largest US banks by assets exceeding consensus for net income. International market volatility seen last quarter persisted, which bolstered some firms results, while inhibiting others growth prospects. The stronger US dollar both helped and hindered banks operations. Loan growth was sluggish, albeit there were a few bright spots to indicate the domestic market may be moving beyond the post-recession mentality. Many management teams highlighted their compliance with the new liquidity coverage ratio, along with potential benefits traditional banking operations could receive should rates rise. Second quarter 2015 bank announcements seemed even more mixed than first quarter. Low asset reinvestment rates ate into margins, but the recent, though small, uptick in interest rates showed some promise. By-and-large firms managed down analysts estimates for earnings. Still, firms that exceeded Street expectations did not necessarily demonstrate solid quarterly performance, while other banks recorded much stronger quarters beyond what was captured in the earnings surprise. Many of the larger banks with international operations benefited from the volatility and, in turn, increased volume in foreign exchange rates, while others noted the increased risk brought on by falling energy prices. Further, the stronger US dollar negatively affected assets under management overseas. Traditional banking operations remained mixed and margins largely fell, despite firms desire to manage or cut costs to counteract the low rates. A few institutions recorded loan growth, particularly on the commercial side, but also through real estate operations showing signs of life in more economically challenged regions. Legacy portfolio run-off was still prevalent and welcomed, and firms maintained solid asset quality, as seen by record (or near record) low net charge offs and nonperforming loans. On the deposit side, costs were already low, so firms did not have the ability to minimize expenses, and instead looked at ways to improve mix if possible. Fee-based operations offset some of the negative interest margin pressures. Capital quality exceeded requirements, even after firms instituted robust share buybacks and dividend plans. Some banks expanded via acquisitions, as means to achieve growth in this sluggish environment, along with putting extra cash to work. Like in 1Q, firms delved into liquidity coverage ratio requirements, which took effect at the beginning of Most of the largest US banks disclosed their average high quality liquid asset balances for the quarter and/or their liquidity coverage ratios, affirming at the least compliance with the 2015 minimum requirements. See page 8 for important information regarding certifications, our ratings system as well as other disclaimers. Large Banks: 2Q Results Page 1 Looking at percentages of actual net income vs. consensus estimates, notable winners included: Bank of America (24%) Improved net interest income carried through the income statement; BB&T (20%) Loan growth and recent acquisitions bolstered 2Q performance; BNY Mellon (16%) Strong top line growth across units was helped by exchange rate moves; Goldman Sachs (12%) The firm guided down analysts estimates from last year s strong 2Q; and Citigroup (9%) Lower operating costs and net credit losses aided stronger net income. Source: Janney FISR; Company Reports; SNL Financial

2 As in 1Q 2015, an addition to banks discussions this quarter revolved around the newly instituted liquidity coverage ratio requirements. Only two banks fell short of consensus estimates: Capital One (-11%) Flattish revenues and higher noninterest expense caused margin erosion; and Regions (-4%) Weaker net interest margin and higher overhead costs contributed to disappointing earnings. All other banks greater than $100B in assets* either beat or met net income estimates. As in 1Q 2015, an addition to banks discussions this quarter revolved around the newly instituted liquidity coverage ratio requirements. The Fed, along with the FDIC and OCC, implemented for the first time a standardized minimum liquidity requirement for large and internationally active banking organizations. Each firm must hold a certain amount of high quality liquid assets ( HQLA ) defined as central bank reserves or government and corporate debt that can be converted to cash of an equal or greater amount easily and quickly (within a 30-day stress period). Further, each firm s ratio of liquid assets to projected net cash outflows, dubbed the liquidity coverage ratio ( LCR ), must exceed certain thresholds. The phase-in period began in January 2015, and started with a minimum LCR of 80%, which will increase to 90% in January 2016, and finally to 100% in January Since January 2015, firms are required to calculate their LCR daily. Per the regulators, These transition periods were similar to, but shorter than, those set forth in the Basel III Revised Liquidity Framework, and were intended to preserve the strong liquidity positions many U.S. banking organizations have achieved since the recent financial crisis. Banking organizations that will need to comply are those with at least $250B in total assets or at least $10B in on-balance sheet foreign exposure, along with their subsidiaries that hold at least $10B in assets. Almost all of the largest US banks disclosed their average high quality liquid asset balances for the quarter and/or their liquidity coverage ratios, with many in compliance with the 2017 requirement of 100%. Selected Banks ($ in billions) Net Inc Surp Total Assets Assets Deposits Net Inc NIM NII/Op Rev JPMorgan Chase 2.3% $2, % -5.9% 6.4% 5bps -36bps Bank of America 24.1% $2, % -0.3% 58.5% 22bps -276bps Citigroup 8.7% $1, % 0.9% 1.1% 7bps -178bps Wells Fargo 6.4% $1, % -0.9% -1.7% 4bps -140bps Goldman Sachs 11.9% $ % -63.2% Morgan Stanley 6.4% $ % 2.5% -25.7% U.S. Bancorp -0.4% $ % 3.6% 3.7% -3bps 116bps BNY Mellon 16.2% $ % 1.6% 9.8% 3bps -82bps PNC -0.5% $ % 1.4% 4.0% -7bps 356bps Capital One -11.3% $ % -0.8% -25.2% -1bps 86bps State Street -0.5% $ % 9.1% 3.2% -5bps 51bps BB&T 20.2% $ % 1.2% -8.4% -4bps 118bps SunTrust 6.9% $ % 0.4% 12.5% 6bps 122bps Fifth Third 8.6% $ % -0.4% -14.4% 7bps -13bps Regions -4.0% $ % -0.4% 21.8% 1bps 127bps Large Banks: 2Q Results Page 2 AVERAGE 6.3% $ % 0.8% -1.2% 3bps 19bps ; *We excluded Northern Trust from this report, as total assets reached above the $100B threshold in 4Q 2013, but has been below the mark historically

3 BofA commented on the Fed s request for model changes, and guided that Tier 1 common (advanced approach) would fall to 9.3% as a result. Large Banks: 2Q Results Page 3 Basel III Capital and Liquidity Coverage Ratio Requirements Bank ($ in bln) Standardized Basel III Est. Tier 1 Common Change Advanced Basel III Est. Tier 1 Common Change High Qlty Liquid Assets ($B) Liquidity Coverage Ratio JPMorgan Chase 11.2% 60bps 11.0% 30bps $532 >80% Bank of America 10.3% 0bps 10.4% 30bps $484 >100% Citigroup >11% N/A 11.4% 30bps $ % Wells Fargo 10.5% -36bps >10.5% N/A $250 >100% Goldman Sachs 11.8% 40bps 12.5% -10bps $181 N/A Morgan Stanley >12.5% N/A 12.5% 90bps $188 N/A U.S. Bancorp 9.2% 0bps 12.4% 60bps N/A >80% BNY Mellon 10.0% 0bps 9.9% 0bps N/A >100% PNC 10.0% 10bps N/A N/A N/A >100% Capital One 12.1% 0bps >8% N/A N/A >100% State Street 10.9% 100bps 11.4% -10bps N/A >90% BB&T 10.4% -10bps N/A N/A $ % SunTrust 9.8% 1bps N/A N/A N/A >90% Fifth Third 9.4% -20bps N/A N/A N/A N/A Regions 11.0% 10bps N/A N/A N/A >90% Second Quarter Bank Earnings Summary: Company Synopsis Selected Net Inc Key Key Banks Surp Positives Negatives Earnings beat Street expectations for the fifth Net revenue declined 1% and 4% YoY consecutive quarter. Net income grew 6% due to lower revenues in Mortgage Banking and 5% YoY to $6.3B, despite a declining and Corporate & Investment Banking top line. Consumer and Community Banking operations related to business simplification. revenue expanded 3%, and carried Commercial Banking and Asset Management to the bottom line. Noninterest expense segments each recorded double-digit JPMorgan fell on lower legal expenses and reduced declines in net income vs. 2Q14. The firm Chase headcount. The firm's balance sheet shrank continues to use headcount reduction as a 2.3% as non-operating deposits lessened. Basel means to drive profits. High quality liquid III Tier 1 common (advanced) rose 30bps to assets on average fell 13% from lower cash (A3/A/A+) 11.0%, despite $1.0B in share buybacks this levels. Management expects to see a 9% quarter. Net interest margin improved 2bps YoY decline in 3Q Capital Markets revenues on lower cash and higher loan balances. as it eliminates non-core operations and a The firm reported compliance with fully corresponding decline in expenses. Mortgage phased-in liquidity coverage requirements. Banking noninterest revenue is expected to Management expects core loan growth to be down YoY on lower servicing revenue and continue at a roughly 10% YoY rate. diminishing repurchase benefits. Bank of America (Baa1/A-/A) 24.1% Earnings had a strong beat against Street A fall in sales & trading revenue and expectations and a more modest beat vs. investment banking fees contributed to the consensus for revenue. The top line expanded slight erosion and YoY in noninterest 4% and 2% YoY to $22.1B on net income. Loan growth, although positive, interest income growth stemming from higher was "partially offset by a $13.9B reduction rates, as well as deposit and commercial in the discretionary loan portfolio along loan growth. Decreased legacy costs helped with legacy portfolio runoff. Total deposits noninterest expenses stay down, even after dropped seasonally. Management one-time legal fees, and in turn, net income guided for increased costs associated with improved meaningfully. Asset quality was the firm's "CCAR resubmission through the strong, as net charge offs hovered near lows, balance of the year." It commented on the while nonperforming loans fell further. Basel Fed s request for model changes, and guided III Tier 1 common (standardized) held steady that Tier 1 common (advanced approach) from 1Q at 10.3%. would fall to 9.3% as a result.

4 Well Fargo warned its balance sheet remains asset sensitive, but sees itself positioned to grow net interest income YoY even in a low rate environment. Citigroup 8.7% (Baa1/A-/A) Wells Fargo (A2/A+/ AA-) Goldman Sachs (A3/A-/A) 6.4% 11.9% Earnings well exceeded analysts guesses. Excluding debt valuation adjustments, While net income fell from 1Q15, it improved revenues were flattish and down. Loans fell sizably YoY on lower operating costs, net 5% YoY from a shrinking North American credit losses, and effective tax rate. Citicorp mortgage portfolio and negative currency net income rose modestly YoY, while net effects. Deposits declined 6% YoY on a income at Bad Citi Citi Holdings trended reclassification of Japan retail banking positive in 2Q. Net interest margin bumped deposits. Both Global Consumer Banking up 7bps on benefits from trading. Basel and Institutional Clients groups recorded III Tier 1 common (advanced) rose 30bps. revenue declines. Institutional Clients The firm remains focused cutting legal and Group expenses crept up with increases in overhead costs, and as such, costs at Citicorp regulatory and compliance costs. fell 6% YoY, helped by exchange rates. Earnings beat Street estimates. Revenue grew Noninterest income shrank 2% both 1% YoY to $21.3B on higher net interest and YoY due to lower noninterest income income. Net interest margin bumped up 2bps and a fall in trading gains. Net income in due to a rise in investments & loans and the Community Banking sector dropped 8% lower deposit costs. Noninterest expense fell, and 2% YoY due to higher income taxes and the efficiency ratio was flattish and within and declining noninterest income. Wholesale management's targeted range. Asset quality Banking AUM reduced from equity outflows remained strong as net charge offs dropped offsetting fixed income inflows. Although to 0.30%, the lowest level in 20 years, while only a small portion of operations, the energy nonperforming assets fell further this quarter. portfolio s nonperforming loans rose on lower Both average loans and deposits crept up 1% energy prices. The firm warned its "balance. Net income in the Wholesale Banking sheet remains asset sensitive," but sees itself sector expanded 12% and 3% YoY on positioned to grow net interest income YoY solid loan and deposit growth and higher real even in a low rate environment; however, the estate brokerage and fees. firm anticipates lower originations in 3Q. The bottom line solidly outperformed Net revenues declined 15% and 1% consensus. Despite a drop in net revenue, a YoY on softer debt underwriting, Institutional few segments showed strong performance. Client Services revenues (particularly credit Investment Banking and Investment products), and lowered investments in Management revenue improved and equities. In turn, the bottom line came YoY. Debt and equity underwriting recorded in weak. Client activity in particular was healthy growth vs. 1Q. Despite higher negatively impacted by currency trends. FICC headcount vs. 1Q, compensation and benefits performed poorly this quarter on a difficult stayed low in 2Q, and partially offset margin operating environment. Net interest income deterioration. Assets under supervision rose fell sharply, with double-digit drops from each and YoY. Per management, "The firm 1Q and 2Q14. The smaller compensation and continues to maintain strong capital ratios benefits cost was not enough to offset the and liquidity." Basel III Tier 1 common 59% rise in noncompensation costs primarily (standardized) bumped up 40bps to 11.8%. "related to litigation charges." Morgan Stanley (A3/A-/A) 6.4% Earnings outperformed analysts' projections for both the top and bottom lines. Wealth Management and Investment Management revenues grew and YoY. Equity sales and trading expanded YoY on increased client volumes, while fixed income benefitted YoY from the moves in rates and foreign exchange markets. Investment Banking revenue increased 23%. Basel III Tier 1 common improved significantly from 1Q, and the firm is exiting its physical oils unit. Management remarked on the positive effects of the 2-notch Moody s upgrade during 2Q. Net income fell 27% and 8% YoY (exdebt valuation adjustments). Both interest and noninterest revenues fell. Institutional Securities revenue and net income fell, but improved modestly YoY. Compensation and non-compensation expenses rose YoY, but did not outpace revenue growth, and management is very focused on cost containment. The firm completed its $625MM share buyback plan, and views itself as capital heavy. On Europe's softer market, management guided for "muted activity and volumes in the near term." Large Banks: 2Q Results Page 4

5 Management at US Bancorp guided for stability in net interest margin and net charge offs in 3Q15. U.S. Bancorp (A1/A+/ AA-) BNY Mellon (A1/A+/ AA-) -0.4% 16.2% PNC -0.5% (A3/A-/A+) Capital One (Baa1/ BBB/A-) -11.3% Earnings met consensus estimates. Net interest income increased and YoY on a rise in average earning assets. The efficiency ratio improved, and looking forward management expects the ratio to remain in the low 50s. Average commercial loan growth was strong YoY at 11%, and added to a YoY rise in total loans, matched by deposit growth of 9% YoY. Asset quality was helped by drops in nonperforming assets and YoY and, per management, credit quality "remains strong," as net charge offs dropped modestly YoY. Basel III Tier 1 common (standardized) remained stable from Q1 at 9.2%. Total revenue fell 3% YoY on a one-time item in 2Q14. Noninterest income decreased 7% YoY also on a one-time item and on lower mortgage banking revenue. Consumer & Small Business Banking showed modest decreases in net income and YoY on heightened noninterest expense and provisions for credit losses. Net interest margin gave up 5bps and 24bps YoY from lower average reinvestment and loan rates. The drop in net charges offs YoY was sullied by an increase in net charge offs of 6% on lower recoveries. Management guided for stability in net interest margin and net charge offs in 3Q15. Earnings surpassed Street expectations. Net Investment management and performance income expanded 10% and 50% YoY, fees fell despite benefits from the driven by both higher fee and net interest Cutwater acquisition. Employee incentives revenues. Fee revenue grew 3% YoY, driven and business development costs grew YoY. by higher investment service fees, foreign While foreign exchange movements helped exchange revenue, and financing-related fees. the top line on a YoY basis, it cut into Net interest margin expanded slightly in 2Q. revenues. Assets under management fell Noninterest expense fell YoY on flattish staff 1%. Management expects financingrelated fees to decline after 3Q, predicting costs, reduced legal charges, and favorable impacts of a strong US dollar. Assets under a more moderate usage by clients and an management rose 5% YoY, helped by a increase in the use of alternative investments. recent acquisition, partially offset by currency Short-term costs are expected to increase as effects. Basel III Tier 1 common (standardized) the firm incorporates a new business into its held steady. investment management vertical. Revenue moved up 4% and 1% YoY on higher noninterest income, which rose 9% on fee income growth and increased gains on asset sales. Strong performance across the board translated to healthy rises in fee income and YoY. The efficiency ratio improved slightly and was stable YoY. Commercial loan growth offset a drop in consumer lending, while deposits showed solid expansion vs. 2Q14. Credit quality improved as nonperforming assets dropped and net charge offs decreased sizably. Basel III Tier 1 common (standardized) improved 10bps from 1Q15. The bottom line missed consensus by a penny. Overhead expenses rose modestly despite management's efforts to cut costs. Net interest income fell slightly on lower purchase accounting accretion, and net interest margin gave up 9bps and 39bps YoY on extra liquidity on hand. Earnings in the residential mortgage banking segment declined and YoY on smaller loan sales and servicing revenue. Management anticipates constrained net interest income growth in the short term, as a result of the low interest rate environment, along with only modest loan growth. Revenue stayed flat and advanced 4% Earnings missed consensus expectations. Net YoY to $5.7B. Noninterest income rose 6% income fell considerably on a drop in preprovision earnings and increased provision, but fell 2% YoY, and net interest income improved YoY. Net charge offs dropped 8bps expense; the latter bumped up 8% due, while loans and deposits improved to increased marketing and growth-related modestly over the same period. The Domestic operating expense. Net interest margin Card business experienced strong loan gave up 1bp on restructuring charges, and growth and higher new account originations, management guided for "a modest amount while delinquency rates declined 8bps. of incremental non-recurring charges later Consumer Banking benefitted from growth this year." The efficiency ratio softened. in auto loan originations, but management The firm s UK PPI reserve increased, guided for slowed growth in this category in driven by declines in complaint volumes that the future. The firm sees its liquidity coverage were slower than anticipated. Once again, exceeding the 2015 minimum. In an attempt management did not give an exact estimate to simplify operations, the firm plans to exit for Basel III Tier 1 common (advanced), but fully certain assets by 1Q16. stated it was above the 8% target. Large Banks: 2Q Results Page 5

6 BB&T anticipated a steady decline in expenses throughout 2016 to achieve targeted cost savings of 32%. State Street (A2/A+/ AA-) -0.5% BB&T 20.2% (A2/A-/A+) SunTrust (Baa1/ BBB+/ BBB+) 6.9% Net interest revenue fell 3% YoY, due to Earnings were in line with consensus lower yields from interest earning assets and estimates, and net income rose 3%. currency effects, partially offset by higher Revenue increased 2% and YoY, each client deposits. In turn, net interest margin driven by servicing and management fees, ticked down. Operating expenses rose YoY on along with securities finance revenue, despite higher compensation and benefit expenses negative currency effects. Compensation and and elevated costs to support new business benefits dropped on seasonal effects. and regulatory initiatives. Foreign exchange Basel III Tier 1 common (standardized) grew revenue dropped 18% YoY thanks to lower 100bps to 10.9%, despite $350MM in share currency volatility. The firm recorded an buybacks. Management reported compliance after-tax charge of $156MM in 2Q related with fully phased-in liquidity coverage to indirect foreign exchange matters. About requirements. The firm expects % of its non-us investment portfolio is operating revenue to outperform 2014's in the Eurozone. Management anticipates numbers by 4% to 7%. pressures from a weaker euro for FY2015. Revenue grew 1% YoY to $2.4B, benefitting Earnings missed consensus expectations by from double-digit growth in noninterest under a penny. Net interest margin eroded income; the latter rose from higher mortgage 6bps on lower loan rates, while the banking and investment banking income. efficiency ratio softened over the same Loan growth was driven by increases period. Noninterest expense expanded, in most types except residential mortgage, reflecting early debt extinguishment costs revolving credit, and those loans acquired from and higher personnel expense. Residential the FDIC, while average deposits advanced mortgage loans remained weak YoY. Basel and YoY, reflecting improved mix. Asset III Tier 1 common gave up 10bps. The quality strengthened as evidenced by reduced firm completed the sale of American Coastal nonperforming assets and net charge offs Insurance and increased its partnership. The firm completed its purchase of the in commercial property risk underwriter Bank of Kentucky, and the firm guided that its AmRisc in the hopes of reducing exposure acquisition of Susquehanna is "expected to to underwriting losses in the future. close on August 1." The bank anticipated a Management guided for a slight reduction in steady decline in expenses throughout 2016 noninterest income in 3Q15 and a moderate to achieve targeted cost savings of 32%. increase in expenses for the same period. The bottom line outperformed consensus Net interest income fell 3% YoY on smaller estimates. Revenue increased 4%. commercial loan swap income. Noninterest Net interest income improved 2% on expense grew 4%, thanks to seasonality improved loan yields, and noninterest income as well as early debt extinguishment costs. grew 7%, driven by higher investment Mortgage production income decreased banking activities and seasonal benefits., as a result of lower lock volume and The efficiency ratio strengthened towards reduced gain on sale margins. The firm used management's FY2015 target. Noninterest headcount reduction to bolster margins. expense shrank 2% YoY from the sale of Provisions for credit losses were lower asset manager RidgeWorth Capital and and YoY, also contributing to bottom line lower operating losses. Delinquencies and improvement. Average loan balances were nonperforming loans fell from 1Q, thanks to slightly lower on smaller consumer improvements in commercial and residential and commercial real estate balances, while loans, partially offset by consumer loans. Net deposits grew, but the mix did not improve charge offs improved by 40bps. too dramatically. Large Banks: 2Q Results Page 6

7 Fifth Third (Baa1/ BBB+/A) 8.6% Earnings exceeded analysts forecasts. Both Net income fell and YoY on lower corporate and mortgage banking showed noninterest income, partially offset by solid double-digit revenue growth. improved net interest income. Net Net interest margin bumped up 4bps. interest margin fell 25bps YoY. Noninterest Asset quality improved, as net charge offs expense crept up 3%, and management hit a record low of 0.37% while the amount plans to close 105 branches within 12 of nonperforming loans declined further. months, demonstrating an "intense focus on Net charge offs shrank for all portfolios expense management." The efficiency ratio except commercial real estate. Average softened despite this effort. Basel III Tier portfolio loans rose and YoY primarily 1 common dropped 20bps to 9.4%, and on commercial & industrial and construction the firm announced a block repurchase of its loan growth. Average deposits advanced 2% own shares, which it completed during the and 8% YoY. Management guided for quarter. CEO Kabat announced his retirement increased net interest income and stable net effective later this year; Greg Carmichael will interest margin in 3Q15 and into 4Q15. replace him. Region s home equity balances increased for the first time in 6+ years. Regions Financial (Baa3/BBB/ BBB) -4.0% Revenue grew 3% and 2% YoY on Earnings missed Street forecasts by a elevated mortgage income, capital markets penny. Salaries and benefits increased 4% income, and card & ATM fees. The firm due to higher annual bonuses and an reported a 23% rise in net income, unusually low 1Q level. Noninterest costs thanks to higher commercial credit and rose, despite management's desire to cut capital markets fee, and expanding mortgage costs. Net interest margin declined 2bps income. Net interest income was flattish. due to pressure on asset yields. The A lawsuit settlement bolstered the bottom firm incurred legal and regulatory charges, line. Consumer lending grew from strong which negatively impacted earnings. The performance in every loan category; home energy portfolio experienced heightened risk, equity balances increased for the first time and management expects added downward in 6+ years. Average loans expanded 4% movement if oil prices remain low. The firm YoY. Nonperforming assets shrank further anticipates a softening credit card portfolio on legacy portfolio runoff. The firm reported driven by concentrated commercial credits compliance with new liquidity coverage and fluctuating commodity prices. requirements. Large Banks: 2Q Results Page 7

8 Analyst Certification I, Jody Lurie, the Primarily Responsible Analyst for this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject sectors, industries, securities, and issuers. No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. Janney Montgomery Scott LLC ( Janney ) Debt Research Disclosure Legend Janney may seek compensation for investment banking services for any company listed in this report in the next 3 months. The research analyst is compensated based on, in part, Janney s profitability, which includes its investment banking revenues. Additional information available upon request. Definition of Issuer/Company Outlooks Janney FIS employs a rating system which considers the company, but not any specific debt or equity securities of the company and is not making a recommendation with regard to any specific debt securities of the company. Outlooks reflect our opinion about how credit factors of the company may affect its credit rating(s). Positive: Janney FIS believes there are factors which point towards improving issuer or sector credit quality which may result in potential credit ratings upgrades Stable: Janney FIS believes there are factors which point towards stable issuer or sector credit quality which are unlikely to result in either potential credit ratings upgrades or downgrades. Cautious: Janney FIS believes there are factors which introduce the potential for declines in issuer or sector credit quality that may result in potential credit ratings downgrades. Negative: Janney FIS believes there are factors which point towards weakening in issuer credit quality that will likely result in credit ratings downgrades. Definition of Sector/Industry Ratings Overweight: Janney FIS expects the target asset class or sector to outperform the comparable benchmark (below) in its asset class in terms of total return. Marketweight: Janney FIS expects the target asset class or sector to perform in line with the comparable benchmark (below) in its asset class in terms of total return. Underweight: Janney FIS expects the target asset class or sector to underperform the comparable benchmark (below) in its asset class in terms of total return. Janney FIS Outlooks Distribution as of 07/28/2015 IB Serv./Past 12 Mos. Outlook Count Percent Count Percent Positive Stable Cautious Negative Benchmarks Asset Classes: Janney FIS ratings for domestic fixed income asset classes including Treasuries, Agencies, Mortgages, Investment Grade Credit, High Yield Credit, and Municipals employ the Barclay s U.S. Aggregate Bond Market Index as a benchmark. Treasuries: Janney FIS ratings employ the Barclay s U.S. Treasury Index as a benchmark. Agencies: Janney FIS ratings employ the Barclay s U.S. Agency Index as a benchmark. Mortgages: Janney FIS ratings employ the Barclay s U.S. MBS Index as a benchmark. Investment Grade Credit: Janney FIS ratings employ the Barclay s U.S. Credit Index as a benchmark. High Yield Credit: Janney FIS ratings for employ Barclay s U.S. Corporate High Yield Index as a benchmark. Municipals: Janney FIS ratings employ the Barclay s Municipal Bond Index as a benchmark. 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For investment advice specific to your individual situation, or for additional information on this or other topics, please contact your Janney Financial Consultant and/or your tax or legal advisor. Large Banks: 2Q Results Page 8