Commercial Loan Origination

CEB TOWERGROUP COMMERCIAL BANKING Commercial Loan Origination Technology Analysis

RETAIL BANKING & CARDS PRACTICE Executive Director Aaron Kissel Practice Manager Joanne Pollitt Research Director Andy Schmidt VENDOR ASSESSMENT TEAM Managing Director Jaime Roca Project Manager Magda Rolfes Senior Research Analyst Phung Phan QUANTITATIVE INSIGHT TEAM Project Manager Carolina Valencia Research Analyst Ben Fieselmann COPIES AND COPYRIGHT As always, members are welcome to an unlimited number of copies of the materials contained within this handout. Furthermore, members may copy any graphic herein for their own internal purpose. The Corporate Executive Board Company requests only that members retain the copyright mark on all pages produced. Please contact your Member Support Center at +1-866-913-6450 for any help we may provide. The pages herein are the property of The Corporate Executive Board Company. Beyond the membership, no copyrighted materials of The Corporate Executive Board may be reproduced without prior approval. LEGAL CAVEAT CEB TowerGroup has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and CEB TowerGroup cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, CEB TowerGroup is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither The Corporate Executive Board Company nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by CEB TowerGroup or its sources, or b) reliance upon any recommendation made by CEB TowerGroup. 2

EXECUTIVE SUMMARY Technology Analysis Scope & Methodology In response to feedback from our membership, CEB TowerGroup developed this technology analysis product to identify key components of a technology investment decision and effectively compare vendor technology products. The basis of our process comes from the knowledge that investment decisions revolve around the benefit to the end-user and enterprise of a technology rather than the feature set alone. This technology analysis is tailored to reflect the needs of the end-user to diagnose the technology attributes particular to a firm, and to effectively identify vendor products that align with the firm s needs. To that end, CEB TowerGroup conducted a series of interviews and surveys with financial services executives, industry experts, and vendors regarding commercial loan origination technology. The results of this research formed the basis of our anatomy and informed the proprietary five point rating system on which we scored individual products. Current Market & Future Investment Lenders Face Slow Recovery: Despite signs of recovery in the first half of 2011, flagging economic growth and the escalation of the European Sovereign Debt Crisis in the second half of the year hampered more robust lending growth in most developed economies. In Europe commercial lending fell by around 5% in the second half of 2011, while in Japan demand for commercial credit remained stagnant. Among major developed economies, the US is one of the few countries to experience a significant uptick in commercial lending, with annualized growth exceeding 10% in the second half of 2011. Banks Expect Moderate Revenue Growth and Higher Costs: Fifty-three percent of financial executives expect to improve revenues in 2012, but most anticipate growth to remain modest. Stronger lending performance will be tempered by deteriorating spreads on commercial loan products as wholesale funding costs rise while major central banks maintain historically low benchmark interest rates. Executives also expect operational costs to rise due to a raft of new regulations introduced in the aftermath of the 2008-2009 Financial Crisis that will dramatically increase compliance reporting and capital reserve requirements. Banks Invest in Technology to Improve the Credit Lifecycle: A majority of lenders still rely on core banking applications that do not provide industrial strength commercial lending functionality as well as a mix of home-grown and legacy vendor systems. These obsolete systems provide little information visibility, are loosely integrated and require multiple manual entries of data, all of which can lead to unnecessary expenditure of already tight resources. Most lenders recognize the need to modernize their commercial lending operations with an integrated lending platform to facilitate straight-through processing (STP). Single-platform commercial lending systems provide a unified depository of information, which improves the efficiency of all lending business units and ultimately contributes to enhanced customer satisfaction. 3

EXECUTIVE SUMMARY Vendor Landscape and Rankings The selection process centered around those vendors with mature products, globally recognized innovation and multiple large-scale installations with major financial services institutions. This technology analysis includes Algorithmics, Custom Credit Solutions, Davis and Henderson, FIS, Harland Financial Solutions, HCL, Polaris, Moody s Analytics, Nucleus, Third Pillar and WebEquity. By combining our qualitative and quantitative data from interviews with industry experts, financial institutions and vendors, CEB TowerGroup identified 20 attributes that define a best-in-class commercial loan origination system. These attributes are grouped into four categories that highlight a firm s user and enterprise needs. Vendor rankings are based on our proprietary five point rating scores on each of the 20 best-in-class attributes. The top vendors were designated as key performers based on their composite scores in each of the technology categories below. Best-in-Class Technology Categories Banking executives investing in commercial lending technology should use The Technology Anatomy on page 24 to select the vendor that best aligns with their firm s needs and business objectives. USER EXPERIENCE includes those attributes of the solution that directly contribute to enhancing user productivity. Leaders are D+H s CreditPath, Moody s Analytic's RiskOrigins, and WebEquity s WebEquity Lending WORKFLOW AUTOMATION includes those attributes that streamline the credit origination lifecycle by automating pre-existing manual processes. Leaders are Harland Financial Solution s CreditQuest, Moody s Analytic's RiskOrigins, and Third Pillar s LoanPath ENTERPRISE RISK MANAGEMENT includes those attributes that enable lenders to more effectively manage risk and make informed credit decisions. Leaders are Algorithmics Credit Lifecycle Management, HCL s CapitalStream, and Moody s Analytic's RiskOrigins ENTERPRISE SUPPORT includes those attributes that influence the enterprise s tactical fit and strategic alignment with the vendor. Leaders are D+H s CreditPath, HCL s CapitalStream, and WebEquity s WebEquity Lending 4

TECHNOLOGY ANALYSIS OVERVIEW Mission Statement: CEB TowerGroup technology analysis process provides a customer-driven, transparent, and unbiased review designed to drive informed business decisions. Current Market: Provides a view of industry and customer changes, and best practices for technology investment and implementation. Future Investment: Forecasts IT spending and identifies emerging technologies and innovations. Vendor Landscape: Provides an overview of key vendors, product features, and market position. Product Rankings: Highlights bestin-class attributes and shows a comparative perspective of leading products. Technology Analysis Presentation Roadmap Current Market Market Drivers: Assess changes in the industry and customer behavior Future Investment Emerging Technology Landscape: Pinpoint emerging technologies and innovations Vendor Landscape List of Players: Identify key technology firms and their products Product Ranking Best-in-Class Products: See the top products based on our anatomy categories PP. 7-14 PP. 20-23 P. 25 PP. 47-53 Case Study: Learn why a global bank s inadequate AML controls led to massive fines Diagnostic Anatomy: Choose your investment priorities with our proprietary framework Ranking Methodology: Review the key components of an investment decision PP.15-18 PP. 26-28 PP. 54-55 Feature Audit: Compare the relative feature offerings by vendors PP. 29-30 Vendor Profiles: Understand the key differentiators between products PP.31-45 5

Current Market Future Investment Vendor Landscape Product Rankings 6

LOAN GROWTH OUTLOOK WEAK IN DEVELOPED MARKETS Flagging GDP growth and continued macroeconomic instability in developed markets will continue to dampen commercial lending. European lending sharply declined in the final months of 2011 as the escalation of the Euro Zone Debt Crisis curtailed banks access to capital markets and dampened business confidence. In Japan, demand for commercial credit remains largely flat as the country struggles to recover from the March 2011 earthquake and tsunami. Euro Area Commercial Loan Growth Rate 3 Month Annualized Growth Rate, - 2011 2.0% 0.0% (2.0%) (4.0%) (6.0%) (8.0%) 15% 10% 5% 0% (5%) (10%) (15%) (20%) Jan-10 Feb-10 Q1 Mar-10 Source: European Central Bank Apr-10 Q2 May-10 Jun-10 Jul-10 Japan Commercial Loan Demand Net Percentage of Banks Reporting Demand for Commercial Loans, - Q1 2012 Source: Bank of Japan Q3 Aug-10 Sep-10 Oct-10 Q4 Nov-10 Dec-10 Q1 2011 Jan-11 Feb-11 Mar-11 Q2 2011 Apr-11 May-11 Jun-11 Q3 2011 Jul-11 Aug-11 Sep-11 Q4 2011 Oct-11 Nov-11 Large Firms Medium Firms Small Firms Q1 2012 Dec-11 7

RECOVERING DEMAND FOR US COMMERCIAL CREDIT Among major developed economies, the US is one of the few countries to experience a significant uptick in commercial loan demand and growth. Commercial and Industrial Loan Growth Rate Seasonally Adjusted Annualized Growth Rate, 2011 9.5% 11.6% 10.7% US Average Monthly New Commercial Loans In Millions USD, 2011 = +94% $126,068 C&I volumes grew for all four quarters in 2011, with growth accelerating in the second half of the year. Average monthly new loan issues almost doubled in 2011 to $126 billion. Despite temporary softness in the fourth quarter of 2011, a net majority of US banks continued to report stronger demand for commercial credit in the first quarter of 2012. 5.8% Q1 Q2 2011 2011 Source: Federal Reserve 40% 20% Q3 2011 Q4 2011 $63,464 $45,758 US Commercial and Industrial Loans Demand Net Percentage of Banks Reporting Stronger Demand for C&I Loans, 2009 - Q1 2012 $64,829 2008 2009 2011 Source: Bloomberg Large and Medium Firms Small Firms 0% (20%) (40%) (60%) (80%) Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 Q2 Q3 Q4 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Source: Federal Deposit Insurance Corporation 8

US BANKS INCREASE CREDIT AVAILABILITY Record deposit levels provided a cheap source of financing for US banks for use to increase the supply of new loans. Total deposits held at US banks increased to $10 trillion in the third quarter of 2011, a 6% increase from the year prior. US banks loosened lending standards for eight consecutive quarters. Total Deposits Held at US Commercial Banks In Millions USD, 208-2011 $10,000 $9,500 $9,000 $8,500 $8,000 $7,500 Q1 2008 Source: Federal Reserve Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 Q2 Q3 Q4 Q1 2011 Q2 2011 Q3 2011 Commercial and Industrial Lending Credit Standards Net Percentage of Banks Reporting Tightening Lending Standards, 2008-2011 Large and Medium Firms Small Firms 100% 80% 60% 40% 20% 0% (20%) Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 Q2 Q3 Q4 Q1 2011 Source: Federal Deposit Insurance Corporation 9

EXECUTIVES BUSINESS PRIORITIES NOT ALIGNED WITH STRATEGY Most lenders lack an effective IT strategy that balances the perennial goals of improving customer service and sales performance. Two-thirds of financial executives cite improving client experience and creating better sales tools as major strategic priorities. However, only one-third say that implementing new technologies will be a priority for 2012. Modern, integrated commercial lending platforms are already optimized to address some of these challenges. Commercial Banking Executive s Strategic Priorities Percentage of Respondents, December 2011 Improving Customer Acquisition and Onboarding Strategies Creating High Impact Lead Generation Tools and Processes Improving the Efficiency of Sales and Service Processes 69% 64% 57% Integrated loan origination platforms improve client experience by decreasing application turnaround and providing enhanced visibility into credit decisioning processes. Loan origination systems with analytic capabilities enable banks to identify changes needed to continue to grow the business without taking on excessive levels of risk. Integrated loan origination platforms improve data management by minimizing manual entry and errors and optimizing integration of data sources leading to improved decisions and monitoring of existing credits Implementing New Technologies and Systems 36% Major disconnect between stated goals and IT investments Source: CEB TowerGroup Research 10

EXECUTIVES BUSINESS PRIORITIES NOT ALIGNED WITH STRATEGY The goal of STP in commercial lending is to automate as much of the workflow as possible from a single application platform to improve data visibility and accessibility, and risk management. Loan Origination Workflow Model Front Office: The system integrates with core banking systems and external databases and automatically gathering borrower and guarantor financial data. Mid-Office: The system allows banks to standardize and optimize spreading and risk calculations to improve credit decisions. Back Office: The system automatically generates required loan documents, manages all correspondence and facilitates the booking of the loan in the bank s core accounting system. Source: CEB TowerGroup Research 11

Current Market Future Investment Vendor Landscape Product Rankings 12

FORECASTING GLOBAL TECHNOLOGY SPEND Bank spending on commercial loan origination technology is expected to increase starting in 2013, reflecting the need to automate. Global Commercial Loan Origination Technology Spend In Millions of USD, -2015 $2,200 $2,150 5-Year CAGR = 2.6% $2,156 $2,100 $2,096 $2,050 $2,040 $2,000 $1,987 $1,950 $1,940 $1,900 $1,895 $1,850 $1,800 E 2011 P 2012 P 2013 P 2014 P 2015 P Source: CEB TowerGroup Research 13

FORECASTING TECHNOLOGY SPENDING BY REGION Large bank hesitation to invest in new commercial loan origination technologies, such as cloud, is predicted to keep spending growth steady over the next five years. Technology spending in Asia and Pacific and other maturing markets is expected to be driven by banks desire to support new commercial loan growth. Region North America Europe Definitions USA and Canada Includes Western, Central and Eastern Europe Regional Forecast of Commercial Loan Origination Technology Spending In Millions USD, -2015 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 E 2011 P 2012 P 2013 P 2014 P 2015 P Europe North America Asia and Pacific Latin America and the Caribbean Middle East and Africa Asia and Pacific Latin America and Caribbean Middle East and Africa Includes Australia and New Zealand Includes Mexico Includes Turkey and all African and Middle Eastern countries Regional Spend In Millions USD E 2011 P 2012 P 2013 P 2014 P 2015 P CAGR Europe 720 733 743 757 771 786 2.1% North America 644 655 669 683 698 714 1.8% Asia and Pacific 322 334 350 365 382 399 4.0% Latin America 151 157 163 169 177 184 4.4% Middle East and Africa 56 58 61 63 67 70 4.3% Source: CEB TowerGroup Research 14

CURRENT TECHNOLOGY LANDSCAPE OF COMMERCIAL LENDING CEB TowerGroup identified four stages to categorize the maturity of lenders loan origination processes. Commercial Lender Maturity Map Virtually all lenders business loan origination processes are currently at these two stages Most banks recognize the need to modernize their commercial lending operations with an integrated lending platform to facilitate straight-through processing (STP). The goal of STP is not only to improve efficiency and turnover time of loan applications, but also to improve customer service throughout the entire credit lifecycle. Maturity of Commercial Lending Processes: Lagging Emerging Planning Mature Lenders who are using multiple disparate and manual legacy systems and have not identified any specific plans to upgrade. Lenders who are currently using a legacy or manual system for origination but have indentified the need for an integrated origination platform. They have a business case ready for implementation or are the in process of evaluating technologies. Lenders who are in the process of implementing an integrated origination solution on the latest technology, and plan to do a global implementation across all business units. Lenders who have implemented an integrated origination platform based on current technologies with end-to-end capabilities across multiple geographies and business units. Most banks here rely on: Core banking applications that do not provide industrial strength commercial lending functionality A hodge-podge of home grown and vendor systems that provide little visibility, are loosely integrated and require inputs of data multiple times. Source: CEB TowerGroup Research 15

OPTIMIZING PERFORMANCE TO ENHANCE CUSTOMER EXPERIENCE Commercial lending technology is moving toward consolidated platforms that can support the entire credit lifecycle as well as exploit new delivery channels. The goal of single-platform commercial lending is to provide a unified depository of information. This improves the efficiency and performance of all lending business units, which ultimately increases customer satisfaction across the entire credit lifecycle. FSIs are also investing in new communication channels, such as web and mobile, to provide online applications and status updates to corporate customers. Consolidated Lending Platforms Consolidated platforms improve data management. These systems minimize manual data entry, eliminate duplicate entry, and ease the integration of internal and third-party sources of data, all of which lead to improved credit decisions and monitoring of existing credits. Integrated solutions improve the client-experience. Companies with solid financials are not only looking at lending relationships from the perspective of willingness to lend at competitive rates, but also the overall experience with the bank and ease of the on-boarding process for credit. Integrated solutions enhance information visibility and collaboration. Emerging solutions are able to provide role-based workflow environment for managing new and existing loans. This enables stakeholders to take appropriate actions with visibility to the full history of previous activity and access to the relevant documents and data needed for managing credit. Relationship Lifecycle Management Lifecycle management provides a holistic view of the client relationship. Effective relationship management allows lenders to develop an enterprise view of the customer through use of sales-effectiveness tools, onboarding, ongoing client interaction, and business intelligence. The result is improved client retention, service, and sales performance. Lifecycle management facilitates market segmentation. A primary benefit of comprehensive lifecycle management is that it allows lenders to differentiate multi-regional business segments and incorporate strategic or tactical realities. Mobile Corporate Banking Mobile technology enables FSIs to expand service options to business clients. The growing adoption of mobile technology in business represents an opportunity to provide client value through the convenience of the mobile channel. In some cases it may also provide an additional source of revenue. Treasury users are the most important users of mobile corporate banking. Most banks and technology providers that have embarked on mobile projects focus on delivering what is most important to that senior treasury user: enhanced alerts, approvals, and exception management. Source: CEB TowerGroup Research 16

IMPROVING BUSINESS RESULTS WITH ANALYTICS The strategic use of portfolio analytics can provide banks with the insight necessary to capture market share while minimizing potential losses. The holistic application of analytics including corporate performance management, business intelligence, and portfolio analysis enables an FSI to gain competitive advantage and achieve sound risk management. BI gives banks a host of tools needed to turn unstructured data sets into actionable business results. Next Generation Analytics Analytics enhance loan-level profitability. Portfolio analytics combines a 360 view of the clients existing exposures and contributions to profitability. This enables lenders to optimize lending and pricing decisions in the context of the client s overall relationship using risk-adjusted return on capital (RAROC) measurements. Analytics leverage origination data to optimize all lending decisions. The availability of advanced analytics capabilities as a core component of the origination process allows banks to make strategic decisions at the portfolio level by providing a holistic view of the impact of each decision on a line of business across the bank s entire portfolio. Analytics is a source of competitive advantage. Banks with high levels of confidence in their ability to gather and analyze data needed that impacts their overall portfolio prior to loan approval are poised to grow market share. These banks will be able to grant approval for loans that other banks might decline due to incomplete information or flawed analysis based on traditional static measures for probability of default (PD) or loss given default (LGD). Business Intelligence Business intelligence tools transforms raw data into tactical insights that drive business decisions. BI allows lenders to extract efficiencies from all organizational touch points. In commercial lending, banks that capture data from corporate client interactions for predictive behavioral analysis can develop a greater understanding of their individual clients' businesses as well as cross-industry dynamics that affect those clients. Business Intelligence supports organic growth. BI improves operational performance by enabling dynamic discovery of the most successful products, services, and service approaches that a lender can leverage across underperforming business units. Source: CEB TowerGroup Research 17

Current Market Future Investment Vendor Landscape Product Rankings 18

IMPROVING BUSINESS RESULTS WITH ANALYTICS CEB TowerGroup identified vendors for this analysis based on expert opinion, product maturity, and size of installations. Of the eleven vendors profiled, all are platforms with numerous installations at both global and community banks. Commercial Loan Origination Vendor HCL Algorithmics D+H Harland Financial Solution Custom Credit Solutions Nucleus Polaris Third Pillar FIS Moody s Analytics WebEquity Product CapitalStream Credit Lifecycle Management CreditPath CreditQuest CustomLender FinnOne Intellect Loan Origination System LoanPath LoanVantage and FIS Loan Origination RiskOrigins WebEquity Lending 19

Workflow Automation COMMERCIAL LOAN ORIGINATION DIAGNOSTIC ANATOMY 1 Productivity Tools 2 Report Management 3 UI Configurability 4 UI Intuitiveness 5 Business Rules 6 Core Integration 7 Document Creation Users can leverage the solution's interactive workflow tools to better manage current and pending tasks. Non-IT users can design and execute a wide range of custom static and ad hoc operational reports. User Experience Non-IT users can easily configure the user interface according to role and authority level. The solution's intuitive interface allows a user to quickly master the system with minimal training requirements. Non-IT business analyst can configure and design new business rules to adapt the system to changing business needs. The enterprise can seamlessly integrate the solution with existing or third party source systems system to automatically fill required data fields. The solution provides a series of customizable document templates that can automatically be created and populated by business rules. 8 External Communication 20 19 Vendor Collaboration The vendor effectively identifies and aligns technology implementation to enterprise needs. Technology Innovation The vendor possesses a proactive strategy to incorporate innovative technology and practices into its product development roadmap. Enterprise Risk Management 18 17 16 15 14 13 12 Product Maturity Product Deployment Pricing Flexibility Geographic Flexibility Predictive Analytics Error Reduction Credit and Risk Scoring The vendor possesses a mature product with a growing market share and client base. Enterprise Support The vendor offers multiple options for deployment of the technology. HOW TO USE ANATOMY The anatomy is designed to assist financial services executives better assess and prioritize components of their technology investment. As you take this anatomy, please consider your firm s business strategy and current technology maturity. 1. Rate the impact of each attribute to your business and your firm s effectiveness on a 1-5 scale using the grading scale below and tally the results using the scorecard. 2. Map the results on the scorecard on to identify areas that are most important, but where your firm is least effective. Attribute Grading Current Effectiveness The vendor offers multiple pricing options to meet customer demands. Potential Impact 5 = Superior Capability We or our vendor offer this regularly, 5 = Very High Impact Our firm considers this attribute mission critical systematically, and at the highest standard. when performed at the highest standard. 4 = Strong Capability We or our vendor offer this regularly and systematically. 3 = Adequate Capability We or our vendor offer this regularly but in an ad hoc manner. 2 = Marginal Capability We or our vendor offer this irregularly and in an ad hoc manner. The solution provides multilingual and multicurrency capabilities to support lending operations in multiple localities where the bank operates 4 = High Impact Our firm considers this attribute highly important when performed at the highest standard. 3 = Moderate Impact Our firm considers this attribute moderately important when performed at the highest standard. 2 = Low Impact Our firm considers this attribute somewhat important when performed at the highest standard. 1 = Weak or not at all We or our vendor do not do this at all. 1 = No Impact Our firm does not consider this attribute important when performed at the highest standard. The solution provides predictive analytic models that allow banks to test the portfolio impact and the profitability of new deals to optimize loan pricing. The solution possesses wizards and interactive business logic that identifies and prevents manual errors and omissions. The solution can communicate with and collect information from external financial institutions such as credit bureaus and appraisal services. Process Improvement The solution simplifies existing workflows and reduces the time to process a commercial loan Business Intelligence The enterprise can utilize the solution's BI tools to mine system data to identify bottlenecks and inefficiencies in current workflows. Compliance Reporting The solution supports access to loan account and transaction data to support audits and compliance reporting mandates. The solution provides a wide range of credit analysis tools to improve credit decisioning and risk management. 20 9 10 11

COMMERCIAL LOAN ORIGINATION ANATOMY SCORE CARD Score Your Technology Needs With the Anatomy Scorecard: Financial services executives should complete the scorecard using the commercial loan origination anatomy diagnostic tool. Attribute Categories Alignment Attributes Potential Impact Importance of Improvement 1. Productivity Tools User 2. Report Management Experience 3. UI Configurability 4. UI Intuitiveness Workflow Automation 5. Business Rules 6.Core Integration 7. Document Creation 8. External Communication 9. Process Improvement Business Process Optimization 10. Business Intelligence 11. Compliance Reporting 12. Credit and Risk Scoring 13. Error Reduction 14. Predictive Analytics Enterprise Support 15. Geographic Flexibility 16. Pricing Flexibility 17. Product Deployment 18. Product Maturity 19. Technology Innovation 20. Vendor Collaboration 21

Potential Impact COMMERCIAL LOAN ORIGINATION ANATOMY SCORE CARD Map Your Technology Needs: Financial services executives should map their attribute scores from rating their impact and effectiveness on the Anatomy Scorecard. 5 =Very High 4 =High 3 = Moderate 2 =Low 1 =No Impact 5 = Superior 4 =Strong 3 = Adequate 2 = Marginal 1 =Weak Current Effectiveness 22

FEATURE AUDIT The breadth and scope of features a Commercial Loan Origination system provides are critical components of any financial institution s investment selection process. Banking executives can directly compare the feature offerings of leading hub products with our side-by-side matrix to identify which solution best aligns with their firm s needs. CreditPath D+H All Vendors Percent Offering Feature Application Monitoring 100% Automated Decisioning 100% Document Creation and Management 100% Reporting Capabilities 100% Audit Trails 100% Configuration Tools 100% Counterparty Management 91% Collateral Management 91% Covenant Management 100% Limits Management 91% Portfolio Analysis 100% Stress Testing and Scenario Analysis 73% Default and Recovery Management 55% Spreading Templates and Financial Ratios 100% Corporate Banking Web Portal Integration 64% Business Intelligence Tools 64% Predictive Analytics 36% Credit and Risk Scoring Tools 100% Risk-Based Pricing Models 64% Data Mart/Warehouse 91% KYC/AML Tools 64% Real-Time Collaboration 91% Multi-Language and Multi-Currency 73% Full Native Feature of the Solution 23

Client Size (by Assets) Under $10 Billion Over $10 Billion COMPANY STATISTICS Company Type: Public HQ: Toronto, Canada Founded: 1875 Employees: 4,200 Revenue: $640 Million Client Base: 1,300+ Coverage: North America Target Market North America Only Global Target CREDITPATH D+H Company Overview D+H is a technology solutions and services provider for North American-based financial institutions. In 2008, the company introduced CreditPath, its end-to-end commercial lending platform whose core functionality was derived from the credit lifecycle management solutions of Cyence, a financial software provider acquired by D+H that same year. Headquartered in Toronto, the company has a strong presence in both the Canadian and US markets. Product Overview CreditPath is full-service commercial lending suite that can be deployed as both an installed and hosted solution. Targeted at both large and medium-sized customers, CreditPath is currently supports the commercial lending operations at many large and mid-size North American firms. Product Demonstration Highlights Integration and Communication: CreditPath supports seamless integration with core accounting systems through a single LOS connection. Furthermore, the solution has the ability to communicate and integrate with external information providers such as credit reporting bureaus and appraisal to dynamically update counterparty information. Error Reduction and Compliance Management: CreditPath includes a dynamic checklist, based on interactive business logic and the defined parameters of specific deal types, which identifies errors and omissions, and flags and tracks compliance items to alert the user. Robust Reporting: CreditPath comes with 25 configurable static reports as well as OLAP cube reporting to support data mining and gives users the ability to create custom dynamic reports. CreditPath also includes configurable executive dashboards that provide higher level pipeline analytics. CEB TowerGroup View In terms of feature range, CreditPath is one of the most robust solutions featured in this technology analysis. The solution combines strong core commercial lending functionality with an intuitive document management system and analytics capabilities to support the automation of most origination workflow processes. One of the solution s outstanding features include a top-level wizard that guides users through required processes, while a dynamic checklists based on the solution s customizable business rules engine ensures the accuracy and completeness of loan information. For solution marketed only to clients based in North America, CreditPath can also support the overseas commercial lending activity of multinational institutions. Supported N/A Acquisition and Development Asset-Based Lines Equity Lines Commercial Real Estate Equipment Financing Standby Letters of Credit Working Capital Lines 24

Current Market Future Investment Vendor Landscape Product Rankings 25

Differentiator ATTRIBUTES Strong Priority Mission Critical CATEGORIES CREATING OUR BEST-IN-CLASS PRODUCT RANKINGS Phase 1 Utilizing qualitative and quantitative data, CEB TowerGroup identified 20 attributes that define a Best-in-Class Commercial Loan Origination system, which are grouped into four categories. User Experience Those attributes that directly contribute to enhancing individual productivity. Workflow Automation Those attributes that streamline the credit origination lifecycle by automating pre-existing manual processes. Enterprise Risk Management Those attributes that enable lenders to more effectively manage risk and make informed credit decisions. Enterprise Support Attributes that influence the client s tactical fit and strategic alignment with the vendor Phase 2 Recognizing that all attributes are not equally important, CEB TowerGroup divides them into tiers to reflect their level of importance as mission critical, strong priority or differentiators. Phase 3 Report Management UI Customization UI Intuitiveness Core Integration External Communication Process Improvement Document Creation Compliance Reporting Credit Risk and Scoring Error Reduction Product Maturity Vendor Collaboration Pricing Flexibility Productivity Tools Predictive Analytics Product Deployment Technology Innovation Certain products are recognized as Best-in- Class after scoring each product based on its performance at an attribute level. Best-in-Class User Experience Best-in-Class Workflow Automation Best-in-Class Enterprise Risk Management Best-in-Class Enterprise Support 26

RANKING MATRIX = Best-in-Class in Anatomy Category Overall, high performing vendors exhibited excellence in multiple categories. Product Leaders are the top scoring products in a given category and are chosen based on the differentiation in scoring in a particular category. 1.0-5.0 Point Scale User Experience Workflow Automation Enterprise Risk Management Enterprise Support D+H CreditPath 4.8 4.8 3.8 4.4 User Experience includes those attributes that directly contribute to enhancing individual productivity. Workflow Automation includes those attributes that streamline the credit origination lifecycle by automating pre-existing manual processes. Enterprise Risk Management includes those attributes that enable lenders to more effectively manage risk and make informed credit decisions. Enterprise Support includes those attributes that influence the enterprise s tactical fit and strategic alignment. 27

BEST-IN-CLASS RATIONALE D+H Credit Path received 2 Best-in-Class ratings for User Experience and Enterprise Support. Key differentiators for Best-in- Class in User Experience include the design of the user interface and the presence of graphical and user-configurable workflow management tools and dashboards. Key differentiators for Best-in- Class in Enterprise Support include the industry experience of the vendor and the maturity of the product. User Experience UI is customized to individual roles, but users can also customize certain screens and displays Top level wizards logically guides users through the workflow steps required for each particular loan type Cube reporting allows users to mine data and create custom charts and graphics out of raw system generated data Basis for Best-in-Class Scoring: Enterprise Support D+H s implementation plan, RapidPath, includes the company s proprietary methodology to deliver technologies and guide customers to deploy the system as quick as possible through the use of accelerator models. D+H offers 4 pricing models to fit a wide range of financial institution s needs or available resources Basis for Best-in-Class Scoring: Mission Critical Report Management Mission Critical Product Maturity Vendor Collaboration Strong Priority UI Customization UI Intuitiveness Strong Priority Pricing Flexibility Product Differentiator Productivity Tools Product Differentiator Product Deployment Technology Innovation 28

Scoring Metric Anatomy UNDERSTANDING OUR SCORING METHODOLOGY For each technology analysis, CEB TowerGroup develops a unique & proprietary scoring methodology that highlights the key priorities for an executive s investment decision. Understanding that each investment decision is different, CEB TowerGroup combines similar attributes into overall categories for comparing vendor products. Rating attributes are informed by the combined experience and membership of the Corporate Executive Board and CEB TowerGroup. Sample Anatomy Scoring Matrix Category Attribute Title Attribute Definition 1 2 3 4 5 User Experience Productivity Tools Users can leverage the solution's interactive workflow tools to better manage current and pending tasks. The solution provides no productivity tools. The solution provides non-customizable textbased productivity tools including calendar, lists of recent and pending tasks. The solution provides customizable textbased productivity tools including calendar, lists of recent and pending tasks. The solution provides a standard set of graphics-based productivity tools including visualizations of current and pending tasks, calendars that cannot be customized. The solution provides customizable graphicsbased productivity tools including visualizations of current and pending tasks, graphical calendars with multiple views. Enterprise Support Vendor Collaboration The vendor effectively identifies and aligns technology implementation to enterprise needs. The vendor demonstrates a poor understanding of client needs and offers no formal implementation strategy. The vendor demonstrates an adequate understanding of client needs and will customize the implementation program to meet a client's expectations, but relies heavily on the client to make all strategic decisions. The vendor demonstrates an adequate understanding of client needs and will customize the implementation program to meet a client's expectations, but defers to clients on major strategic decisions. The vendor demonstrates a clear understanding of client needs and closely collaborates with all internal stakeholders as strategic partners to deliver above average implementation results. The vendor demonstrates a profound understanding of client needs and closely collaborates with all internal stakeholders as strategic partners through a best-practice implementation plan that draws on experience and industry-leading insights to deliver a world-class results. 29