This material is for informational purposes and not intended as investment advice. Cash Management in Today’s Marketplace Tampa Bay Association for Financial.

This material is for informational purposes and not intended as investment advice.

Cash Management in Today’s Marketplace

Tampa Bay Association for Financial Professionals March 15, 2013

TOPICS FOR DISCUSSION

I. About StoneCastleII. The Current State of the Cash

Management MarketIII. What Treasurers Are Seeking TodayIV. Cash Management Beyond the Big

Three

About StoneCastle

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Experienced Team

Founded in 2003Pioneer of innovative strategies in community banking

30+ professionals dedicated to investing in sector Core management team together since 1995

Institutional Sponsorship

Charlesbank and CIBC own minority interests in StoneCastle Substantial ownership held by senior management

Deep Industry Relationships

Close ties to State and Federal banking regulatorsLong-term relationships with ABA, CSBS, other industry groups

Highly Specialized Investment Platform

Specialized in-house accounting, legal and regulatory expertise Proprietary systems designed for community bank investments

RAMPART was developed in-house to combine dealorigination, credit underwriting, CRM, risk management, investmentmonitoring andaccounting into a single seamless technology platform, helping StoneCastle overcome the fragmented nature of the banking industry.

ABOUT STONECASTLE PARTNERS, LLC-A SUMMARY

Long History of Success

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StoneCastle Partners’ Minority Shareholders

• Charlesbank Capital Partners

• Spinout of the former Harvard endowment private equity team

• Founder and CEO, Michael Eisenson, former President of Harvard Private Capital

• Manages $2+ billion of private equity investments

• Canadian Imperial Bank of Commerce (“ CIBC” )

• One of largest and best-capitalized banks in the world

• $391 billion of assets1 / $30 billion market capitalization2

• Weathered and profited from financial crisis (21% ROE1)

• Partnered with StoneCastle to identify and pursue banking opportunities in the U.S.1 Source: CIBC investor presentation (June

2012)

2 As of 8/13/12

MINORITY SHAREHOLDERS

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• StoneCastle Cash Management, on behalf its clients, has deposited over $2 Billion in newly established FICA bank accounts in over 400 banks across the U.S., giving StoneCastle even greater reach into the community banking sector.

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NATIONAL INDUSTRY REACH

Current State of the Cash Management Market

Where we are and where we may be heading

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YIELDS: A SAD STATE OF AFFAIRS

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Observations:• Bank deposits increased almost equally % that money funds

decreased–a return to money funds?

• Second biggest decrease from 2010-2012 were treasury bills—return to treasury bills?

• Instruments which show consistent increase are commercial deposits, separate managed accounts & municipal securities

MOST COMMONLY UTILIZED

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CASH MANAGEMENT VEHICLES

Source: AFP Liquidity Survey

Then:Banks Lobbying to Extend Financial Crisis Deposit Guarantee Program

Fox Business, February 15, 2012Community Bankers Push for TAG Extension

American Banker, February 17, 2012

Now:

Bill to Extend TAG Program Fails in US Senate

Reuters, December 13, 2012

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RECENT HEADLINES – EXPIRATION OFFDIC UNLIMITED DEPOSIT INSURANCE

Then:Bernanke Pledges to Keep Rates Low Thru 2014: A “Very Pessimistic” Outlook, Former Fed VP Says

Yahoo Finance, January 25, 2012

Now:

Fed’s Lacker Says Reaching 6.5% Unemployment May Take 3 Years

Bloomberg, 12/17/12

Fed’s Yellen backs holding rates near zero to 2016

Reuters - November 13, 2012

Federal Reserve Expects to Keep Interest Rates Low Through Mid-2015

ABC News – September 13, 2012

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RECENT HEADLINES –LOW TREASURY YIELDS, GET USED TO IT

Then:Money Market Funds May Face More Challenges

New York Times – January 8, 2012Will the Government Put Money Market Funds Out of Business?

The Atlantic, February 7, 2012Money Funds Reforms Won’t Stop Next Crisis

MarketWatch, February 15, 2012Now:

SEC’s Gallagher: Money Fund Reform ‘Primary’ IssueMarketWatch – 1/17/13

Money funds Still Psoe Risks, Fed’s SteinMarketWatch – 12/23/12

Key SEC Holdout in MMF Overhaul Reverses StanceWSJ – 12/7/12

Proposed Money-Fund Rules Could Send Treasurers FleeingCFO.com Magazine – 11/16/12

Geithner Steps up Pressure to Make Money Market Funds SaferBloomberg News – 11/13/12

Money Fund Reform Has Top SupportNew York Times – 11/13/12

SEC’s Gallagher Calls for Floating Price for Money FundBloomberg– 9/27/12

Study: 78 money market funds were at risk of breaking buckUSA Today– 8/13/12

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RECENT HEADLINES – MONEY MARKET FUNDSNO SEC-NOW WHAT

What Treasurers Are Seeking Today

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Most Important Short Term Investment Objectives:

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Companies continue to invest conservatively…

* Source: 2012 Association for Financial Professionals Liquidity Survey

WHAT TREASURERS ARE SEEKING TODAY

2012 2011 2010

Safety 77% 77% 76%

Liquidity 21% 18% 22%

Yield 2% 5% 2%

• Events of past 3 years

• Conservative natureSource: 2012 Association for Financial Professionals Liquidity Survey

DRIVING SENTIMENT

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Cash Management Beyond the Big Three

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THE NEW REALITY: BEYOND THE BIG THREE

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"Regular opportunities exist to purchase full faith and credit instruments of the U.S. government at spreads of 40 to 50 basis points above otherwise

comparable but more liquid treasury issues.“

- David Swensen, CIO, Yale University

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THERE IS HOPE (AND OPPORTUNITIES)

• Separately Managed Accounts• US Government Agency Short Duration MBS

Portfolio

• Extended FDIC Insured Programs• Liquid

• Term

• Others?

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THE NEW REALITY: BEYOND THE BIG THREE

THE NEW REALITY: BEYOND THE BIG THREE

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Why Are Many Corporate Treasurers Now Using or Considering Separate Accounts as Part of Their Cash Management Strategy?

• Separate accounts are simple and easy to set up and administer.

• Determine and control liquidity needs.• Develop a set of investment guidelines for quality, interest rate

risk exposure and liquidity to ensure that portfolio synchronizes with your investment policies.

• Delegate investment authority internally and/or to outside managers.

• Outside managers generally work with your existing custody relationships.

THE NEW REALITY: BEYOND THE BIG THREE

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When Selecting Outside Managers – Look for:

Consistent low risk investment approach to emphasizing ultra-high quality very liquid securities and defined duration parameters.

GIPS compliant long-term performance. Clear, value-added investment process. Personal experience in strategy AND managing corporate cash. Strong communication skills and access to senior management. Timely reporting in an easy to use format.

US Government Agency Short Duration MBS Strategy

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100% U.S. Government Agency MBS securities (Ginnie Mae, Fannie Mae, Freddie Mac)

High Quality Gov/Agency Credit Rating

Highly Liquid Market

Daily Liquidity and Transparency

Stable and Low Volatility

Attractive Yield Over Comparable Treasuries, Muni’s, Corporates, Money Markets etc.

Emphasis on Risk Management: Identifying, Measuring and Controlling Risk

HIGH QUALITY SHORT DURANTION FIXED INCOME YIELD PROFILE

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• Primarily a series of electronically-linked bank deposit accounts at one or more banks available within a single account

• FDIC opinion allows for pass through of Federal Deposit Insurance Corporation (FDIC)

• Look for Letter from FDIC Confirming Offering Meets FDIC Requirements

• Programs can offer extended FDIC insurance as a result of having multiple banks or savings institutions, each providing up to $250,000 of insurance.

• Two type of programs-Term (utilizes CDs) and Liquid (utilizes MMDA)

• Programs can offer from $500,000 to $50 million plus of FDIC insurance via a single account, per tax id.

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What is an Extended FDIC Insured Account?

EXTENDED FDIC INSURED ACCOUNTS

EXTENDED FDIC INSURED ACCOUNTS: HISTORY

• Similar path of money funds• Retail

• Individuals would open accounts at different banks to access FDIC insurance beyond individual bank limits.

• Then Brokerage• In 1999, Merrill Lynch began ‘bankerage’ trend within brokerage

community• And Today, Institutional

• Recognized in 2012 AFP Liquidity Survey• CDARS: deposits placed in CDs• FICA: Deposits placed in MMDA

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• Safety• Deposits FDIC Insured

• “No insured depositor has ever lost a penny of FDIC insured deposits— and none ever will.” – FDIC Statement

• FDIC insurance is funded by fees assessed to banks

• Liquidity• MMDA programs have no term commitments

• Yield• Can offer a premium over all types of money funds, treasuries and short term

CDs

• Transparency• Ability to view where all deposits placed• All deposits placed in US, FDIC insured banks/savings institutions

• Control• Unlike a money fund or pool, have direct ownership of underlying deposit (vs. own

a % of a fund/pool),not impacted by actions of others• Ability to opt out of specific banks

• Diversification • No one institution has more then $250,000 per Tax ID 25

WHY ATTRACTIVE

For informational purposes only. Past performance is not a guarantee of future results. Rates are subject to change without notice. Sources: Bloomberg.com, iMoneyNet. & Bankrate.com MMA Overnight Average

Performance is based on the top performing Institutional Prime Money Market Fund according to iMoneyNet. As provided by sources thought to be reliable. Rates can and do differ across individual clients. Rate reflected is for informational purposes only

HISTORICAL YIELDS (Cumulative)

TODAY’S YIELD ADVANTAGE

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Extended FDIC Insured AccountSingle Application

Terms and

Conditions Via wire

FDIC-insured bank deposit accounts; only “well capitalized” banks (as defined bythe FDIC) permitted

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Money Market FundsSingle Application

Prospectu

s Via wire

Asset-backed SecuritiesBank Deposit Accounts, CDs and TDs Collateralized Loan Agreements Commercial PaperCorporate Bonds Floating-rate ProductsGovernment Agency NotesU.S. Treasuries

Monthly

Seeks to maintain $1 NAV (not guaranteed)

Account Opening

Governing Document

Deposits/Redemption

s Underlying

Portfolio

Portfolio

Transparency Safety

Daily

Principal and interest backed by full faith and credit of the U.S. government

Every Monday

Interest

1099–

INT

.27% (balances up to $15mm)

Liquidit

y

Income

Year End Tax

Form Yield (as of

03.01.13)

Same-day

settlement Dividend

1099–DIV

.05%

For informational purposes only. Past performance is not a guarantee of future results. Rates are subject to change without notice.

AS COMPARED TO MONEY FUNDS

For informational purposes only. Past performance is not a guarantee of future results. Rates are subject to change without notice.

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AS COMPARED TO MOST COMMONCASH MANAGEMENT VEHICLES

Product Problems The FICA Solution

Treasuries Little to no yield Little to no compensation for

introducing bank

Provides an attractive yield Fully Insured

Money market mutual fund sweeps Not insured

Potential headline risk- European Debt Exposure, Floating NAV

Historically low yields Little to no compensation for

introducing bank

Offer access to multi-million-dollar protection that is backed by the full faith and credit of the federal government

Attractive yields

CDARs CD programs have term constraints Costly set up and maintenance fees Need for reciprocity of deposits Expense for each dollar introduced

into program

Not reciprical Simple and easy account set up and

support Work with an industry leader and

resource No set up, maintenance or other fees.

Repo sweeps / Collateralized deposits Eligible assets required

Assets must be marked-to-market Pledging requirements reduce

asset liquidity Cost and administrative burden

affect profit potential

No ongoing collateralization and tracking burdens

Improve margins by reducing collateral requirements

Easy to explain, easy to understand

1. Clients deposit funds via wire directly into a single custodial account.

2. The appointed administrator provides the Custodian with instructions that direct the allocation of the funds across the Program Banks. The instructions are verified by the Custodian prior to execution.

3. Upon verification of the allocation instructions, the Custodian allocates the funds as deposits across the Program Banks.

4. Client receives a single confirmation, with ability to view deposits by bank.

HOW EXTENDED FDIC INSURED PROGRAMS WORKS

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Disclosures

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U.S. Bank, N. A. is not affiliated with StoneCastle Partners, LLC. and is not responsible for, and does not guarantee the products, services or performance of its affiliates and third party providers.

This document is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy. It contains a preliminary summary of the purpose and principal business purpose of FICA®; this summary does not purport to be complete and is qualified in its entirety by reference to the more detailed discussions contained in the FICA® Account Custody Agreement, Terms and Conditions, and Investor Representations and Contact (“Agreements”).

Before making a decision with respect to StoneCastle Cash Management’s FICA®, potential clients are advised to carefully read the respective Agreements and to consult with their tax, legal and financial advisers.

This document is being provided to you on a confidential basis solely to assist you in deciding whether or not the FICA® Program is appropriate for you. Accordingly, this document may not be reproduced in whole or part, and may not be delivered to any person without the consent of StoneCastle Cash Management, LLC.

StoneCastle Cash Management, LLC, is an affiliate of StoneCastle Partners, LLC, a leading asset management and financial services firm. StoneCastle Cash Management is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply a particular level of skill or training. For more information regarding the firm, please see our Form ADV Parts I and 2 on file with the SEC.

For additional information:

Eric Lansky

(212) 354-6500 ext 388

[email protected]

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DISCLOSURES