Where are we now?(Sample Presentation)

Rural Bank of XYZStrategic Planning-Workshop

Financial and Operational Analysis

Financial Performance(Last 3 Years)

Year 1 Year 2 Year 3

Total Assets 79,109,796 104,197,077

103,979,762

Annual Growth Rate 19% 32% -0.2%

3-Year Average 16.9%

Total Loan Portfolio (Gross) 68,579,492 89,408,314

75,831,355

Annual Growth Rate 23% 30% -15%

3-Year Average 13%

As % of Total Assets 87% 86% 73%

Financial Performance(Last 3 Years)

Breakdown of Gross Loan Portfolio

Current 58,086,487 80,780,947 62,984,424

Past Due 9,556,797 8,114,487 12,461,699

LIL 936,208 512,880 385,232

As % of Gross Loan Portfolio

Current Loans 85% 90% 83%

Past Due 14% 9% 16%

LIL 1% 1% 1%

Past Due Ratio 15% 10% 17%

Total Deposits Year 1 Year 2 Year 3

Active Savings (Ordinary)

29,444,182

39,503,989

37,942,840

Special Savings (Time Deposit-Passbook

based)

25,369,764

29,317,426

38,399,151

Time Deposit

2,128,923

3,205,982 387,677

Special Savings + Time Deposits 31,573,105

42,709,971

38,330,517

Total Deposits 61,017,287

82,213,960

76,273,357

Annual Growth Rate 19% 35% -7%

3-Year Average 15%

Financial Performance(Last 3 Years)

Financial Performance(Last 3 Years)

Deposit Mix (High cost vs. Low cost)

Active Savings 48% 48% 50%

Special Savings + Time Deposits 52% 52% 50%

Deposit to Loan Ratio 89% 92% 101%

Financial Performance(Last 3 Years)

Total Borrowings Year 1 Year 2 Year 3

Local Banks

6,256,750

9,644,400

4,110,891

Others

1,500,000

7,953,169

8,406,775

7,756,750

17,597,569

12,517,666

Annual Growth Rate 166% 127% -29%

3-Year Average 88%

Financial Performance(Last 3 Years)

Year 1 Year 2 Year 3

Total Liabilities

67,314,750

91,424,448

90,838,470

Annual Growth Rate 20% 36% -1%

Liability Structure (% Share)

Deposits 47% 47% 42%

Borrowings 12% 19% 14%

Financial Performance(Last 3 Years)

Year 1 Year 2 Year 3

Total Net Worth (Equity)

11,795,046

12,772,628

13,141,292

Annual Growth Rate 16% 8% 3%

3-Year Average 9%

Year 1 Year 2 Year 3

Total Operating Income

11,265,236

16,337,445

19,269,808

Total Operating Expenses

9,646,067

14,550,407

18,561,947

Net Operating Income

1,619,169

1,787,038

707,861

Growth in Total Income 30% 45% 18%

Growth in Net Income 241% 10% -60%

Financial Performance(Last 3 Years)

Financial Performance(Last 3 Years)

Expense & Net Income as % of Total Income Year 1 Year 2 Year 3

Total Expense 86% 89% 96%

Net Income 14% 11% 4%

Financial Performance(Last 3 Years, in % of Total Expense)

Expense Item Analysis Year 1 Year 2 Year 3

Interest on Deposits 42% 41% 35%

Interest on Borrowed Funds 4% 12% 10%

Others (Banking Fees) 0.3% 0.3% 0.2%

Finance Charges 0.0% 0.1% 0.2%

Compensation/Fringe Benefits 33% 31% 31%

Mgmt & Other Prof Fees 33% 31% 31%

Fines, Penalties & Other Fees 0.1% 0.0% 0.1%

Taxes & Licenses 2% 2% 2%

Insurance 2% 1% 1%

Depreciation/Amortization 3% 4% 7%

Litigation/Acquired Assets

Other Expenses 16% 18% 16%

Provisions 0% 2% 5%

Selected Ratios

Return on Assets (ROA) Year 1 Year 2 Year 3

2% 2% 0.68%

Net Income-Taxes

1,619,169

1,787,038 707,861

Avg. Assets

72,726,019

91,653,436

104,088,419

Return on Equity (ROE) 15% 15% 5%

Net Income-Taxes

1,619,169

1,787,038 707,861

Avg. Equity

10,989,511

12,283,837

12,956,960

Selected Ratios

Year 1 Year 2 Year 3

Portfolio Yield18% 21% 23%

Total Operating Income

11,265,236

16,337,445

19,269,808

Avg. Gross Portfolio

62,262,467

78,993,903

82,619,834

Debt to Equity 5.71 7.16 6.91

Liabilities

67,314,750

91,424,448

90,838,470

Equity

11,795,046

12,772,628

13,141,292

Selected Ratios

Year 1 Year 2 Year 3

Financial Expense Ratio (Blended Cost) 19% 12% 12%

Interest Expenses on Deposits and Borrowed Funds 4,047,000

5,955,176

6,401,648

Avg. Deposit + Avg. Borrowings 21,125,620

49,818,697

55,577,862

Financial Expense Ratio-Deposits 23.1% 11.3% 11.2%

Interest Expenses on Deposits 3,649,759 4,193,758 4,555,054

Avg. Deposit 15,786,552 37,141,538 40,520,244

Financial Expense Ratio-Borrowings 7% 14% 12%

Interest Expense on Borrowed Funds 397,240 1,761,418 1,846,594

Avg. Borrowings 5,339,068 12,677,159 15,057,618

Selected Ratios

Operating Expense Ratio to Avg. Gross Portfolio 8% 9% 12%

Operating Expense

5,201,827

6,790,591

10,279,818

Avg. Gross Portfolio

62,262,467

78,993,903

82,619,834

Operating Expense as % of Total Operating Income 86% 89% 96%

Operating Income as % of Total Operating Income 14% 11% 4%

Selected Ratios

Selected Ratios

Loan Product Analysis

Selected RatiosLoan Portfolio Quality

Results of Other Assessment

• Focus Group Discussion Results

• Customer Satisfaction survey

• Client Exit survey

• Competitors analysis

Growth Drivers

• Additional Branches are source of increase business opportunities (loans and deposits)

• Microfinance is the major source of growth in portfolio, active clients and revenue

Strategic Issues and Concerns(Areas for Improvement)

Financial Performance• ROA is below standard of 2% or

higher• ROE is below industry standard• Past Due Ratio is consistently a

double-digit level• Portfolio-At-Risk Ratio does not

meet accepted standards• Deposit mix leans toward the

more expensive source which is time deposit

• Income and expense ratio is very lopsided at 10% - 90% of total gross income

• No business planning template

Market Focus• Low portfolio outstanding and

number of clients per account officer

• 2-year holding period (non-withdrawal) of contractual savings in MF loans

• Clients complain of going to the bank to pay loan; want pick-up like what other providers do

• Bank do not offer incentives to long-time clients

• Bank does not offer a current/checking account

• Some loan product procedures are cumbersome to the clients

Strategic Issues and Concerns(Areas for Improvement)

Business Processes/ Operations

• No standardized manuals of operations

People/ Structure

• Inadequate training of staff especially on credit evaluation, loan appraisal and sales skills

• Inadequate computers to prepare credit evaluation report