2013 Small Business Credit Trends

Patricia Hines, CTP

Director, Financial Services Industry Marketing

GXS

Slide 2 © 2013 GXS, Inc.

Small businesses confidence dips in early 2013 after 2012 gains

80.0

85.0

90.0

95.0

100.0

105.0

1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13

February 2013: 90.8

January 2006: 101.6

NFIB Optimism Index

Sources: NFIB Small Business Economic Trends Quarterly report

Slide 3 © 2013 GXS, Inc.

Sources: Federal Reserve System H.8 Release

Commercial and industrial loans up almost 14% over the past year

$17 $17 $16 $16 $15 $14 $14 $14 $14 $14

$16 $15 $13

$12 $12 $13 $13 $14 $15 $15

$33 $32

$30 $28 $27 $27 $28 $28 $29 $30

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

12/08 12/09 12/10 12/11 12/12

Commercial real estate Commercial and industrial

Slide 4 © 2013 GXS, Inc.

Small business loans outstanding flat with a continued increase in volume

Sources: FDIC Quarterly Banking Profile, Loans to Small Businesses

Amount outstanding (USD in billions)

Number of loans outstanding (in thousands)

120.3 120.2

46.8 46.9

115.7 116.7

0

50

100

150

200

250

300

12/31/2011 12/31/2012

282.7 283.7 +0.4%

19.6 20.8

0.5 0.5 0.4 0.4

0.0

5.0

10.0

15.0

20.0

25.0

12/31/2011 12/31/2012

20.4 21.7

+6.3%

> $100K $100k to $250K $250K to $1M

Slide 5 © 2013 GXS, Inc.

Delinquency rates continue to improve for all loan types except residential real estate

11.2%

10.6% 9.1%

4.6%

3.6%

6.7%

2.8% 2.4% 3.8%

2.6%

1.2%

4.4%

1.2% 0%

2%

4%

6%

8%

10%

12%

1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12

Residential real estate loans

Commercial real estate loans

Credit card loans

Consumer loans

Commercial & industrial loans

Sources: Federal Reserve Statistical Release

Slide 6 © 2013 GXS, Inc.

$46$51

$55$60

$67$71

$75$79 $82 $85

$92$95 $96

$0.3$0.4 $0.5

$0.3 $0.3

$1.0

$0.5

$1.3

$1.3

$2.3

$2.1

$2.1

$1.9

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$0

$25

$50

$75

$100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Unpaid principal balance Charge off amount

Charge-offs (USD billions)Principal balance (USD billions)

In 2012, Small Business Administration lending jumped up with charge-offs leveling off

Est.

Sources: Small Business Administration budget and performance reports

Slide 7 © 2013 GXS, Inc.

-70%

-50%

-30%

-10%

10%

30%

50%

70%

90%

3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13

Small C&I loan demand Small C&I loan standards

Large and medium C&I loan demand Large and medium C&I loan standards

Loan demand

Loan standards

Commercial and industrial (C&I) loan demand reflects economic uncertainty

Quarterly percentage change

Sources: Federal Reserve Board senior loan officer opinion survey

Slide 8 © 2013 GXS, Inc.

2.4%

3.6%

4.0%

1%

2%

3%

4%

5%

3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12

More than $1,000,000 $100,000–$1,000,000 Less than $100,000

Spreads narrowing, especially for large C&I loans

3.3%

1.4%

2.1%

3.2%

4.0%

2.0%

1.6%

Sources: Federal Reserve survey of terms of business lending

Spread percentage

Slide 9 © 2013 GXS, Inc.

4

6

8

10

12

14

16

18

0%

2%

4%

6%

8%

10%

1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13

Business bankruptcy filings Unemployment percentage

Unemployment percentage Number of filings (000s)

Es

Business bankruptcy filings a bright spot in the picture for small business risk

4.7%

10.0%

7.7%

Sources: American Bankruptcy Institute, U.S. Bureau of Labor Statistics

Est.

Slide 10 © 2013 GXS, Inc.

0%

1%

2%

3%

4%

Up to $300M $300M to $1B $1B to $10B $10B to $20B Over $20B

2009 2010 2011 2012

Smaller banks continue to struggle with non-performing commercial loans

3.9%

Ratio of non-performing commercial loans to total

commercial loans (%)

Sources: Federal Reserve Bank of St. Louis

0.7%

Slide 11 © 2013 GXS, Inc.

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2009 Actual 2010 Actual 2011 Actual2012

Projection 2013 Forecast

DevelopingAsia

LATAM

CIS*

United States

Japan

Euro Area

2012 did not meet expectations, recovery stalls for 2013

3.8%

0.8%

3.9%

7.8%

2.2%

*CIS = Commonwealth of Independent States (former Soviet Republics)

1.6%

Sources: International Monetary Fund World Economic Update January 2013

Percent change in GDP

Slide 12 © 2013 GXS, Inc.

Trade payables and receivables at 12-year lows

11.7%

14.1%

10%

12%

14%

16%

18%

20%

22%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Trade Payables Trade Receivables

Recessionary Periods

Percent of company net worth

Sources: Federal Reserve Bank of St. Louis

Slide 13 © 2013 GXS, Inc.

• Risk metrics continue to show a mixed bag, but underlying improvement

seems to be taking hold

• Small Business Credit Index points to improving environment for small

businesses by end of 2013, and continuing into the next couple of years

• Small business lenders continue to lend to borrowers who meet their

desired risk/reward profile

• Close monitoring needed to identify emerging adverse trends and

minimize loan losses

• Investments in credit analytics and

monitoring tools continue to pay off,

reflected in decreases in non-performing busi ness

loans

Parting thoughts

Slide 14 © 2013 GXS, Inc.

Thank You and Q&A

Patty Hines, CTP Director, Financial Services Industry

Marketing

E-mail: patty.hines@gxs.com