Special Finance

7/23/2019 Special Finance

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March 2015

Specialty FinanceIndustry InsightsA review of M&A activity and

public market valuation in the

consumer and commercialspecialty finance sectors


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William Blair

Specialty Finance Industry Insights

Table of Contents

Table of Contents

Introduction .....................................................................................................................................................................................................................................................1

Consumer Specialty Finance .....................................................................................................................................................................................................................2

M&A Trends .................................................................................................................................................................................................................................................2

Select M&A Transactions .......................................................................................................................................................................................................................3

Public Valuation Update .........................................................................................................................................................................................................................4

Commercial Specialty Finance ..................................................................................................................................................................................................................7

M&A Trends .................................................................................................................................................................................................................................................7

Select M&A Transactions .......................................................................................................................................................................................................................8

Public Valuation Update .........................................................................................................................................................................................................................9

Capital Markets Transactions ................................................................................................................................................................................................................ 12

Recent Equity Offerings ....................................................................................................................................................................................................................... 12

Recent Debt Offerings .......................................................................................................................................................................................................................... 14

Recent Preferred Equity Offerings .................................................................................................................................................................................................. 15

Financial Services & Technology Analysts and Coverage .......................................................................................................................................................... 16

Investment Banking Team Biographies ............................................................................................................................................................................................ 17

Select William Blair Transactions ........................................................................................................................................................................................................ 18

Notes ................................................................................................................................................................................................................................................................ 19

Disclosures ..................................................................................................................................................................................................................................................... 20


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William Blair

Specialty Finance Industry InsightsIntroduction 1

Introduction

Specialty finance can be broadly defined as any financing activity that takes place outside the traditional banking system. Typically,specialty finance firms are thought of as non-bank lenders that make loans to consumers and small to midsize businesses that cannototherwise obtain financing. This report covers trends in M&A activity, transaction multiples, and public company valuations in theconsumer and commercial specialty finance sectors. Specifically, consumer specialty finance includes auto finance, collection,

alternative financial services, credit card, and mortgage companies. Commercial specialty finance includes business developmentcompanies (BDCs), commercial finance, commercial real estate lending, and leasing companies. We hope you enjoy this report, andwe welcome any feedback.

Summary of M&A Activity

Both the M&A and equity markets performed strongly in the first quarter. Total global year-to-date M&A volume is over $400 billion,up more than 5% from the corresponding period last year, and over the same period the total disclosed dollar volume of new equityissuances (both initial public offerings and follow-on offerings) is up more than 17%. While some industry veterans believevaluations are ahead of themselves, deal activity suggests otherwise.

This theme persists within the specialty finance sector and we believe 2015 M&A activity will remain strong for high qualitycompanies in this sector. Large strategic acquirers with healthy war chests will likely continue to pursue companies withdifferentiated solutions, go-to-market strategies, and proven strong growth and profitability. In addition, private-equity firms remainhighly active in the specialty finance sector. Aging portfolio companies of private-equity firms in particular, specialty finance

businesses purchased before or during the downturn may create liquidity opportunities in the near to midterm and will continue tofuel middle-market M&A activity.

Specialty finance companies generate high margins and recurring cash flows. In addition, these companies have meaningfuloperating leverage. As a result, M&A transactions in the sector are generally completed at attractive multiples. Since 2002,approximately 53% of the aggregate deals in the consumer specialty finance sector have been completed at above 10.0 times LTMnet income, and approximately 18% have been completed at more than 3.00 times LTM book value. In the commercial specialtyfinance sector, approximately 46% of the aggregate deals since 2002 have been completed at above 10.0 times LTM net income, andapproximately 22% have been completed between 1.50 and 3.00 times LTM book value. Acquirers in the sector are most oftenstrategic parties that are able to pay more because of the significant revenue synergies generated by pushing new or stronger financeproducts through an established distribution platform. In addition, many private-equity funds have developed a differentiated levelof industry knowledge and expertise, and as a result have established strong reputations in the sector.

In 2015 thus far, M&A activity in the sector has been strong, driven primarily by strategic acquirers looking for new products andsegments, differentiated platforms, and additional avenues for growth. Examples include New Residential Investment Corporations'

acquisition of Home Loan Servicing Solutions and Huntington Bancshares acquisition of Macquarie Equipment Finance. While globaleconomic uncertainty may cause the broad universe of buyers and sellers to proceed more cautiously in 2015, we remain optimisticthat both M&A and capital markets activity will remain strong for solidly performing businesses.

Robert Metzger+1 312 364 [email protected]

J.P. Young+1 312 364 [email protected]

Kegan Greene+1 312 364 [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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ConsumerSpecialtyFinanceSector


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William Blair

Specialty Finance Industry Insights2 Consumer Specialty Finance

Consumer Specialty Finance

M&A Trends

Year-to-date aggregate M&A transaction volume is running slightly ahead of the comparable period in 2014, though discloseddollar volume is meaningfully lower over the same period.

Approximately 53% of the aggregate deals since 2002 have been completed at above 10.0 times LTM net income, andapproximately 18% have been completed at more than 3.00 times LTM book value.

Transactions less than $50 million were completed at an average of 5.9 times LTM net income, meaningfully lower than LTM netincome multiples on deals above $50 million.

Historical Transaction Volume

Historical Transaction Dollar Volume ($ in millions)

LTM Net Income Multiple Breakdown LTM Book Value Multiple Breakdown

LTM Net Income Multiple by Transaction Size LTM Book Value Multiple by Transaction Size

Source: SNL Financial and William Blairs market analysis.Note: Year-to-date as of February 28, 2015.

47 41

79

53

75

5432 33 46

5042 47 39

8 10

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2014YTD

2015YTD

Average: 49 25.0%

$17,055$26,075

$8,866

$51,379

$16,926

$2,090 $3,299 $2,754

$12,024

$43,055

$10,519

$1,817$6,009

$1,828 $1,327

-

$20,000

$40,000

$60,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2014YTD

2015YTD

($ in millions) Average: $16,322 (27.4%)

53.2%32.3%

14.5%Greater than 10.0x

5.0x to 10.0x

Less than 5.0x

18.2%

27.3%54.5%

Greater than 3.00x

1.50x to 3.00x

Less than 1.50x

5.9x7.5x

13.4x

0.0x

5.0x

10.0x

15.0x

$100mm

1.36x

1.12x

1.34x

0.90x1.00x1.10x1.20x1.30x1.40x1.50x

$100mm


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William Blair


Public Valuation Update

Auto Finance

Indexed Price / LTM Earnings Ratios as of 2/28/2015

Public Company Valuations

Ticker

StockPrice2/28/15

EquityMarketCap.

Debt /Equity

Stock Price /AssetCAGR ROAA ROAE

Net Income

EPS BVPS 3-Yr CAGR Margin

Company LTM FY2015 LTM 09-14 LTM LTM LTM LTM

Ally Financial Inc. ALLY $20.78 $10,005.6 4.8x 15.3x 10.6x 0.71x (2.5%) 0.6% 6.2% NMF 17.6%America's Car-Mart Inc. CRMT $53.21 $456.0 0.5x 16.9x 16.2x 2.02x 10.6% 7.6% 13.1% (3.4%) 5.5%

Consumer Portfolio Services, Inc. CPSS $6.96 $178.2 NMF 7.6x 6.6x 1.40x 11.4% 1.8% 26.6% NA 20.9%

Credit Acceptance Corp. CACC $183.30 $3,829.7 2.5x 15.4x 13.6x 5.45x 18.8% 10.2% 36.7% 12.3% 40.7%

Nicholas Financial Inc. NICK $14.89 $183.4 0.8x 11.6x NA 1.18x 7.5% 5.5% 10.8% (8.9%) 26.4%

Santander Consumer USA Holdings Inc. SC $22.53 $7,862.6 NMF 10.5x 9.3x 2.29x NA 2.6% 24.5% 6.6% 26.3%

Mean $3,752.6 2.2x 12.9x 11.3x 2.17x 9.2% 4.7% 19.6% 1.6% 22.9%

Median $2,142.8 1.7x 13.5x 10.6x 1.71x 10.6% 4.1% 18.8% 1.6% 23.6%

Collection



Ticker

StockPrice2/28/15

EquityMarketCap.

Debt /Equity

Stock Price /Asset

CAGR ROAA ROAE

Net Income


Company LTM FY2015 LTM 09-14 LTM LTM LTM LTM

Asta Funding Inc. ASFI $8.47 $110.0 0.2x 10.0x NMF 0.62x NA (2.1%) 6.9% 47.5% 28.5%

Encore Capital Group, Inc. ECPG $39.97 $1,031.4 4.2x 10.4x 7.9x 1.78x 44.5% 7.8% 15.9% 19.4% 9.7%

Performant Financial Corporation PFMT $5.25 $259.1 1.2x 27.6x 22.4x 3.04x NA 6.6% 11.4% (8.8%) 4.8%

PRA Group, Inc. PRAA $50.09 $2,508.5 1.6x 14.3x 10.6x 3.81x 28.5% 10.3% 19.9% 20.5% 20.0%

Mean $977.2 1.8x 15.6x 13.6x 2.31x 36.5% 5.6% 13.5% 19.7% 15.7%

Median $645.2 1.4x 12.4x 10.6x 2.41x 36.5% 7.2% 13.6% 20.0% 14.9%

Note: Dollar amount in millions.Source: SNL Financial and Capital IQ.

6.0

8.0

10.0

12.0

14.0

16.0

Feb 2010 Feb 2011 Feb 2012 Feb 2013 Feb 2014 Feb 2015

Current:13.5x

2.0x

6.0x

10.0x

14.0x

18.0x

22.0x

26.0x


Current:12.4x


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William Blair


Mortgage



Company Ticker

StockPrice2/28/15

EquityMarketCap.

Debt /Equity


Net Income


LTM FY2015 LTM 09-14 LTM LTM LTM LTM

Ellington Financial LLC EFC $20.48 $685.1 2.2x 9.8x 8.3x 0.88x 20.8% 1.7% 8.5% 78.9% (9.3%)

Heritage Financial Group,

Inc.

HBOS $25.89 $228.0 1.3x 27.3x 23.4x 1.61x 24.4% 0.5% 5.3% 25.5% 8.6%

Nationstar MortgageHoldings Inc.

NSM $26.65 $2,424.7 NMF 10.9x 7.3x 2.07x 54.1% 1.8% 20.0% NMF 15.2%

Ocwen Financial Corp. OCN $8.14 $1,024.1 3.8x 6.1x 4.4x 0.71x 28.8% 6.1% 11.0% 33.6% 8.6%

PennyMac MortgageInvestment Trust

PMT $21.44 $1,597.5 2.0x 8.7x 8.4x 1.01x NA 4.2% 12.8% 44.5% 47.7%

PHH Corporation PHH $24.28 $1,243.1 1.1x NA NMF 0.80x 1.4% (2.8%) (11.3%) 57.1% 8.4%

Stonegate MortgageCorporation

SGM $10.02 $258.3 4.1x 12.5x 6.7x 0.95x NA (2.4%) (10.4%) NA (12.9%)

Walter InvestmentManagement Corp.

WAC $16.67 $628.8 NMF 8.7x 8.4x 2.12x 58.7% (0.6%) (9.8%) NA (9.3%)

Mean $1,065.8 2.4x 12.5x 9.8x 1.15x 25.9% 1.3% 5.1% 47.9% 9.5%

Median $1,024.1 2.1x 10.3x 7.8x 0.95x 24.4% 1.7% 8.5% 44.5% 8.6%

Note: Dollar amount in millions.

Source: SNL Financial and Capital IQ.

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x


Current:10.3x


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CommercialSpecialtyFinanceSector


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William Blair

Specialty Finance Industry Insights7 Commercial Specialty Finance

Commercial Specialty Finance

M&A Trends

Year-to-date aggregate M&A transaction volume and disclosed dollar volume are running significantly above those of thecomparable period in 2014.

Approximately 46% of the aggregate deals since 2002 have been completed at above 10.0 times LTM net income, andapproximately 22% have been completed between 1.50 and 3.00 times LTM book value.

Transactions less than $50 million were completed at an average of 5.6 times LTM net income, slightly lower than LTM netincome multiples on deals above $50 million.

Historical Transaction Volume

Historical Transaction Dollar Volume

LTM Net Income Multiple Breakdown LTM Book Value Multiple Breakdown

LTM Net Income Multiple by Transaction Size LTM Book Value Multiple by Transaction Size

Source: SNL Financial and William Blairs market analysis.Note: Year-to-date as of February 28, 2015.

39

26

4540 43 42

29

22

28

16

29 2635

49

0

10

20

30

40

50

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2014YTD

2015YTD

Average: 32 125.0%

$1,551

$7,885 $9,126$6,484 $5,702

$11,162

$15,423

$2,453 $1,780 $240

$7,802$7,314 $4,159

$229 $1,123

$0

$4,000

$8,000

$12,000

$16,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2014YTD

2015YTD

($ in millions) Average: $6,237 NMF

46.2%

30.8%

23.1% Greater than 10.0x

5.0x to 10.0x

Less than 5.0x

6.5%

21.7%71.7% Greater than 3.00x

1.50x to 3.00x

Less than 1.50x

5.6x8.1x

10.0x

0.0x

5.0x

10.0x

15.0x

$100mm

1.00x 1.40x 1.01x

0.00x

0.50x

1.00x

1.50x

$100mm


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William Blair

Specialty Finance Industry InsightsCommercial Specialty Finance 8

Select M&A Transactions

Transaction Value /

AnnouncedDate Sub-Sector Buyer Name / Target Name

TransactionValue

LTM NetIncome

LTM BookValue

03/09/15 Commercial Finance BankUnited/ CertusHolding's small business finance unit - - -

03/03/15 Leasing Wood Creek Capital Management/ Milestone Equipment Holdings - - -

03/03/15 Commercial Finance Triumph Capital Advisors/ Doral Money Inc. $133.3 - -

02/24/15

Leasing Huntington Bancshares Incorporated/ Macquarie Equipment Finance, Inc. $425.0 - -

02/20/15 Commercial Finance Wesleyan Assurance Society/ Syscap Holdings Limited - - -

02/11/15 Commercial Finance Fortress Investment Group/ UniCredit Credit Management Bank $624.0 - -

02/10/15 Commercial Finance Aquiline Holdings LLC/ Engs Commercial Finance Co. - - -

02/06/15 Leasing Beacon Credit Union/ Midwest Ag Finance, Inc. - - -

01/23/15 Commercial Finance Prosper Marketplace, Inc./ American HealthCare Lending, LLC $21.0 - -

01/20/15 Commercial Finance UniCredit Bank Austria/ Transfinance - - -

01/15/15 Commercial Finance Temasek Holdings Limited/ SVB India Finance Private Limited $45.4 - -

01/09/15 Leasing General Finance Corporation/ Bristlecone Ventures, LLC $7.3 - -

12/30/14 Commercial Finance AgTexas Farm Credit Services/ Great Plains Ag Credit - - -

12/15/14 Leasing Fortress Investment Group LLC/ MicroFinancial Incorporated $151.4 15.2x 1.58x

11/26/14 Leasing General Finance Corporation/ YS Container Services Limited - - -

10/31/14 Commercial Finance Blackrock Kelso Capital Corporation/ GB Credit Partners LLC $129.6 - -

10/31/14 Leasing General Electric Capital Corporation/ VB Leasing CZ - - -

10/14/14 Commercial Finance Meta Financial Group, Inc./ AFS/IBEX Financial Services, Inc. - - -

10/13/14 Leasing General Electric Capital Corporation/ Milestone Aviation Group Limited $1,775.0 - -

10/10/14 Leasing FIMBank/ First Factors $5.7 - -

10/09/14 Commercial Finance Heritage Commerce Corp/ BVF/CSNK Acquisition Corp. $22.5 1.7x 0.14x

09/29/14 Commercial Real Estate Walker & Dunlop, Inc./ Johnson Capital Group, Inc. - - -

09/26/14 Leasing First Midwest Bancorp, Inc./ National Machine Tool Financial Corporation - - -

09/04/14 Commercial Finance National Commerce Corporation/ CBI Holding Company, LLC - - -

08/26/14 Commercial Finance Funding Circle Limited/ LeapPay, Inc. - - -

08/11/14 Leasing Signature Bancshares, Inc./ Lease Finance Group, Inc. - - -

08/05/14 Commercial Finance Cargills Bank Ltd./ Capital Alliance Finance PLC $441.0 - -

08/04/14 Leasing Carolina Alliance Bank/ Dave McBride Leasing, LLC - - -

07/11/14 Commercial Finance Pine Tree Equity Management, LP/ Celtic Capital Corporation - - -

06/28/14 Commercial Real Estate Sutherland Asset Management Corp./ CIT Small Business Lending Corporation - - -

06/10/14 Commercial Finance Minnwest Corporation/ HiLine Credit Corporation - - -

06/05/14 Commercial Finance Ares Management, L.P./ Keltic Financial Services, LLC - - -

06/02/14 Leasing Element Financial Corporation/ PHH Vehicle Management Services Group LLC $1,402.5 24.2x 3.80x

06/02/14 Commercial Finance Omega Commercial Finance Corp./ AmericaVest CRE Mortgage Funding Trust, Inc. $2.0 - -

05/15/14 Commercial Finance National Bancshares, Inc./ Doral Healthcare Finance - - -

05/05/14 Commercial Finance United Community Banks, Inc./ Business Carolina Inc. - - -

04/22/14 Commercial Real Estate Wood Creek Capital Management, LLC/ Genesis Funding Limited - - -

04/08/14 Commercial Real Estate Northwest Federal Credit Union/ Park Place Equity, LLC - - -

03/28/14 Commercial Finance FBR & Co./ Securities Lending Business - - -

03/14/14 Commercial Finance Tiger Global Management/ OnDeck $77.0 - -



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William Blair


Public Valuation Update

Business Development Companies (BDCs)



Ticker

StockPrice2/28/15

EquityMarketCap.

Debt /Equity


Net Income

EPS BVPS 3-Yr CAGR MarginDividendYieldCompany LTM FY2015 LTM 09-14 LTM LTM LTM LTM

Apollo Investment Corporation AINV $7.79 $1,844.2 0.8x 11.8x 8.1x 0.89x 7.4% 5.3% 8.0% NA 36.7% 10.3%

Ares Capital Corporation ARCC $17.30 $5,434.1 0.7x 8.9x 10.8x 1.04x 32.6% 4.8% 11.6% 22.8% 59.8% 9.1%

BlackRock Kelso Capital Corporation BKCC $8.78 $654.5 0.5x 5.2x 10.0x 0.88x 8.2% 4.1% 15.8% 21.3% NMF 9.6%

Capitala Finance Corp. CPTA $18.81 $244.0 0.8x NA 9.8x 0.95x NA 4.1% 5.6% NA (6.9%) 10.0%

CM Finance Inc. CMFN $13.73 $187.6 0.7x 8.1x NA 0.94x NA 4.8% 13.5% NA 79.7% 10.1%

Fidus Investment Corporation FDUS $16.60 $266.0 0.6x 12.2x 10.0x 1.09x NA 4.9% 7.2% (1.7%) 38.2% 9.2%

Fifth Street Finance Corp. FSC $7.08 $1,085.6 1.0x 21.4x 8.0x 0.73x 45.0% 4.6% 3.5% 28.0% 16.1% 12.4%

Full Circle Capital Corporation FULL $3.88 $46.4 1.0x NMF 5.9x 0.62x NA 5.5% 4.6% NA NMF 10.8%

Garrison Capital Inc. GARS $15.03 $251.9 0.9x 8.3x 9.9x 0.96x NA 3.6% 12.2% (8.1%) 60.4% 9.3%

Golub Capital BDC, Inc. GBDC $17.76 $837.8 1.0x 12.5x 13.6x 1.14x 28.7% 3.7% 9.4% 45.0% 58.9% 7.2%

Harvest Capital Credit Corporation HCAP $12.55 $77.9 0.2x 8.3x 8.1x 0.87x NA 7.2% 8.0% NA 57.2% 10.8%

Hercules Technology Growth Capital, Inc. HTGC $15.55 $998.2 1.0x 14.1x 11.7x 1.52x 20.6% 5.3% 10.9% 14.9% 49.6% 8.0%

Horizon Technology Finance Corporation HRZN $14.13 $136.0 0.6x 8.8x 10.2x 0.98x NA 5.0% 5.5% (19.1%) 23.9% 9.8%

KCAP Financial, Inc. KCAP $7.50 $275.4 0.7x 10.0x 7.8x 0.96x (0.4%) 5.9% 9.7% NMF 47.9% 13.3%

Main Street Capital Corporation MAIN $30.95 $1,397.7 0.8x 13.4x 13.6x 1.47x 53.9% 4.9% 11.6% 17.0% 71.6% 6.8%

Medallion Financial Corp. TAXI $10.45 $258.6 1.3x 9.2x 9.8x 0.95x 2.6% 2.4% 10.5% 14.4% 69.9% 9.2%

Medley Capital Corporation MCC $9.46 $555.6 0.9x 25.2x 7.0x 0.75x NA 5.7% 3.3% 11.7% 13.2% 12.7%

Monroe Capital Corporation MRCC $14.91 $141.9 0.8x 10.3x 9.4x 1.07x NA 4.9% 10.1% NA 44.2% 9.1%

OFS Capital Corporation OFS $12.13 $116.9 1.1x 11.8x 10.6x 0.87x NA 3.0% 5.5% 29.6% 37.5% 11.2%

PennantPark Floating Rate Capital Ltd. PFLT $13.97 $208.1 0.6x 14.0x 11.1x 0.97x NA 3.9% 7.0% NA 48.1% 7.7%

PennantPark Investment Corporation PNNT $9.51 $714.1 0.8x 13.8x 8.6x 0.86x 22.5% 4.8% 6.3% NA 31.2% 11.8%

Prospect Capital Corporation PSEC $8.63 $3,093.0 0.8x 9.0x 8.1x 0.82x 57.6% 5.5% 9.3% 25.2% 41.8% 11.6%

Saratoga Investment Corp. SAR $15.76 $84.8 1.1x 7.0x 8.9x 0.71x 10.9% 4.1% 10.3% (5.9%) 47.2% 5.6%

Solar Capital Ltd. SLRC $20.12 $854.4 0.2x 17.8x 12.5x 0.90x 13.8% 3.0% 5.0% (7.5%) 39.7% 8.0%

Solar Senior Capital Ltd. SUNS $16.17 $186.5 0.7x 16.0x 11.7x 0.92x NA 3.2% 5.7% NA 52.9% 8.7%

TCP Capital Corp. TCPC $16.60 $808.6 0.4x NMF 10.3x 1.07x 16.9% 5.3% 10.8% 33.3% 74.9% 9.3%

THL Credit, Inc. TCRD $12.09 $409.9 0.6x 11.1x 8.8x 0.91x NA 5.2% 9.5% 26.5% 49.6% 11.2%

TICC Capital Corp. TICC $7.29 $440.0 1.0x NA 6.9x 0.78x 35.8% 5.4% (0.6%) 6.9% (2.9%) 14.8%

TPG Specialty Lending, Inc. TSLX $18.54 $1,000.4 0.5x 11.0x 11.1x 1.18x NA 6.4% 12.1% NA 52.1% 8.4%

Triangle Capital Corporation TCAP $23.67 $778.9 0.8x 24.8x 10.7x 1.42x 30.4% 5.8% 5.8% (20.7%) 27.1% 9.3%

Mean $779.6 0.8x 12.5x 9.8x 0.97x 24.2% 4.7% 8.3% 12.3% 43.6% 9.8%

Median $425.0 0.8x 11.4x 9.9x 0.94x 21.5% 4.9% 8.7% 14.9% 47.5% 9.5%


5.0x

10.0x

15.0x

20.0x

25.0x


Current:11.4x


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William Blair


Leasing



Company Ticker

StockPrice2/28/15

EquityMarketCap.

Debt /Equity


Net Income

EPS BVPS 3-Yr CAGR MarginDividendYieldLTM FY2015 LTM 09-14 LTM LTM LTM LTM

AerCap Holdings N.V. AER $44.50 $9,448.2 3.8x 9.8x 8.7x 2.75x 45.3% 4.4% 15.6% 67.6% 22.3% NA

AeroCentury Corp. ACY $10.07 $16.2 3.2x NA 10.3x 0.45x 4.5% NMF 5.9% NA 8.4% NA

Air Lease Corporation AL $38.24 $3,915.5 2.4x 16.1x 12.9x 1.41x NA 3.8% 9.7% 68.8% 24.4% 0.4%

Aircastle LTD AYR $23.07 $1,867.5 2.2x 18.5x 11.5x 1.09x 6.9% 4.6% 6.0% 26.9% 12.5% 3.8%

CAI International Inc. CAP $24.28 $504.7 2.9x 8.5x 8.3x 1.14x 36.9% 3.7% 14.1% 6.3% 26.5% NA

Element Financial Corporation EFN $12.80 $3,380.9 2.8x NMF 15.6x 2.11x NA 0.7% 2.5% NA 16.0% NA

GATX Corp. GMT $62.25 $2,757.7 3.3x 13.9x 11.8x 2.24x 5.9% 2.9% 15.1% 22.8% 14.1% 2.4%

Marlin Business Services Corp. MRLN $18.71 $239.9 NA 12.6x 11.8x 1.34x 6.0% 2.6% 11.5% 46.3% 25.9% 2.7%

Mobile Mini, Inc. MINI $41.49 $1,915.1 1.1x NMF 11.6x 2.09x 3.7% 3.6% 5.2% 13.2% 10.0% 1.8%

Ryder System, Inc. R $93.99 $4,980.3 2.5x 22.7x 14.8x 3.67x 9.1% 3.9% 11.9% 8.8% 3.3% 1.6%

TAL International Group, Inc. TAL $41.73 $1,372.1 4.6x 11.3x 11.4x 2.31x 18.9% 4.6% 18.3% 4.2% 19.1% 6.9%

Textainer Group Holdings Limited TGH $32.26 $1,834.4 2.4x 9.7x 10.8x 1.57x 26.2% 4.1% 16.3% 7.8% 33.6% 5.8%

Willis Lease Finance Corp. WLFC $21.34 $179.6 3.5x 24.0x 17.3x 0.81x 4.1% 3.4% 6.6% (1.8%) 8.0% NA

Mean $2,493.2 2.9x 14.7x 12.1x 1.77x 15.2% 3.5% 10.7% 24.6% 17.2% 3.2%

Median $1,867.5 2.9x 13.2x 11.6x 1.57x 6.9% 3.8% 11.5% 13.2% 16.0% 2.6%


6.0x

11.0x

16.0x

21.0x


Current:13.2x


16/26

Capital MarketsTransactions


17/26

William Blair

Specialty Finance Industry Insights12 Capital Markets Transactions

Capital Markets Transactions

Recent Equity Offerings

Initial Public Offerings

PricingDate Company Price Shares Amount

Market Cap. at Pricing /

LTM EPSLTMBook Value

02/13/15 Great Ajax Corp. $14.25 5.0 $71.3 - 1.00x

12/16/14 On Deck Capital, Inc. $20.00 10.0 $200.0 - -

12/11/14 Avolon Holdings Limited $20.00 13.6 $272.7 12.1x 1.05x

12/10/14 LendingClub Corporation $15.00 58.0 $870.0 - -

11/20/14 Neff Corporation $15.00 10.5 $157.1 9.8x 1.11x

10/08/14 Eagle Point Credit Company Inc. $20.00 5.2 $103.1 - -

07/30/14 Synchrony Financial $23.00 125.0 $2,875.0 - -

05/08/14 Alcentra Capital Corporation $15.00 6.6 $100.0 10.3x 0.90x

04/09/14 Ally Financial Inc. $25.00 95.0 $2,375.0 - 0.80x

03/20/14 TPG Specialty Lending, Inc. $16.00 7.0 $112.0 12.4x 1.03x

03/05/14 TriplePoint Venture Growth BDC Corp. $15.00 8.3 $125.0 - -

02/05/14 CM Finance Inc. $15.00 6.7 $100.0 9.1x 1.47x02/05/14 Ladder Capital Corp $17.00 13.3 $225.3 - 6.44x

01/22/14 Santander Consumer USA Holdings Inc. $24.00 75.0 $1,799.8 17.2x 3.10x

01/15/14 American Capital Senior Floating, Ltd. $15.00 10.0 $150.0 - -

11/08/13 JGWPT Holdings Inc. $14.00 13.9 $195.0 - -

11/06/13 StoneCastle Financial Corp. $25.00 6.3 $157.1 - -

10/15/13 Springleaf Holdings, Inc. $17.00 21.0 $357.8 - 1.12x

10/09/13 Stonegate Mortgage Corporation $16.00 7.1 $113.6 14.1x 2.48x

10/03/13 Cherry Hill Mortgage Investment Corporation $20.00 6.5 $130.0 - -

09/24/13 Capitala Finance Corp. $20.00 4.0 $80.0 - -

07/11/13 Fifth Street Senior Floating Rate Corp. $15.00 6.7 $100.0 - -

05/08/13 PennyMac Financial Services, Inc. $18.00 11.1 $200.0 - -

05/02/13 Harvest Capital Credit Corporation $15.00 3.4 $51.0 - -

05/01/13 Ellington Residential Mortgage REIT $20.00 6.5 $129.0 - 5.75x03/26/13 Garrison Capital Inc. $15.00 5.3 $80.0 - -

03/21/13 Five Oaks Investment Corp. $15.00 4.0 $60.5 22.2x 3.32x

02/14/13 Orchid Island Capital, Inc. $15.00 2.4 $35.4 - -

02/07/13 ZAIS Financial Corp. $21.25 5.7 $120.1 - -

12/04/12 WhiteHorse Finance, Inc. $15.00 6.7 $100.0 - -

11/07/12 OFS Capital Corporation $15.00 6.7 $100.0 - 2.35x

11/07/12 Stellus Capital Investment Corporation $15.00 8.0 $120.0 - -

10/24/12 Monroe Capital Corporation $15.00 5.0 $75.0 - -

Note: Dollar amount and shares amount are in millions and exclude overallotment.Source: SNL Financial and William Blairs market analysis.


18/26

William Blair

Specialty Finance Industry InsightsCapital Markets Transactions 13

Recent Equity Offerings (contd)

Follow-On Offerings

PricingDate Company Price Shares Amount

Market Cap. at Pricing /

LTM EPSLTMBook Value

03/05/15 Apollo Commercial Real Estate Finance, Inc. $17.00 10.0 $170.0 10.3x 0.92x

12/19/14 Ally Financial Inc. $23.25 54.9 $1,277.0 10.4x 0.74x

12/01/14 AerCap Holdings N.V. $41.23 11.2 $463.1 15.1x 1.18x

11/21/14 New York Mortgage Trust, Inc. $7.94 13.0 $103.2 6.1x 1.01x

11/21/14 TCP Capital Corp. $17.05 5.9 $100.6 11.4x 1.03x

11/20/14 Walker & Dunlop, Inc. $15.30 2.0 $30.6 11.0x 1.25x

11/12/14 Newtek Business Services Corp. $12.50 2.2 $27.5 16.5x 1.55x

11/04/14 StoneCastle Financial Corp. $23.00 1.6 $36.8 - 1.00x

10/27/14 Hannon Armstrong Sustainable Infrastructure Capital, Inc. $13.60 4.0 $54.4 - 1.37x

10/23/14 New Mountain Finance Corporation $14.53 5.0 $72.7 10.0x 1.08x

10/07/14 KCAP Financial, Inc. $8.02 3.0 $24.1 11.3x 1.12x

09/30/14 Fidus Investment Corporation $17.00 2.0 $34.0 16.8x 1.29x

09/18/14 Blackstone Mortgage Trust, Inc. $27.49 8.0 $219.9 21.7x 1.05x

09/05/14 AerCap Holdings N.V. $47.10 10.2 $479.5 29.4x 1.38x

09/05/14 PennantPark Investment Corporation $11.63 8.5 $98.9 6.4x 1.14x

09/04/14 Arlington Asset Investment Corp. $27.61 2.8 $75.9 7.9x 0.87x

09/04/14 NorthStar Realty Finance Corp. $18.40 45.0 $828.0 - 1.25x

09/03/14 Ellington Financial LLC $23.92 8.0 $191.4 11.2x 1.24x

09/02/14 Santander Consumer USA Holdings Inc. $18.68 10.0 $187.7 12.0x 2.14x

08/20/14 Medley Capital Corporation $13.02 5.0 $65.1 12.9x 1.14x

08/14/14 Fifth Street Senior Floating Rate Corp. $12.91 22.8 $294.3 - 3.61x

08/12/14 Newcastle Investment Corp. $4.32 39.5 $170.6 15.8x 1.95x

08/12/14 Triangle Capital Corporation $26.85 4.3 $115.5 11.2x 1.95x

08/05/14 TPG Specialty Lending, Inc. $18.63 5.0 $93.2 10.5x 1.13x

07/29/14 TCP Capital Corp. $17.33 5.4 $93.6 10.2x 1.04x

07/17/14 Garrison Capital Inc. $14.50 2.0 $29.0 7.9x 0.94x

07/16/14 Ares Capital Corporation $16.63 13.5 $224.5 9.9x 1.07x

07/16/14 Colony Financial, Inc. $22.14 15.0 $332.1 17.7x 0.85x

07/11/14 Fifth Street Finance Corp. $9.95 13.3 $131.8 12.8x 1.09x

06/19/14 Five Oaks Investment Corp. $11.00 3.5 $38.5 - 0.76x

05/13/14 NorthStar Realty Finance Corp. $15.45 30.0 $463.5 - 2.24x

04/30/14 Apollo Commercial Real Estate Finance, Inc. $16.35 9.0 $147.2 10.4x 0.88x

04/29/14 ePlus Inc. $50.00 1.6 $78.7 11.4x 1.51x

04/25/14 New Residential Investment Corp. $6.10 25.0 $152.5 5.2x 1.00x

04/23/14 Hannon Armstrong Sustainable Infrastructure Capital, Inc. $13.00 5.0 $65.0 - 1.48x

04/23/14 Medley Capital Corporation $13.25 6.0 $79.5 15.3x 1.17x


04/08/14 Main Street Capital Corporation $31.50 4.0 $126.0 14.0x 1.75x

04/08/14 Starwood Property Trust, Inc. $22.32 22.0 $491.0 12.2x 1.38x

04/03/14 Western Asset Mortgage Capital Corporation $14.67 13.0 $190.7 - 1.02x

04/02/14 New York Mortgage Trust, Inc. $7.59 13.0 $98.7 8.8x 1.19x

04/01/14 Blackstone Mortgage Trust, Inc. $27.72 8.0 $221.8 - 1.11x

03/26/14 PennyMac Financial Services, Inc. $16.50 5.6 $91.7 5.3x 0.55x

03/19/14 Orchid Island Capital, Inc. $12.55 3.2 $40.2 - 2.43x

03/11/14 Oxford Lane Capital Corp. $17.00 2.8 $47.6 18.1x 2.37x

02/27/14 Colony Financial, Inc. $21.90 13.0 $284.7 23.1x 1.26x

02/20/14 Kayne Anderson MLP Investment Company $37.05 8.0 $296.4 31.6x -


01/16/14 Orchid Island Capital, Inc. $12.50 1.8 $22.5 - -

01/14/14 Full Circle Capital Corporation $7.13 1.7 $11.8 - 0.85x

Note: Dollar amount and shares amount are in millions and exclude overallotment.Source: SNL Financial and William Blairs market analysis.


19/26


20/26

William Blair

Specialty Finance Industry InsightsCapital Markets Transactions 15

Recent Preferred Equity Offerings

Date Company Amount Call Date Dividend Rate (%)

02/25/15 American Express Company $850.0 03/15/20 4.9%

12/04/14 Wells Fargo Real Estate Investment Corp. $240.0 12/11/19 6.4%

11/20/14 Oxford Lane Capital Corp. $25.0 06/30/17 8.1%

11/05/14 American Express Company $750.0 11/15/19 5.2%

11/05/14 Gladstone Investment Corporation $36.0 12/31/17 6.8%10/13/14 Kayne Anderson MLP Investment Company $25.0 02/09/17 3.9%

09/04/14 Invesco Mortgage Capital Inc. $150.0 12/27/24 7.8%

06/17/14 Federal Agricultural Mortgage Corporation $75.0 07/18/24 6.0%

06/12/14 Colony Financial, Inc. $75.0 06/19/19 7.5%

06/03/14 Resource Capital Corp. $110.0 07/30/24 8.6%


05/21/14 Five Oaks Investment Corp. $15.0 12/23/18 8.8%

05/13/14 Gladstone Capital Corporation $55.0 06/30/17 6.8%

05/12/14 NorthStar Realty Finance Corp. $225.0 05/15/19 8.8%

05/05/14 American Capital Agency Corp. $175.0 05/08/19 7.8%


02/26/14 Element Financial Corporation $125.0 06/30/19 6.5%

12/18/13 Five Oaks Investment Corp. $20.0 12/23/18 8.8%

12/10/13 Element Financial Corporation $100.0 12/31/18 6.6%11/13/13 Oxford Lane Capital Corp. $36.6 06/30/16 7.5%

07/16/13 Farm Credit Bank of Texas $300.0 09/15/23 6.8%


05/29/13 General Electric Capital Corporation $1,000.0 06/15/23 5.3%

05/28/13 New York Mortgage Trust, Inc. $75.0 06/04/18 7.8%

05/08/13 Capstead Mortgage Corporation $150.0 05/13/18 7.5%

05/06/13 Arbor Realty Trust, Inc. $30.0 05/09/18 7.8%

04/23/13 CYS Investments, Inc. $200.0 04/30/18 7.5%

04/15/13 CoBank, ACB $200.0 07/01/18 6.1%

04/11/13 Dynex Capital, Inc. $50.0 04/30/18 7.6%

04/08/13 MFA Financial, Inc. $175.0 04/15/18 7.5%


03/12/13 iStar Financial Inc. $175.0 03/15/18 4.5%

02/07/13 ARMOUR Residential REIT, Inc. $135.0 02/12/18 7.9%

01/29/13 Arbor Realty Trust, Inc. $35.0 02/01/18 8.3%

01/29/13 MuniMae TE Bond Subsidiary, LLC $74.0 04/30/28 5.0%


01/10/13 KKR Financial Holdings LLC $325.0 01/15/18 7.4%


10/09/12 Discover Financial Services $500.0 12/01/17 6.5%


09/25/12 Resource Capital Corp. $25.0 10/02/17 8.3%

09/20/12 AG Mortgage Investment Trust, Inc. $100.0 09/27/17 8.0%

09/13/12 Apollo Residential Mortgage, Inc. $150.0 09/20/17 8.0%

09/06/12 Annaly Capital Management, Inc. $400.0 09/13/17 7.5%

08/16/12 Hatteras Financial Corp. $250.0 08/27/17 7.6%

07/27/12 CYS Investments, Inc. $75.0 08/03/17 7.8%

07/27/12 AG Mortgage Investment Trust, Inc. $45.0 08/03/17 8.3%

07/25/12 Dynex Capital, Inc. $50.0 07/31/17 8.5%

07/25/12 Apollo Commercial Real Estate Finance, Inc. $75.0 08/01/17 8.6%

07/24/12 General Electric Capital Corporation $1,750.0 12/15/22 6.3%

07/19/12 Invesco Mortgage Capital Inc. $135.0 07/26/17 7.8%

07/10/12 Colony Financial, Inc. $102.7 03/20/17 8.5%


Note: Dollar amount in millions and excludes overallotment.Source: SNL Financial and William Blairs market analysis.


21/26

William Blair

Specialty Finance Industry Insights16 Financial Services & Technology Analysts and Coverage

Financial Services & Technology Analysts and Coverage

Insurance Brokers and Propertyand Casualty Insurance

Adam Klauber, CFA

Financial Technology andSpecialty Finance

Robert Napoli

Asset Management andFinancial Technology

Chris Shutler, CFA

Allstate Corporation (The) (ALL)

American International Group, Inc. (AIG)

AmTrust Financial Services, Inc. (AFSI)

Aon plc (AON)

Argo Group International Holdings. Ltd.(AGII)

Arthur J. Gallagher & Co. (AJG)

Benefitfocus, Inc. (BNFT)

Brown & Brown, Inc. (BRO)

Chubb Corporation (The) (CB)

CNA Financial Corporation (CNA)

Connecture, Inc. (CNXR)

Crawford & Company (CRD.A)

Crawford & Company (CRD.B)

eHealth, Inc. (EHTH)

Erie Indemnity Company (ERIE)

Federated National Holding Company (FNHC)

HCC Insurance Holdings, Inc. (HCC)

Kemper Corporation (KMPR)

Markel Corporation (MKL)

Marsh & McLennan Companies, Inc. (MMC)

National General Holdings Corp. (NGHC)

National Interstate Corporation (NATL)

Navigators Group, Inc. (The) (NAVG)

Patriot National, Inc. (PN)

Progressive Corporation (The) (PGR)

RLI Corp. (RLI)

Travelers Companies, Inc. (The) (TRV)

WebMD Health Corp. (WBMD)

Willis Group Holdings Public LimitedCompany (WSH)

Alliance Data Systems Corporation (ADS)

American Express Company (AXP)

Bottomline Technologies, Inc. (EPAY)

CAI International, Inc. (CAP)

Capital One Financial Corporation (COF)

Cardtronics, Inc. (CATM)

Discover Financial Services (DFS)

Encore Capital Group, Inc. (ECPG)

EVERTEC, Inc. (EVTC)

Financial Engines, Inc. (FNGN)

Garrison Capital Inc. (GARS)

Green Dot Corporation (GDOT)

Harvest Capital Credit Corporation (HCAP)

Independence Realty Trust, Inc. (IRT)

Marlin Business Services Corp. (MRLN)

MasterCard Incorporated (MA)

MoneyGram International, Inc. (MGI)

Monroe Capital Corporation (MRCC)

Performant Financial Corporation (PFMT)

PRA Group (PRAA)

QIWI plc (QIWI)

Visa Inc. (V)

WageWorks, Inc. (WAGE)

Western Union Company (The) (WU)

WEX Inc. (WEX)

Affiliated Managers Group, Inc. (AMG)

Artisan Partners Asset Management Inc.(APAM)

Charles Schwab Corporation (The) (SCHW)

Eaton Vance Corp. (EV)

Envestnet, Inc. (ENV)

Euronet Worldwide, Inc. (EEFT)

Fiserv, Inc. (FISV)

Global Payments, Inc. (GPN)

Heartland Payment Systems, Inc. (HPY)

Invesco Ltd. (IVZ)

LPL Financial Holdings Inc. (LPLA)

MSCI Inc. (MSCI)

SEI Investments Company (SEIC)

SS&C Technologies Holdings, Inc. (SSNC)

T. Rowe Price Group, Inc. (TROW)

TD Ameritrade Holding Corporation (AMTD)

Vantiv, Inc. (VNTV)

Waddell & Reed Financial, Inc. (WDR)

WisdomTree Investments, Inc. (WETF)


22/26

William Blair

Specialty Finance Industry InsightsInvestment Banking Team Biographies 17

Investment Banking Team Biographies

William Blair & Company Financial Services Investment Banking

Robert Metzger, Managing Director and Head of Financial Services Investment Banking, joined William Blair in 1999. While at William

Blair and in his prior position at ABN AMRO, he focused on the corporate finance needs of insurance, financial technology, andspecialty finance companies. Mr. Metzger graduated in 1989 with highest honors from the University of Illinois, receiving a B.S. inaccountancy. In 1995, he graduated with distinction from Northwestern Universitys J.L. Kellogg Graduate School of Management,receiving an M.B.A. in finance and strategy. He is a Certified Public Accountant.

[email protected]

+1 312 364 8517

J.P. Young,ManagingDirector, is a member of the financial services industry group, where he focuses on the corporate finance needsof banks, broker-dealers, and specialty finance companies. Mr. Young joined William Blairs investment banking group in 2009 fromMacquarie Capital and began his investment banking career in 2000 at Piper Jaffray. He has extensive experience providing M&Aadvisory services and raising public and private-equity capital for clients. Mr. Young received a B.S. from Lehigh University and an M.S.from the University of Chicago.

[email protected]

+1 312 364 8160

Kegan Greene, Vice President, joined William Blair in 2010. Before joining William Blair, Mr. Greene worked at Babcock & Brown,Goldman Sachs, and Deloittes transaction services department. He holds an M.B.A. in finance and entrepreneurship from theUniversity of Chicago, a J.D. from DePaul University, and a B.A. in English from DePauw University.

[email protected]

+1 312 364 8113


23/26

William Blair

Specialty Finance Industry Insights18 Select William Blair Transactions

Select William Blair Transactions

$27,500,000

Direct Unsecured Notes

158,000,000

has been acquired by

Arrow Global

$70,000,000

Senior Notes

$100,000,000

Senior Unsecured Notes

$29,000,000

Follow-on Offering

$76,475,000

Follow-on Offering

$1,285,000,000


Portfolio RecoveryAssociates

Not Disclosed


Milestone Partners

$60,000,000

Debt Placement

$151,800,000

Follow-on Offering

$161,000,000

Convertible Bond Offering

$66,815,000

Follow-on Offering

Not Disclosed

has been recapitalized by

Pine Tree EquityManagement

NORTH STATE ACCEPTANCE

$100,000,000

Senior Credit Facility

Debt Placement

Not Disclosed

has acquired

Persian AcceptanceCorporation

$50,000,000

Follow-on Offering

Not Disclosed

has acquired

$34,000,000

Initial Public Offering

$287,500,000

Convertible Senior,Unsecured Notes

$75,000,000

Follow-on Offering

$18,750,000

Junior UnsecuredNotes

$438,600,000


$51,000,000


525,000,000


$42,000,000

BabyBond Offering

$78,000,000

Follow-on Offering

$92,000,010


$97,980,000

Follow-on Offering

$35,000,000

Senior Subordinated NotesPreferred Equity

$75,000,000


$125,000,000

Senior Secured CreditFacility

$230,000,000

Convertible Offering

$74,000,000

Senior Credit Facility &Subordinated Notes

Not Disclosed


Manheim

$30,000,000

Second Lien Loan

$102,212,920


$75,469,000

Follow-on Offering

188,893,000

Follow-on Offering

$228,433,000

Follow-on Offering

$15,000,000

Second LienTerm Loan

COLLINS FINANCIAL SERVICES, INC.

I N N OV A T I ON CO M P LI A N CE I N T EG RI T Y

CFSI

28,000,000

has sold aminority stake to

Investcorp

$271,860,000

Follow-on Offering


24/26

William Blair

Specialty Finance Industry InsightsNotes 19

Notes


25/26

William Blair

William Blair is a trade name for William Blair & Company, L.L.C. and William Blair International, Limited. William Blair & Company, L.L.C., is a Delaware company and is regulated by the Securities andExchange Commission, The Financial Industry Regulatory Authority, and other principal exchanges. William Blair I nternational Limited is authorised and regulated by the Financial Conduct Authority("FCA") in the United Kingdom. William Blair & Companyonly offers products and services where it is permitted to do so. Some of these products and services are only offered to persons orinstitutions situated within the United States and are not offered to persons or institutions outside of the United States.

This material has been approved for distribution in the United Kingdom by William Blair International Limited, Regulated by t he Financial Conduct Authority (FCA), and is directed only at, and is onlymade available to, persons falling within COB 3.5 and 3.6 of the FCA Handbook (being Eligible Counterparties and Professional Clients). This Document is not to be distributed or passed on to anyRetail Clients. No persons other than persons to whom this document is directed should rely on it or its contents or use it as the basis to make an investment decision.

William Blair & Company | 222 West Adams Street | Chicago, Illinois 60606 | +1 312 236 1600 | williamblair.com

March 18, 2014

Specialty Finance Industry Insights20 Disclosures

Disclosures


26/26

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