1. Municipal Market Update December 4, 2008

2. 1 Discussion Topics Recent events in the capital markets Impact on national and local municipal markets Historical interest rates Continued challenges with Bond insurers Commercial banks Investment banks Summary Contact information

3. 2 Timeline of Capital Markets Developments  Skyrocketing housing prices lured real-estate speculators  This created even more demand and drove the cycle further  US economy is healthy; interest rates are low and consumers feel confident  This helped push up real- estate values  With values escalating, lenders felt more confident about making mortgages to customers whose poor credit histories had prevented them from buying homes in the past 2000 Note: This timeline is highly simplified for discussion purposes Sources: Ponder Investment Company research and NPR.org news articles 20062007  The mortgage market began seeing an increase in defaults and delinquency to a level that exceeded modeled expectations  Property values stopped increasing or started to decrease  Adjustable Rate Mortgages (ARM) began to reset higher 2008  Defaults in the mortgage market began to spill over into the asset-backed security and CDO markets and seeped into every area of the financial markets  There is great concern about the exposure of major investment banks, and several banks were downgraded  The rating agencies are concerned about the exposure of bond insurance companies, and a full review is initiated  Uncertainty and volatile markets continue as investors seek liquidity and safe credit structure  Volatility expected to continue  Recession expected to last until 2010  Sub-prime loans expanded to 20 percent of the mortgage market in 2006, from 9 percent a decade earlier  Home ownership reaches a record high of 69% in 2004

4. 3 A Historic Quarter for Wall Street Week ofSignificant Events September 15 Lehman files for bankruptcy; Bank of America announces buyout of Merrill Lynch AIG downgraded; government “Invests” $85 billion Reserve Primary Fund “breaks the buck” Treasury and Fed bolster Money Market Funds (“MMF”) with a guaranty program; extended to municipal market late in the week Investor fears spurs flight to quality Investors pull nearly $80 billion from money market funds The 3-month Treasury yield falls to near zero Global central banks join to unfreeze credit markets; U.S. Treasury announces $700 billion bailout plan Goldman Sachs and Morgan Stanley, the only two remaining investment banks, become bank holding companies September 22 Morgan Stanley announces sale of up to $8.5 billion in stock to Japanese bank Mitsubishi Warren Buffett’s Berkshire Hathaway announces a $5 billion investment in Goldman Sachs FBI begins investigating Fannie Mae, Freddie Mac, Lehman Brothers and AIG for potential mortgage fraud Washington Mutual is closed by the US government in the largest failure by far of a U.S. bank; the assets are sold to JPMorgan Chase for $1.9 billion EU government steps in with several major bailouts September 29 Citigroup agrees to acquire Wachovia’s banking operations for $2.1 billion in stock; later in the week, Wells Fargo offers $15.6 billion The House rejects the proposed bailout plan; the Senate approves the revised plan by a 74-25 vote; the House approved the revised plan by a vote of 263-171 Commercial banks, investment banks and AIG borrowed a record $410 billion from the Federal Reserve October 6 Passage of the bail-out plan doesn’t allay market fears; the Dow drops below 9,000 for the first time since 2003 Fed announced a plan to buy commercial paper in an effort to thaw short-term lending markets The Fed and several other foreign central banks lowered interest rates in an unprecedented coordinated effort AIG to receive an additional $37.8 billion loan from the Fed Treasury announces plans to buy stakes in a wide range of banks October 13 Volatile stock market continues Report that housing starts fell to second lowest rate in 50 years Hedge funds saw a record $210 billion drop in assets under management during the third quarter Source: Various news reports; Citigroup market update presentation dated 10/23/08

5. 4 Week ofSignificant Events October 20 U.S. Government and N.Y. Attorney General open joint investigation into the $34.8 trillion credit-default swap market Municipal bonds rally most in 26 years as the tax-exempt market thaws; yields drop 73 basis points in one week (nearly ¾ of 1%) AMBAC and MBIA make bid for government help under rescue plan Federal Reserve announces plans to shore up money market mutual funds October 27 Commodities head for their worst month since 1956 on concerns that a slump in global economic growth will sap demand for raw materials Commerce Department says gross domestic product contracted in the third quarter at the fastest annual pace since 2001 November 3 U.S. Treasury announces its plans to sell $55 billion in long-term government debt this quarter as a slowing economy balloons the budget deficit to a record level U.S. Treasury announced major changes to its auction schedule, reflecting what is likely to be a record high $1 trillion-plus budget deficit this year JPMorgan Chase, UBS and Royal Bank of Scotland, three of the world’s biggest banks, say they expect further pain from the global financial crisis Financing arm of General Motors, GMAC, posted its 5 th straight quarterly loss and said its mortgage unit may not survive November 10 Treasury Secretary Paulson announces plan to use the second half of the $700 billion financial rescue program to help relieve pressure on consumer credit, scrapping an effort to buy devalued mortgage assets General Motors stock drops 30% after an analyst cuts price target to zero American Express gets Fed’s OK to become a bank holding company November 17 Mortgage write downs and rising audit costs could push Freddie Mac’s 2009 losses into the range of $20-$40 billion, according to an analyst China takes over Japan’s spot as the biggest foreign holder of Treasury bills, notes and bonds Standard & Poor’s drops AMBAC from AA to A Fears about deflation push Dow Jones to close below 8,000 for the first time since March 2003 A Historic Quarter for Wall Street (continued)

6. 5 Impact on the Municipal Market The immediate impact on the municipal market was high interest rates and a halt to new bond issues coming to market Flight to quality generally meant investment in U.S. Treasuries which has pushed benchmark treasury yields to 50-year lows with the 2-yr at 1.00% and the 10-yr at 2.93% as of 11/28/08 Massive out-flows from municipal money market funds resulted in significantly higher rates  SIFMA Index (1) resets Few new variable-rate demand bonds were issued  Many commercial banks have been unwilling to provide LOC support for new issues during this volatile time  Investment banks have been reluctant to take on additional remarketing business when it was so difficult to successfully remarket debt currently outstanding Daily Variable Rate Demand Bonds (“VRDBs”) have significantly out-performed weekly bonds No new fixed-rate bond issues came to market for several weeks 1)The Securities Industry Financial Market Association Index is a 7-day index comprised of tax-exempt variable rate demand bonds (“VRDBs). The Index represents a cross section of national VRDB issues. The rate resets on every Wednesday afternoon and becomes effective on Thursday.

7. 6 Short-term Variable Rates Although the relationship between SIFMA and 67% 1M LIBOR has held over the long-term, the current credit turmoil has caused a spike in short-term tax-exempt VRDO yields in late September.  The SIFMA index as of 11/19/08 was 1.12%, implying a short term ratio of SIFMA to 1M LIBOR of 79%.  The disruption in the tax-exempt market is attributable to several factors: –Seasonal tax implications (September 15 tax payments and September 30 quarter end) –Money Market Fund Assets down substantially in late September –Flight to quality given credit and economic environment –Failed remarketings that result in higher rates –Widening demand gap between troubled and well-regarded Letter of Credit banks  Over the past month the market has responded positively –MMFs have begun to experience net inflows –Strong investor demand for new “untainted” VRDO issues  Significant concerns remain regarding concentration of exposure to relatively few bank names and uncertainty surrounding practical impact of central bank guarantees (1)Based on market conditions as of November 21, 2008 and subject to change. SIFMA = 1.12% and 1M LIBOR = 1.39% (2)Fixed spread quoted based on a Act/360 day count basis. On September 24th, SIFMA reset at 7.96%

8. 7 Impact on the Municipal Market Tax-exempt market has begun to recover MMFs beginning to see net inflows; strong demand for short-term paper easing variable rate borrowing costs Merrill Lynch brought a fixed-rate healthcare deal to market on October 23, the first in over six weeks  Providence Health and Services (Aa2/AA)  Yield of 6.70% in 2038 which reflects a credit spread of 1.33% versus 0.50% one year ago In October and November strong AA and A rated credits begin coming to market, including Trinity (St. Alphonsus) and St. Luke’s  Credit spreads remain in the +1.50% to 1.80% for strong credits The first BBB+ transaction went to market in October  Loma Linda, CA, with credit spread of 2.89% Forward looking supply is still substantial Transactions that can access retail distribution are benefiting with lower interest rates Conditions still very volatile from day to day

9. 8 Recent Trend in Long-term Fixed Rates Graph shows the relationship between indices over the past 18 months Key Stats (1) 30 YR “A” Healthcare (2) 30 Yr SIFMA Swap (3) 30 Yr 67% LIBOR Swap (3) As of 11/21/20087.15%3.53%2.22% Average5.44%3.94%3.41% Min4.51%3.33%2.12% Max7.44%4.47%4.09% Std Dev0.67%0.22%0.31% (1)Rate history provided from April 2007 through November 21, 2008 (2)Approximate “A” rated Healthcare traditional fixed rates. Rates are estimates and do not necessarily reflect actual traded levels. (3)Swap rates are quoted at mid-market and do not include any ongoing costs

10. Trinity Pricing Summary Highlights of the market included Strong retail demand in Idaho One of first 5 Healthcare transactions to come to market in six weeks due to credit crunch Significant institutional investor participation The limited supply of Idaho municipal bonds was a plus with institutional investors Idaho benefit of 12 to 30 basis points 9

11. 10 Challenges for Healthcare Providers Accessing Capital Markets Investment Banking Firms 3 top underwriters exited the municipal business  Bear Stearns  UBS  Lehman Others, including Citigroup, under pressure and reluctant to commit capital Reduced headcount through mandatory reductions in force Significant decrease in available capital Product offerings have changed dramatically, and differ by firm Increased return on capital requirements, putting further pressure on fees Monoline Bond Insurance Companies No consensus on long-term stability of any insurer Little perceived value of bond insurance Higher premiums and more restrictive covenants Requests for consent difficult and costly to secure Credit Enhancement Providers (primarily commercial banks) Letters and lines of credit significantly more costly Covenants more restrictive Trading levels increased due to market capacity constraints Provision of credit tied to additional fee business Regional banks gaining business

12. 11 Bond Insurer Ratings November 24, 2008 Moody’sS&PFitch ACANot RatedA to CCC Negative Dev 12/19/2007 Not Rated AMBACBaa1 Developing Outlook 11/5/2008 A Negative Outlook 11/19/2008 Rating Withdrawn 6/26/2008 Assured GuarantyAa2 Stable Downgrade from Aaa on 11/21/2008 AAA Stable 6/18/2008 AAA Affirmed Stable 12/12/2007 BHACAaa StableAAA StableNot Rated CIFGB3 Under Review 10/28/2008 B Watch Developing 8/22/2008 Withdrawn 10/21/2008 FGICB1 Negative Outlook 6/23/2008 CCC Negative Watch 7/31/2008 CCC Negative Outlook 7/31/2008 FSAAa3 Developing Outlook Downgrade from Aaa on 11/21/2008 AAA Negative Watch 10/9/2008 AAA Negative Watch 10/10/2008 MBIABaa1 Developing Outlook 11/7/2008 AA Negative Outlook 8/14/2008 Rating Withdrawn 6/26/2008 RadianA3 Negative Outlook 6/25/2008 BBB+ Negative Outlook 8/26/2008 Rating Withdrawn 5/2/2008 XLCA (Note is now Syncora) Caa1 Under Review 10/24/2008 B Watch Developing 11/18/2008 Rating Withdrawn 9/05/2008 Sources: Moody’s Investors Service; Standard & Poor’s; The Bond Buyer; UBS; Morgan Stanley; WSJ Online

13. 12 Current Underwriting Experience Variable Rate Debt For direct pay letters of credit deals, rates have returned to one to two percent and lower in some instances For standby letters of credit, insured transactions, and issues with other credit concerns, variable rates are as high as 7% Fixed Rate Debt Access to market remains very volatile even for highly rated issuers and has become more difficult in the last two weeks Longer underwriting periods for negotiated transactions and shorter notices for competitive transactions are becoming more common Underwriters are less willing to commit capital by taking down bonds without increased underwriting spreads Difficult to find buyers throughout the entire maturity structure Mitigation Measures Be flexible with timing and structure Smaller issues are better because of strong but limited retail demand

14. 13 Idaho Tax-Exempt Market Idaho Market for fixed rate, tax-exempt debt has performed relatively well: Low supply of bonds; likely to continue Retail demand is strong Conditions are still very volatile; similar transactions receive wildly varying reception only days apart What could change on a local basis If rates fall significantly, retail is less likely to be a major factor. Six percent appears to be threshold level If rates decline, issuance could rise as slated refundings reach market Issuance is likely to remain relatively low because decrease in housing development will mean fewer school bonds

15. 14 Summary The relationship between SIFMA and 1-month LIBOR has normalized, at least for now Current VRDB programs should trade at or near SIFMA with the following qualifications  VRDBs with “tainted” credit support may continue to trade off significantly –Involvement of bond insurers –Credit quality of the supporting bank –Expertise of the remarketing agent  Daily VRDBs may continue to out-perform weekly VRDBs in the near term (months?) –Daily liquidity more valuable to investors than weekly liquidity –Many remarketing agents will not agree to take on the risks of daily remarketing New bond issues are limited by access and cost of credit enhancement  Self-liquidity is a good option for strong (AA) borrowers

16. 15 Summary, continued The fixed-rate market appears to be opening up, particularly for highly rated credits, but there remains significant supply of new bonds with limited investor demand The Bond Buyer’s 30-day visible supply as of December 2, 2008 was $21.3 billion, highest since October 2002 and 55% higher than the 12-month average In recent years, institutional demand has been driven by tender option bond programs (“TOBs”) and leveraged buyers who have been under pressure from dislocated muni/Treasury ratios and margin calls  Many investors set up TOBs when the 30-year muni/Treasury ratio was 90% while recent levels were 134%, resulting in losses  Major broker-dealers have been imposing margin calls on customer TOBs  As VRDBs are put back to dealers, some are losing financing and therefore being forced to liquidate assets  High short-term rates may cause TOB programs to unwind if the short-term funding cost exceeds the coupon on the bonds Retail investors have become much more important than in the past, but institutional buyers are still a major requirement for successful sale of a large issue Covenant and security packages are more restrictive now than in the past

17. 16 Summary, continued Developments that could improve the municipal debt market include the following Fear needs to subside and confidence needs to be restored Continued retail buyer interest is important for sale of fixed-rate bonds and to support municipal money market funds New issue volume and/or secondary market portfolio unwinding needs to ease and be absorbed Crossover buyers need to return to the market, lured by relative upside and cheapness of municipals Broker-dealers need to re-commit capital to improve liquidity in the marketplace Financial products have generally performed as expected With the possible exception of auction bonds, where investors significantly under-priced the value of liquidity Market uncertainty increases cost, security requirements and investor scrutiny “Flight to quality” behavior by investors tends to disproportionately affect the tax-exempt market

18. 17 Contact Information Michael Lewis, Vice President Public Finance Office phone: 208-344-8587 Mobile phone: 206-330-7656 Email: mlewis@snwsc.com Michael Tym, Vice President Office phone: 219-531-2369 Mobile phone: 312-961-0274 Email: mtym@ponderco.com