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Surviving the Short Term and Excelling at the Long Term Presented By: Jeffrey C. Gerrish Gerrish McCreary Smith, Attorneys and Consultants Presented at: – PowerPoint PPT presentation

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Title: Presented at:


1
Surviving the Short Term and Excelling at the
Long Term
Presented By Jeffrey C. Gerrish Gerrish
McCreary Smith, Attorneys and Consultants
  • Presented at
  • Community Bankers Association of Illinois
  • 35th Annual Convention Exposition
  • Renaissance Hotel, Schaumburg, Illinois
  • September 25, 2009

Gerrish McCreary Smith Consultants and
Attorneys 700 Colonial Road, Suite 200 Memphis,
Tennessee 38117 Telephone (901)-767-0900 Facsimile
(901)-684-2339 www.gerrish.com jgerrish_at_gerrish.c
om
2
Series ofPertinent Questions
  • Why are there interstate highways in Hawaii?
  • If a man is in the woods by himself and disagrees
    with his wife, is he still wrong?
  • Why is it called a hot water heater?
  • Why do we drive on parkways and park on driveways?

Gerrish McCreary Smith Consultants and Attorneys
3
Series ofPertinent Questions
  • Why is it when youre driving and looking for an
    address, you turn down the volume on the radio?
  • If con is the opposite of pro, is Congress
    the opposite of progress?
  • Why did kamikaze pilots wear helmets?

Gerrish McCreary Smith Consultants and Attorneys
4
Community Banks Surviving the Short Term and
Excelling at the Long Term
  • The present assure the short term or there will
    be no long term
  • Major trends for the future
  • Focus on ways to thrive in the future

Gerrish McCreary Smith Consultants and Attorneys
5
Surviving the Short-Term
  • Look in the Rearview Mirror at 2008
  • Likely Environment for the Rest of 2009
  • Regulatory Issues

Gerrish McCreary Smith Consultants and Attorneys
6
Excelling at the Long-Term
  • Maintaining Shareholder Value
  • Focus on Profitability, Asset Quality and
    Liquidity
  • Manage the Risks
  • Plan for It

Gerrish McCreary Smith Consultants and Attorneys
7
The Directors and Officers Real Job
  • Allocate Managerial (Human) Capital and Financial
    Capital
  • Enhance/Maintain Shareholder Value

Gerrish McCreary Smith Consultants and Attorneys
8
Allocate Managerial and Financial Capital
  • All Decisions Involve Allocation of Managerial
    and Financial Capital
  • Managerial Capital (Human Capital)
  • Do we have adequate management for the long term
    goals of the institution?
  • Financial Capital
  • Does excess capital exist?
  • How should it be allocated?

Gerrish McCreary Smith Consultants and Attorneys
9
Primary Obligation To Enhance Shareholder Value
  • Growing Earnings Per Share 8 to 10 a Year
  • Return on Equity of 15 or Better
  • Liquidity for the Shares
  • Appropriate Cash Flow

Do these metrics still hold?
Gerrish McCreary Smith Consultants and Attorneys
10
Looking in the Rearview Mirror 2008
  • Wild Ride National Economy
  • Stock Market Freefall
  • Unprecedented Job Losses
  • Recession/Depression
  • Multi-Billion Dollar Stimulus Plan for the
    General Economy

Gerrish McCreary Smith Consultants and Attorneys
11
Bank-Specific Issues
  • Capital Markets Meltdown
  • TARP/CPP
  • Regulatory Aggression
  • Bank Liquidity Issues
  • Asset Quality/Real Estate Valuation Freefall
  • Bank Failures
  • Merger and Acquisition Creativity
  • The Haves and Have Nots

Gerrish McCreary Smith Consultants and Attorneys
12
Bank-Specific Issues 2008
  • Capital/Credit Markets Meltdown
  • TARP/CPP/CAP
  • Regulatory Aggression
  • Bank Liquidity Issues
  • Asset Quality/Real Estate Valuation Freefall
  • Bank Failures
  • Merger and Acquisition Creativity
  • The Haves and Have Nots

Gerrish McCreary Smith Consultants and Attorneys
13
Looking to the Short TermThe Rest of 2009
  • Critical Needs
  • Stabilization of Real Estate Values PPIP
  • Liquidity Contingency Planning
  • Capital Contingency Planning

Gerrish McCreary Smith Consultants and Attorneys
14
Looking to the Short TermThe Rest of 2009
(Contd)
  • The Haves and Have Nots
  • Increased Bank Failures
  • Continued Regulatory Aggression
  • Hunker Down Philosophy

Gerrish McCreary Smith Consultants and Attorneys
15
Dealing with Short-TermRegulatory Aggression
  • Hot Buttons for 2009
  • Asset Quality
  • Identification of Problem Assets
  • Snowball Effect
  • Liquidity
  • Bank Failure Potential
  • Contingency Planning
  • Capital
  • Scarce
  • Debt versus Equity
  • Capital Contingency Planning
  • Strategic Opportunity Issues

Gerrish McCreary Smith Consultants and Attorneys
16
Dealing with the Regulators
  • Know Your Options Board is in Control
  • Know Their Options
  • Resolution/MOU
  • CD/Written Agreement/Formal Agreement
  • Civil Money Penalties
  • Removal From Banking
  • Miscellaneous
  • Understand Your Banks Due Process Rights

Gerrish McCreary Smith Consultants and Attorneys
17
Miscellaneous Regulatory Issues of Importance
  • Publication of Enforcement Actions
  • Appeal of Examinations
  • Approval of Directors and Officers
  • Prohibition of Parachute Payments
  • Prohibition of Brokered Deposits

Gerrish McCreary Smith Consultants and Attorneys
18
10 Commandments for Dealing with the Regulators
  • Environment Has Changed
  • Prepare the Board
  • Identify Problems Yourself
  • Treat Examination Personnel Fairly
  • Note Your Disagreements in Writing
  • Understand the Regulators Options
  • Understand Your Options
  • Work Toward a Win/Win Result
  • Realize They are Not Your Friends
  • Get Help If You Need It

Gerrish McCreary Smith Consultants and Attorneys
19
10 Commandments for Dealing with the Regulators
  • Environment Has Changed
  • Prepare the Board
  • Identify Problems Yourself
  • Treat Examination Personnel Fairly
  • Note Your Disagreements In Writing
  • Understand The Regulators Options
  • Understand Your Options
  • Work Toward A Win/Win Result
  • Realize They Are Not Your Friends
  • Know When To Get Help If You Need It

Gerrish McCreary Smith Consultants and Attorneys
20
Strategic Opportunities Long TermOnce Out of
the Trough
  • When Mid 2010??
  • Industry Trends for the Long, Long Term
  • Consolidation Survival of Community Banks
  • Continuous Community Bank Advantage
  • Technology
  • Ownership
  • Erosion of Customer Confidence/Less Loyal
    Shareholder/Customer Base

Gerrish McCreary Smith Consultants and Attorneys
21
Industry Trends -Consolidation of the Industry
  • Unprecedented 30-year consolidation
  • Only five remaining banks?
  • Is there a future for community banks?

Gerrish McCreary Smith Consultants and Attorneys
22
Industry Trends Competition for Products and
Services
  • More Intense
  • Niche Player
  • Wal-Mart

Gerrish McCreary Smith Consultants and Attorneys
23
Industry Trends Continuous Community Bank
Advantage
  • Distinct Advantage in Small Business Lending and
    Agricultural Lending
  • Strengths High Touch/Relationship/Trust
  • Large Banks Stubbing Their Toes

Gerrish McCreary Smith Consultants and Attorneys
24
Industry Trends Dominance of Technology
  • Community Bank Advantages Regarding Technology
  • Technology Strategy

Gerrish McCreary Smith Consultants and Attorneys
25
Industry Trends Ownership Will Be Important
  • Most Survivors Sub S
  • Likely Further Relaxation of the Rules
  • Only Public Bank Holding Companies Those That
    Derive Significant Advantages

Gerrish McCreary Smith Consultants and Attorneys
26
Customer/Stockholder Trends
  • Less Loyal Shareholder/Customer Base
  • Aging of the Population and the Changes Resulting
  • Changing Demographics
  • Flight to Quality/Customer confidence

Gerrish McCreary Smith Consultants and Attorneys
27
Product and Service/Line of Business Trends
  • Allocation of Capital Purchase or Joint Venture
  • All Things to all People?
  • Target Changing Demographics, including Elderly,
    Hispanic/Latino, Un-banked and Women

Gerrish McCreary Smith Consultants and Attorneys
28
Employee Trends
  • Attract and Retain Human Capital
  • 2009 Employee on Steroids
  • Demand for Comparable Benefits of Mega Banks

Gerrish McCreary Smith Consultants and Attorneys
29
Regulatory Trends
  • Federal Regulatory Consolidation?
  • Systemic Regulator?
  • Community Bank Regulator?
  • Regulatory Burden
  • The Good Old Days

Gerrish McCreary Smith Consultants and Attorneys
30
Todays Tough Environment
  • Not for the Faint of Heart
  • Pick Your Issue
  • Risk
  • Financial
  • Regulatory
  • Shareholder
  • Market

Gerrish McCreary Smith Consultants and Attorneys
31
Excelling Over the Long Term
  • Survive the Short Term
  • Focus on Profitability, Asset Quality and
    Liquidity
  • Enhancing Shareholder Value
  • Manage the Risks
  • Plan for It or It Will Not Happen
  • Lets Get Back to the Basics

Gerrish McCreary Smith Consultants and Attorneys
32
Focus On Profitability
  • Understand the Secret Formula
  • Revenue Expenses Profit
  • Deconstruct the Income Statement
  • Sources of Revenue and How to Increase
  • Expenses and How to Reduce

Gerrish McCreary Smith Consultants and Attorneys
33
Sources of Revenue and How to Increase
  • Yield on Securities Portfolio
  • Reduce Non-Earning Fixed Assets, e.g.
    sale/leaseback
  • Increase Yield on Earning Assets
  • Loan Floors
  • Pricing Models
  • Fee Income Increase
  • New Lines of Business

Gerrish McCreary Smith Consultants and Attorneys
34
Focus on Profitability
  • Reduction of Expenses
  • Loan Loss Reserve Snowball Effect
  • Personnel
  • Deposit and Other Funding Costs
  • Wholesale vs. Retail Funding
  • Increase Demand Accounts
  • Charitable Contributions
  • Miscellaneous Other Expenses

Gerrish McCreary Smith Consultants and Attorneys
35
Focus on Profitability
  • Reduction of Expenses
  • Increased Deposit Insurance Assessment
  • Loan Loss Reserve Snowball Effect
  • Personnel
  • Deposit and Other Funding Costs
  • Wholesale vs. Retail Funding
  • Increase Demand Accounts
  • Charitable Contributions
  • Miscellaneous Other Expenses

Gerrish McCreary Smith Consultants and Attorneys
36
Excelling Over the Long Term
  • Enhancing Shareholder Value
  • Manage the Risks
  • Plan for It or It Will Not Happen
  • Lets Get Back to the Basics

Gerrish McCreary Smith Consultants and Attorneys
37
Recognize the Need for Change
  • Resistance to Change
  • Change for Change Sake
  • Open Mind/Willing Ear
  • Establishment of Company Policy

Gerrish McCreary Smith Consultants and Attorneys
38
Plan for Success Action Planning
  • Board Obligation
  • Understand the Foundation
  • Enhance Shareholder Value
  • Prepare for Change
  • Get Off Site
  • Dont Waste Time
  • Have Two Agendas
  • Analyze Substantive Issues
  • Use an Outside Facilitator (Shameless
    Self-Promotion)
  • Create an Action Plan

Gerrish McCreary Smith Consultants and Attorneys
39
Long-Term Capital Allocation Techniques to
Enhance Shareholder Value
  • Structure Bank Holding Company
  • Allocating Capital for Share Liquidity
  • Dividend Policy
  • Allocating Capital to Restructure Ownership
    Public/Private/Sub S
  • New Lines of Business
  • Technology to Improve Service
  • Capital to Foster Relationship Building
  • Attracting and Retaining Key Personnel
  • Planning for the Future

Gerrish McCreary Smith Consultants and Attorneys
40
Conclusion
  • Focus on the short term or there will not be a
    long term
  • Short Term Profitability The Secret Formula
  • Strategic Long Term Obligation Enhance
    Shareholder Value
  • Long Term Success Take Advantage of Strategic
    Opportunities

Gerrish McCreary Smith Consultants and Attorneys
41
Surviving the Short Term and Excelling at the
Long Term
Presented By Jeffrey C. Gerrish Gerrish
McCreary Smith, Attorneys and Consultants
  • Presented at
  • Community Bankers Association of Illinois
  • 35th Annual Convention Exposition
  • Renaissance Hotel, Schaumburg, Illinois
  • September 25, 2009

Gerrish McCreary Smith Consultants and
Attorneys 700 Colonial Road, Suite 200 Memphis,
Tennessee 38117 Telephone (901)-767-0900 Facsimile
(901)-684-2339 www.gerrish.com jgerrish_at_gerrish.c
om
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