Jeffrey C. Gerrish

Jeffrey C. Gerrish Gerrish McCreary Smith, Consultants & Attorneys [email protected]

Day with the Superintendent Iowa Division of Banking Embassy Suites on the River

Des Moines, Iowa April 18, 2013

Gerrish McCreary Smith Consultants and Attorneys

JEFFREY C. GERRISH. Mr. Gerrish is Chairman of the Board of Gerrish McCreary Smith Consultants, LLC and Gerrish McCreary Smith, PC, Attorneys. The two firms have assisted over 1,500 community banks in every state across the nation. Mr. Gerrish's consulting and legal practice places special emphasis on strategic planning for boards of directors and officers, community bank mergers and acquisitions, bank holding company formation and use, acquisition and ownership planning for boards of directors, regulatory matters, including problem banks, memoranda of understanding, cease and desist and consent orders and compliance issues, capital raising and securities law concerns, ESOPs and other matters of importance to community banks. He formerly served as Regional Counsel for the Memphis Regional Office of the FDIC with responsibility for all legal matters, including all enforcement actions. Before coming to Memphis, Mr. Gerrish was with the FDIC Liquidation Division in Washington, D.C. where he had nationwide responsibility for litigation against directors of failed banks. He has been directly involved in fair lending, equal credit and fair housing matters, in raising capital for problem financial institutions and in numerous bank merger transactions. Mr. Gerrish is an accomplished author, lecturer and participates in various banking-related seminars. In addition to numerous articles, Mr. Gerrish is the author of the books "Commandments for Community Bank Directors" and “Gerrish’s Glossary for Bank Directors”. He also is or has been a member of the faculty of the Independent Community Bankers of America Community Bank Ownership and Bank Holding Company Workshop, The Southwestern Graduate School of Banking Foundation, the Wisconsin Graduate School of Banking, the Pacific Coast Banking School, the Colorado Graduate School of Banking and has taught at the FDIC School for Commissioned Examiners and School for Liquidators. He is a member of the Board of Regents of the Paul W. Barret, Jr. School of Banking. He is a Phi Beta Kappa graduate of the University of Maryland and received his law degree from George Washington University's National Law Center. He is a member of the Maryland, Tennessee and American Bar Associations, was selected as one of “The Best Lawyers in America” 2005 through 2012 and as the Banking Lawyer of the Year, “Best Lawyers Memphis” 2009. Mr. Gerrish can be contacted at [email protected].


• Economic issues: four years of disaster

• Average size of banks increasing

• Aging shareholders, management, board

• Need to make money/diversify revenue stream

• Large number of regulatory enforcement actions


• Directors’ and Officers’ Real Job

–Allocate managerial (human) capital and financial capital to enhance shareholder value

• Fundamental question: What do we have to work with?

• What does it mean to enhance shareholder value?


• No specific regulatory requirement (except for national banks)

• General regulatory expectation

• Formal and informal regulatory order requirements


• Asset Quality Continues to Improve

• Fatigue (Banker/Borrower/Regulator) Continues to Exist

• Regulators Continue to be Regulators

• Community Banks Shift Focus to Profitability

• Balance Sheet Growth for Most is Not the Goal

• Interest Rate Risk is Coming

• Mergers and Acquisitions’ Wave

• Compliance is Here to Stay

• More Light at the End of the Tunnel Gerrish McCreary Smith Consultants and Attorneys

• Unfair/deceptive/abusive practices

• Fair lending/discrimination

• Expensive violations

• Penalty box Gerrish McCreary Smith

Consultants and Attorneys

• Resistance to change

• Change for change sake

• Open mind / willing ear

• Establishment of “company policy”


• Types of planning

–Visioning – where will we be 10 years from now?

–Long-term planning – timeframe?

–Tactical and operational planning – management’s job


• There is no buy-in from the directors and officers

– Who should attend

– Decision making process

• It is not enjoyable for the participants

– Get offsite

– Bond

– The Caribbean/Ritz-Carlton is always nice


• The group focuses too much on the process itself

– Don’t get hung up on process

– Focus on substantive areas – discuss/decide/move on

– Too touchy/feely

• You spend the entire time on the SWOT analysis

– SWOT as a “cottage industry”

– Rules for SWOT

– An ice breaker


• The participants are not honest with themselves and others

– The four “C’s” of planning – communication/candor/consensus/confidentiality

• One person dominates the meeting

– Patriarch

– Principal shareholder

– Facilitator


• It turns into a budgeting session

– Drives budget

– Establish big picture financial targets

• You focus too much on the mission, vision and value statements

– What do you use these for?

– Regulatory expectation


• You fail to focus on substantive issues – Identify issues

– Create agenda

• There is no accountability and follow up for the actions taken and strategies established

• You fail to use an outside facilitator – Shameless self-promotion

– Ask hard questions without political ramifications

– Industry expert versus academic

Gerrish McCreary Smith


• What it is NOT:

• Budgeting

• A set of unattainable goals

• A document prepared solely for the regulators

• Bonding (only) for the directors


• What it IS:

Who and where we are?

Where do we want to be?

How are we going to get there?

Whose responsibility?

• How often? How long?


• Goals and purpose

• Environmental description/state of the industry

• SWOT analysis

• Independence issue


• Identification of substantive issues

• Discussion of substantive issues

• Discuss long, long-term vision

• Mission/value/vision statement

• Executive session (separate agenda)

• Goals, timetable and assignments


• Can we do a better job for our stockholders than another holding company’s stock or cash?

• Conceptual board determination

• Proactive or reactive?

• Considerations

– Remaining acquirors?

– Window?

– Full potential?

– Pricing



• Capital generation/allocation issues

• Overall business strategy: profitability/growth/mix

• Dividend/distribution policy

• Organizational structure/ownership issues

• Share liquidity

• Geographic expansion

• Marketing Gerrish McCreary Smith


• Technology

• Products, services, lines of business

• Board issues

– Succession for board and management

– Board meetings – efficiency

– Employee compensation planning and strategy

–Corporate governance




• Enterprise Risk Management: Start Now

• Driving by Looking in the Rearview Mirror is Dangerous

• Corporate Governance

Establish Risk Committee

Use Audit Committee



• Establish Committee To Do What?

Identify Risk Areas

Set Risk Parameters

Monitor Risk

Mitigate Risk

Provide Accountability


• Maintain / Enhance Shareholder Value

• Understand How to Remain Independent

• Fundamental Understanding of the Merger and Acquisition Environment

• Identify Risk Tolerance / Assess, Monitor and Manage Risks


• Not Your Father’s Compliance

• Compliance Officer Protection

• Unfair, Deceptive and Abusive Practices

• Fair Lending


• Don’t Be Afraid of It

• Understand How to Get It

• Appropriately Allocate It

• New Minimum Standards

• Basel III


• Does Size Matter?

• Profitability versus Survival


• Go Along / Get Along

• Gut Check / Vote Your Conscience

• Protection / Liability Issues

• Post-Meeting: Support Decision


• No Excuse

• Understand the Terminology

• Regulatory Requirements?

• New / Existing Directors


• Have a Plan

• Have a Way to Get Rid of Nonproductive Directors

• Succession Triggers


• Make a Determination About Ownership and Liquidity

• Consider Sub S

• Create Share Liquidity / Market for Your Stock

• Enhance Shareholder Value


• Action Planning

• 10 Commandments for Action Planning

• Areas to Consider

• Process


Understand as directors and officers:

• Succession issues

• Mergers and acquisitions

• Other growth initiatives

• Within the confines of enhancing shareholder value

Please contact us if we can be of service to you or your organization, or if you simply have further questions where we may be of assistance.


700 Colonial Road, Suite 200 Memphis, Tennessee 38117 Telephone: (901)-767-0900 Facsimile: (901)-684-2339

Jeffrey C. Gerrish

[email protected]

Please visit our website at www.gerrish.com.

Jeffrey C. Gerrish Gerrish McCreary Smith, Consultants & Attorneys [email protected]

Day with the Superintendent Iowa Division of Banking Embassy Suites on the River

Des Moines, Iowa April 18, 2013


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Jeffrey C. Gerrish

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