On behalf of ICBA and Community Banker University

Welcome to Effective Strategic Planning

for Community BanksWebinar

Doc BodineGerrish Smith Tuck, PC

Taunja MoeDirector of Product & Training DevelopmentCommunity Banker University

Independent Community Bankers of AmericaApril 10, 2018

Presented By: Cliston V. “Doc” Bodine, IIIGerrish Smith Tuck, Attorneys and Consultants

Effective Strategic Planning for Community Banks

Gerrish Smith TuckConsultants and Attorneys

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

www.gerrish.com

dbodine@gerrish.com

@GST_Memphis@Doc_Bodine

BIOGRAPHICAL INFORMATION

CLISTON V. “DOC” BODINE, III. Mr. Bodine is the Managing Directorof the Memphis based law firm of Gerrish Smith Tuck, PC, Attorneys, andGerrish Smith Tuck, Consultants. Mr. Bodine’s legal and consultingpractice places special emphasis on compliance matters, bank regulatorymatters, strategic planning, examination issues and appeals, enforcementactions (formal and informal), civil money penalties (“CMPs”), expensepractices, incentive compensation issues, regulatory applications, removaland prohibition matters, bank insurance issues, corporatereorganizations, holding company formation and use, mergers andacquisitions, branch sale or purchase, corporate governing documentsand practices, golden parachute payment and indemnification issues, andgeneral banking and corporate law. He is a graduate of University ofGeorgia (B.S., Accounting, 2000, magna cum laude; Masters ofAccounting, 2001; and J.D., 2004, cum laude). He is a member of theAmerican Bar Association, the Tennessee Bar Association and theMemphis Bar Association. Mr. Bodine can be contacted atdbodine@gerrish.com or (901) 684-2309 (direct line).

Effective Strategic Planning -Overview

• What is Strategic Planning?

• Standard

• Approach

• Planning Mechanics

• Substantive Planning Issues

• Do’s and Don’ts

What is Strategic Planning?

• Who and where is the institution?

• Where do we want to be?

• How are we going to get there?

• Who is responsible for each action?

Strategic Planning is NOT…

• Budgeting

• Ignoring Problems

• Setting Unattainable Goals

• Document to Satisfy Regulators

Regulatory Standard

• Not Required by Law or Regulation

• Regulatory Expectation – Best Practice

➢Focus is Growing

➢Best to View as Required

• Enforcement Action Requirements

Typical Enforcement Action Planning Requirements

• A Plan of Plans…

• 3 Year Plan for Operation of Bank

➢ Assess Current Financial Condition

➢ Assess Market Area

➢ Goals

➢ Strategies

➢ Operating Budget

▪ Budget Operating Assumptions for Major Income and Expense Items

• Should Address:

➢ Improving Operating Performance

➢ Increase Revenues / Decrease Expenses

➢ Financial Goals (growth, capital and earnings)

• Checklist

Standard

• Board and Management Obligation

➢Board Determines Goals and Strategies

➢Management Implements

• Enhance Shareholder Value

➢Allocate Resources (including Human Capital) to Maximize Shareholder Return

Standard –Enhance Shareholder Value

• Grow Earnings Per Share

• Return on Equity

• Liquidity for Stock

• Appropriate Cash Flow

• Favorable Regulatory Relationships

The Changing Standard

• Expectations are Changing

➢ Short-Term vs. Long-Term

➢ Formal vs. Informal

➢Detail vs. Broad Focus

• Know Standard Up Front – Proceed Accordingly

Approach – Timing Focus

• Timing Tips:

➢Consider Long-Term

➢Don’t Get Caught in the Clouds

➢Work from the Long-Term Objectives Back to Short-Term Goals

Approach – Timing Approach

• Establish Long-Term Objectives

• Establish Short- to Mid-Term Objectives

• Focus on Short- to Mid-Term Actions Moving Toward Long-Term Objectives

Mechanics of Planning – Mistakes of the Past

• Focus Too Much on:

➢ Mission Statement

➢ Vision Statement

• Not Enough:

➢ Introspective Analysis

➢ Development of Strategies

➢ Action Plans

Mechanics of the Planning Process

• Current Analysis

➢SWOT (Strengths, Weaknesses, Opportunities & Threats)

➢Financial

➢Environment

• Discussion of Key Issues

➢ Institution Specific

Mechanics of the Planning Process

• Objectives and Goals

• Action Plans to Achieve Goals

➢ How to Address / Resolve Problems

➢ Assign Responsibility

➢ Establish Deadlines

Mechanics of the Planning Process

• Communicate Strategic Plan (as appropriate)

➢ Management and Employees Must Know Expectations

• Monitor and Follow-Up

➢ Reports from Management

▪ Actual to Target

▪ Trends

➢ Updates from Responsible Employees

➢ Re-evaluate and Adjust Goals and Strategies

➢ Accountability

➢ Document in Board Minutes

▪ If Not Documented, it Did Not Happen…

Approach – Who Should Participate?

• Entire Board

• Executive Management

• Key Members of Management

• Utilize Executive Sessions as Appropriate

Substantive Planning Issues

• Ownership Issues

➢ Independence

➢ Pursue Transaction

• Corporate Structure

➢ Bank Holding Company

➢ Subchapter S Election

• Capital Generation / Allocation

• Products, Services and Lines of Business

Substantive Planning Issues

• Geographic Expansion

• Marketing Strategies

• Dividend Policy

• Stock Liquidity

Substantive Planning Issues

• Succession Planning➢Board

➢Management

• Technology

• Compensation Issues

• Board Meeting Efficiency

Strategic Planning Do’s

• Agenda for Structure

• Focus on the Issues, NOT the Process

• Four C’s

➢ Communication

➢ Candor

➢ Consensus

➢ Confidentiality

Strategic Planning Do’s

• Be Realistic

➢ Recognize Problems

➢ Achievable Targets

• Action Plans

➢ Clarifies Responsible Party

➢ Establishes Timeframe

• Accountability

• Reevaluate and Adjust Strategies and Plans

Strategic Planning Do’s

• Get Offsite

➢Avoid Distractions

• Keep Everyone Comfortable

➢ Comfortable Seats and Temperature

➢ Food and Beverage

• Appropriate Facilitator

➢ Internal or External

➢ Must Facilitate Participation and Discussion

Strategic Planning Don’ts

• Allow a Dominant Individual

• Devolve into a Budget Session

• Spend Too Much Time on:

➢SWOT

➢Mission Statement and Vision Statement

Questions

Independent Community Bankers of AmericaApril 10, 2018

Presented By: Cliston V. “Doc” Bodine, IIIGerrish Smith Tuck, Attorneys and Consultants

Preparing Your Bank for the Future Through Succession Planning

Gerrish Smith TuckConsultants and Attorneys

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

www.gerrish.com

dbodine@gerrish.com

@GST_Memphis@Doc_Bodine