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    Everett Advisory Partners   10.01.10 Everett Advisory Partners 10.01.10 Presentation Transcript

    • Everett advisory Partners
      10/13/2010
      1
      Everett Advisory Partners – EverettAdvisory.com
      Achieving Results Through Strategy and Execution
    • The Everett Advantage
      Everett Advisory Partners
      Everett Advisory Partners focuses on meeting the needs of community and regional banks. We provide advice and execution resources to assist management and directors with strategic planning, regulatory compliance, governance enhancements, credit & risk management policy and procedure reviews, merger integration and identification of operational and financial improvements. 
      Our professionals have over 200 years of experience in banking, and led some of the most complicated transactions, financings and business restructurings in the industry. Everett’s problem solving approach is designed to achieve results by leveraging its deep understanding of banking and financial markets to successfully develop and execute strategies within a disciplined, six-sigma based framework.
      Specialties include:
      Credit and Risk Management In-depth Portfolio Reviews/Asset & Securities Valuation
      Management Evaluations Regulatory Compliance/ Response to Orders
      Corporate Governance Acquisition/Investment Due Diligence
      Strategic Planning/Merger & Acquisitions Post-Merger Integration /Bad Bank
      Profitability & Performance Enhancement Liquidity Enhancement/Asset Sales/Divestitures
      Why Everett?
      10/13/2010
      2
      Everett Advisory Partners – EverettAdvisory.com
      Comprehensive assessment capabilities from a team with extensive industry and regulatory experience, and a deep bench of talent
      Track record of successful engagements with regional and community banks, investors and private equity firms
      Specialized capabilities to execute strategies
      Disciplined project management skills to ensure interdependent activities stay on track
    • The Everett Advantage
      10/13/2010
      3
      Everett Advisory Partners – EverettAdvisory.com
      Seasoned, Cohesive Team of Senior Advisors
    • Everett – Advisory Services and Change Management
      Recent Engagements
      Led evaluation of management, lending practices, risk management, governance and administrative processes and controls at the direction of the Board of Directors of a $300 million community bank.  Working closely with regulators, we recommended and led the implementation of a comprehensive restructuring.
       
      Completed management evaluation for $200 million community bank as part of response to a consent order; advised on $10 million capital raise.
      Development of liquidity enhancement strategies, contingency funding plan and capital plan for a $500 million bank.
       
      Provided $2 billion regional commercial bank with regulatory guidance and assistance with response to consent order.
       
      Assisted $300 million community bank with the development of financial and risk management reporting tools.
      Performed due diligence for investors and private equity firms.
       
      Advised on securitization of legacy residential mortgage portfolios of banks and credit unions.
      Valuation of mortgage servicing rights and prepayment exposure.
      10/13/2010
      4
      Everett Advisory Partners
    • Everett – Advisory Services and Change Management
      Bank Directors Face Considerable Challenges
      With Board roles shifting from passive to active, and accountability increasing, many important challenges awaited Boards in 2010
      Enhancing understanding of risk and portfolio management
      Regulatory relations (more regulations and more enforcement)
      Greater involvement in corporate strategy
      Deepening company & industry knowledge
      Role clarity with management
      Adding qualified outside directors to address the perceptions of board independence
      Compensation oversight
      Succession planning
      The Risk of Inaction is Rising
      Directors are vulnerable
      Fiduciary responsibility to the Bank
      A bank regulator can bring an action imposing civil money penalties against officers and board members personally, or enforcement actions seeking personal restitution from officers & board members not covered by D & O insurance.
      Federal courts are now required to expedite the consideration of any case brought by the FDIC against directors & officers
      Reputational damage - one of the top risks facing both Banks and Board members
      Litigation
      Fiduciary responsibility to shareholders and creditors
      Courts have held that when a company is insolvent or nearly insolvent (known as the “zone of insolvency”), boards have a fiduciary duty not just to shareholders but also to creditors
      The menu of viable alternatives is quickly contracting as financial pressure increases and fundamentals deteriorate
      10/13/2010
      5
      Everett Advisory Partners
      For institutions to survive and thrive (or be acquired), it is critical to be proactive, establish concrete and actionable goals, and closely manage execution
    • Banking Management Teams Are Already Over-Burdened
      Declining earnings, less ability to add earning assets
      Regulatory pressures and changes
      Funding obstacles
      Active, motivated boards, with potential for conflict with management
      Investors and creditors challenging management and demanding transparency
      Difficulty retaining top talent while downsizing
      Federal compensation oversight
      Maintain community involvement, reputation and brand
      …and still face the day to day challenges of managing a bank in a tough economic environment
      Everett – Advisory Services and Change Management
      10/13/2010
      6
      Everett Advisory Partners
    • Institutions Can Control & Influence Destiny Through Proactive Changes
      Proactively evaluate restructuring and turnaround options to avoid FDIC takeover
      Progress, and partnership, must be demonstrated to regulators and shareholders
      Credit and Risk Management Enhancements
      Governance Changes, Proactive and Independent Boards and Committees
      Balance Sheet Restructuring & Recapitalization
      Downsizing & Divestitures
      Staffing and Organizational Changes
      Effective Communication
      Stay on top of regulatory changes
      Focused Execution is Critical
      Fate of the bank lies in the hands of proactive executives and boards
      Develop stabilization and recovery plan
      Define initiatives with resource requirements, interdependencies and regulatory implications
      Detailed success criteria, performance metrics and milestones with supporting reporting tools to track progress
      Governance designed to manage implementation through a disciplined change management process
      Joint Board and Management working groups
      Proactively communicate to clients, employees, creditors and shareholders
      Assess the plans in concert with legal counsel and regulatory experts
      Demonstrate a plan, and progress, to regulators
      Everett – Advisory Services and Change Management
      10/13/2010
      7
      Everett Advisory Partners
    • 15/30/45 day plan – Define, Design, Develop, Deploy
      Initiate assessment process
      Evaluate lending, risk management and governance against 50 “Best Practices” identified by Everett
      “Deep dive” on financials, capital levels, reserves and liquidity
      Regulatory consultations
      Summary of findings and comparisons to key benchmarks
      Strategic dialogue on defensive alternatives and next steps
      Develop rapid response template, executing “quick to implement” changes
      Weekly briefings with appropriate board committees or representatives
      Everett advisory services
      10/13/2010
      8
      Everett Advisory Partners
    • Management Evaluations
      Everett conducts in-depth management evaluations, using 155 criteria critical to bank performance, governance and credit and risk management. Criteria are distilled from examination standards, safety and soundness guidelines, audit standards and industry best practices.
      Management Assessments are based on the following information and analyses provided by the bank:
      • Board, Loan Committee, ALCO and Audit Committee minutes from last 2 years
      • Credit, liquidity management, IT, compliance and branch operating procedures
      • Current years budget and most recent strategic plan
      • External audit, internal control audit, external credit review reports and examinations
      • Sampling of lending relationships in an effort to understand underwriting and risk management practices
      • Interviews with the CEO, CFO, COO, senior lenders; branch operations, human resources, credit administration and compliance managers, and at least three directors from the Board
      Each bank is scored 1 – 5 on each criteria, with 1 excellent and 5 worst, and an overall performance score calculated.
      Report is tailored to the unique circumstances facing each institution, and includes objective, fact-based recommendations that both management and the board can use for improvement and share with regulators.
      Everett advisory services
      10/13/2010
      Everett Advisory Partners
      9
    • Comprehensive Review of Credit and Risk Management Practices & Controls
      Assess, review and implement changes to current underwriting and risk assessment processes, with input from management, auditors, examiners and legal counsel
      Roles, responsibilities and internal controls
        Information requirements
        Quality and accuracy of credit underwriting
        Approval process/authorities
        Documentation requirements
      Management of exceptions
      Effectiveness of workout, cross-collateralization and repayment strategies
      Ongoing portfolio monitoring , reporting and credit management
      Accountability of Chief Credit Officer to the Board of Directors
      Review Credit and Counterparty Portfolio (loans, leases, swaps, derivatives, L/C's) and recommend remediation steps:
      Largest exposures
      All Criticized/Watch List/Troubled Debt Restructurings
      Concentration risks - relationship, industry, geography, loan and collateral type
      Evaluate adequacy and recommend changes to:
      Current risk rating structure
      Counterparty exposure
        Allowance for loan and lease methodologies, FAS 5 and 114 application, charge-offs and write-downs
      Recoveries and collection management processes, including on-going monitoring of collateral, financial and structural stability of borrowers  
      Information systems and reporting tools to ensure infrastructure can support timely and accurate risk management reports
      Everett advisory services
      10/13/2010
      Everett Advisory Partners
      10
    • Everett Advisory Services
      Residential Mortgage and Mortgage-Backed Securities Assessments
      The firm focuses on the following areas:
      Creating systems and procedures for managing the interest rate and credit risk of mortgage and MBS portfolios
      Reviewing asset prices and pricing methodologies
      Evaluating mission-critical systems
      Aiding institutions in understanding and interpreting market developments
      Providing support for upcoming and ongoing litigation
      Developing innovative proposals for optimal liquidation of mortgage and MBS holdings
      10/13/2010
      11
      Everett Advisory Partners
    • In-Depth Evaluation of Commercial Real Estate Exposures
      Commercial Real Estate Credit and Underwriting Expertise
      Distressed Asset Investing, Valuation and Management
      Advisory Services
      Securities Investing and Valuation
      Everett Advisory Services
      10/13/2010
      12
      Everett Advisory Partners
      Distressed CRE Lender Services
      Evaluate Lender Situation
      • Provide coordinated assessment of institution’s current situation and goals
      Asset Valuation
      • Proprietary analysis and underwriting process for CRE assets to determine expected and stressed valuation subject to desired exit
      Optimal Resolution
      • Asset-by-asset plan for optimal resolution subject to institution goals, including loan restructuring and/or liquidation
      Asset Management
      • Advisory services to existing bank team or outsourced asset management services
      Manage Optimal Liquidation
      • Work with nationally recognized agents to obtain optimal liquidation value
    • Corporate Governance Review Against Best Practices
      Board of Directors Governance
      Composition of board - does it consist of a majority of independent directors and do board members have working knowledge of core business activities
      Audit, ALCO, compensation, nominating and other key board committees
      Charters to confirm adequate clarity of purpose, authority and responsibilities
      Code of ethics for board and employees
      Board policies and procedures to assure compliance with applicable law and regulation and does an adequate reporting mechanism exist to confirm such compliance
      Processes to ensure ability to obtain and evaluate regular reports from the corporate officers responsible for implementing the bank's internal controls, codes of ethics and compliance policies
      Governance provisions that can make fielding a bid or raising capital easier and more efficient
      Directors should feel assured both in their fiduciary duties and personal risk concerns in knowing that the Bank is being proactive about handling its regulatory, reputational, ethical and compliance risks
      Risk Governance
      Review risk management committee charter to ensure it complies with the following practices:
      Sets forth the scope and responsibility of board oversight or risk management policies (for credit, market and operational risk) and procedures throughout the bank and setting forth the board's responsibility to adopt, review and maintain management-level risk committee charters
      Sets forth the board's responsibility for reviewing and approving the bank's statement of risk appetite and monitoring the same
      Establishes criteria for reporting of risk to the board
      Sets forth the methods by which the board will continually monitor significant risks potentially impacting the bank and its reputation
      Everett Advisory Services
      10/13/2010
      Everett Advisory Partners
      13
    • Regulatory Assessment
      Our team is uniquely qualified in regulatory matters and can help with:
      Strategizing on most effective approach to regulators on regulatory orders, restructurings, portfolio deterioration or restatements
      Guidance on improving relationship with regulators
      Interpretation and response to new legislation, recent regulatory reports and findings, including any orders & directives issued by regulators
      Applications and regulatory approval for new board members or senior executives
       
      Review of departure payments for compliance with the FDIC's golden parachute regulations
       
      Notices & applications seeking permission for new investment areas, products or activities
      Review and update of policies and procedures to ensure compliance with regulatory guidelines
       
      Assist with development of reports of compliance for regulatory orders and agreement
      Decoding regulatory language
       
      Everett Advisory Services
      10/13/2010
      Everett Advisory Partners
      14
    • Performance Enhancement & Profitability Improvement Opportunities
      Everett will work with you to assess, optimize and implement enhancements to profitability and performance:
      • Evaluating organic growth alternatives to identify cross sell strategies or opportunities for new products and services
      • Optimization of retail branches – location, operational costs and sales performance
      • Market and peer group reviews to assure product pricing and fee collection policies and procedures are consistent with customer expectations
      • Identifying alternatives which improve net cash flows, enabling growth in assets and liquidity
      • Enhancements to deposit offerings which encourage increases in core deposit flows and decrease the cost of funds
      • In-depth review of customer & product deliverables, and related support processes, with the goal of increasing process effectiveness and systems efficiency while supporting growth, customer needs and risk management objectives
      • Investment methods to improve yields on liquid assets and investments while reducing levels of non-earning liquid assets
      • Enhancements to fee income that balance customer satisfaction with potential regulatory changes
      • Review of fee disclosures and policies to actual results across all products to identify potential points of leakage
      • Implementation of tools to track and manage Return on Assets and Return on Equity , including management reporting, identification of key performance indicators, and comparison of historical performance to targeted peers and industry benchmarks
      Everett’s advisors can lead your team through the conceptualization, planning and execution of these types of strategies
      Everett Advisory Services
      10/13/2010
      15
      Everett Advisory Partners
    • Workouts, Loss Mitigation and Enhanced Recovery Processes
      • Keen ability to understand and address recovery process “Pain Points” and develop curing strategies
      • Holistic loss mitigation expertise, focused in the following areas:
      • Underwriting policy
      • Pre-Delinquency
      • Early Stage Collections
      • Pre-foreclosures
      • Charge-offs
      • Recoveries
      • Diligent, two phased recovery process approach
      • Assessment and analysis of recovery operational baselines
      • Implementation and measurement of strategies and solutions developed in collaboration with clients team
      • Ability to identify and prioritize recovery process “Quick Wins” to yield rapid process improvements and significant monetary returns
      Everett Advisory Services
      10/13/2010
      16
      Everett Advisory Partners
    • Strategic Planning
      Everett works with Bank management and directors to conduct a detailed examination of the bank’s business model and its underlying financial and market infrastructure to fully identify potential enhancements.
      Identifies each bank’s unique characteristics and market niche in the development and refinement of a comprehensive strategic plan.
      Employs multiple data forms, including demographic market analysis, financial data, market comparables, local market economic statistics and our extensive knowledge of the industry and region.
      Works with management and the board to build a 3 year financial and strategic plan which will serve as a compelling framework for the future, appealing to shareholders, investors, regulators, management and employees.
      To ensure the strategic plan’s consistent alignment with corporate vision we meet with management and the board regularly throughout the project, and actively facilitate strategic planning sessions vertically and horizontally throughout the organization.
      Everett Advisory Services
      10/13/2010
      17
      Everett Advisory Partners
    • Capital Raising/Liquidity/Buy & Sell-Side Advisory/Asset Sales/Divestitures
      Everett will work with you to assess and optimize alternatives, develop a post-distress plan, and tell the story of your business. We will assist you with capital raising plans, or balance sheet downsizing, through asset sales, secured financing, securitizations of assets, divestitures , debt-to-equity conversions or private equity investments.
      Sample non-core businesses and assets of community banks
      • Insurance subsidiaries/assets/claims
      • Real estate
      • Securities Broker-Dealers
      • Real Estate Brokers
      • Asset Management
      • Operations and Servicing Businesses
      And while not plentiful, capital is available, though at a cost
      • Equity issuance
      • Private Equity investment
      • Blind pools
      • SPAC acquisition – Specified Purpose Acquisition Companies
      • Conversions of debt into equity
      Everett Advisory Services
      10/13/2010
      18
      Everett Advisory Partners
      In many cases a solid strategic plan, coupled with a thoughtful acquisition strategy, will enable capital raising, decrease concentration risk, improve regulatory capital ratios and win the support of regulators
    • Everett Advisory Services
      10/13/2010
      19
      Everett Advisory Partners – EverettAdvisory.com
      This presentation is being furnished on a confidential basis to provide preliminary summary information. The information, tools and material (collectively, information) contained herein is not directed to or intended for distribution or use by any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Everett Advisory Partners to any registration or licensing requirement within such jurisdiction.
      The information presented herein is provided for informational purposes only and is not to be used or considered as an offer to sell, or buy securities or other financial instruments, or any advice or recommendation with respect to such securities or other financial instruments. The information may not be reproduced in whole or in part or otherwise made available without the prior written consent of Everett Advisory Partners. Information and opinions presented have been obtained or derived from sources believed to be reliable, but Everett Advisory Partners makes no representation as to their accuracy or completeness. Everett Advisory Partners accepts no liability for any loss arising from the use of the information contained herein.
      This information is subject to periodic update and revision. Materials should only be considered current as of the date of the initial publication, without regard to the date on which you may access the information. Everett Advisory Partners maintains the right to delete or modify the information without prior notice.
      Under no circumstances and under no theory of law, tort, contract, strict liability or otherwise, shall Everett Advisory Partners be liable to anyone for any damages resulting from access or use of, or inability to access or use, this information regardless of whether they are dire, indirect, special, incidental, or consequential damages of any character, including damages for trading losses or lost profits, or for any claim or demand by any third party, even if Everett Advisory Partners knew or had reason to know of the possibility of such damages, claim or demand.