Everett Advisory Partners 10.01.10


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Everett Advisory Partners 10.01.10

  1. 1. Everett advisory Partners<br />10/13/2010<br />1<br />Everett Advisory Partners – EverettAdvisory.com<br />Achieving Results Through Strategy and Execution<br />
  2. 2. The Everett Advantage<br />Everett Advisory Partners<br />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. <br />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.<br />Specialties include:<br /> Credit and Risk Management In-depth Portfolio Reviews/Asset & Securities Valuation<br /> Management Evaluations Regulatory Compliance/ Response to Orders<br /> Corporate Governance Acquisition/Investment Due Diligence<br /> Strategic Planning/Merger & Acquisitions Post-Merger Integration /Bad Bank <br /> Profitability & Performance Enhancement Liquidity Enhancement/Asset Sales/Divestitures<br />Why Everett?<br />10/13/2010<br />2<br />Everett Advisory Partners – EverettAdvisory.com<br />Comprehensive assessment capabilities from a team with extensive industry and regulatory experience, and a deep bench of talent<br />Track record of successful engagements with regional and community banks, investors and private equity firms<br />Specialized capabilities to execute strategies<br />Disciplined project management skills to ensure interdependent activities stay on track<br />
  3. 3. The Everett Advantage<br />10/13/2010<br />3<br />Everett Advisory Partners – EverettAdvisory.com<br />Seasoned, Cohesive Team of Senior Advisors<br />
  4. 4. Everett – Advisory Services and Change Management<br />Recent Engagements<br /> 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.<br /> <br /> Completed management evaluation for $200 million community bank as part of response to a consent order; advised on $10 million capital raise.<br /> Development of liquidity enhancement strategies, contingency funding plan and capital plan for a $500 million bank.<br /> <br /> Provided $2 billion regional commercial bank with regulatory guidance and assistance with response to consent order.<br /> <br /> Assisted $300 million community bank with the development of financial and risk management reporting tools.<br /> Performed due diligence for investors and private equity firms.<br /> <br /> Advised on securitization of legacy residential mortgage portfolios of banks and credit unions.<br /> Valuation of mortgage servicing rights and prepayment exposure.<br />10/13/2010<br />4<br />Everett Advisory Partners<br />
  5. 5. Everett – Advisory Services and Change Management<br />Bank Directors Face Considerable Challenges<br />With Board roles shifting from passive to active, and accountability increasing, many important challenges awaited Boards in 2010<br />Enhancing understanding of risk and portfolio management<br />Regulatory relations (more regulations and more enforcement)<br />Greater involvement in corporate strategy <br />Deepening company & industry knowledge<br />Role clarity with management<br />Adding qualified outside directors to address the perceptions of board independence <br />Compensation oversight<br />Succession planning<br />The Risk of Inaction is Rising<br />Directors are vulnerable<br />Fiduciary responsibility to the Bank<br /> 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.<br />Federal courts are now required to expedite the consideration of any case brought by the FDIC against directors & officers<br />Reputational damage - one of the top risks facing both Banks and Board members<br />Litigation <br />Fiduciary responsibility to shareholders and creditors<br /> 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<br />The menu of viable alternatives is quickly contracting as financial pressure increases and fundamentals deteriorate<br />10/13/2010<br />5<br />Everett Advisory Partners<br />For institutions to survive and thrive (or be acquired), it is critical to be proactive, establish concrete and actionable goals, and closely manage execution <br />
  6. 6. Banking Management Teams Are Already Over-Burdened<br />Declining earnings, less ability to add earning assets<br />Regulatory pressures and changes<br />Funding obstacles<br />Active, motivated boards, with potential for conflict with management<br />Investors and creditors challenging management and demanding transparency <br />Difficulty retaining top talent while downsizing<br />Federal compensation oversight<br />Maintain community involvement, reputation and brand<br />…and still face the day to day challenges of managing a bank in a tough economic environment<br />Everett – Advisory Services and Change Management<br />10/13/2010<br />6<br />Everett Advisory Partners<br />
  7. 7. Institutions Can Control & Influence Destiny Through Proactive Changes<br />Proactively evaluate restructuring and turnaround options to avoid FDIC takeover<br />Progress, and partnership, must be demonstrated to regulators and shareholders<br />Credit and Risk Management Enhancements<br />Governance Changes, Proactive and Independent Boards and Committees<br />Balance Sheet Restructuring & Recapitalization<br />Downsizing & Divestitures<br />Staffing and Organizational Changes<br />Effective Communication<br />Stay on top of regulatory changes<br />Focused Execution is Critical<br />Fate of the bank lies in the hands of proactive executives and boards<br />Develop stabilization and recovery plan<br />Define initiatives with resource requirements, interdependencies and regulatory implications<br />Detailed success criteria, performance metrics and milestones with supporting reporting tools to track progress<br />Governance designed to manage implementation through a disciplined change management process<br />Joint Board and Management working groups<br />Proactively communicate to clients, employees, creditors and shareholders <br />Assess the plans in concert with legal counsel and regulatory experts<br />Demonstrate a plan, and progress, to regulators<br />Everett – Advisory Services and Change Management<br />10/13/2010<br />7<br />Everett Advisory Partners<br />
  8. 8. 15/30/45 day plan – Define, Design, Develop, Deploy<br />Initiate assessment process<br />Evaluate lending, risk management and governance against 50 “Best Practices” identified by Everett<br />“Deep dive” on financials, capital levels, reserves and liquidity<br />Regulatory consultations<br />Summary of findings and comparisons to key benchmarks<br />Strategic dialogue on defensive alternatives and next steps<br />Develop rapid response template, executing “quick to implement” changes<br />Weekly briefings with appropriate board committees or representatives<br />Everett advisory services<br />10/13/2010<br />8<br />Everett Advisory Partners<br />
  9. 9. Management Evaluations<br />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.<br />Management Assessments are based on the following information and analyses provided by the bank:<br /><ul><li> Board, Loan Committee, ALCO and Audit Committee minutes from last 2 years
  10. 10. Credit, liquidity management, IT, compliance and branch operating procedures
  11. 11. Current years budget and most recent strategic plan
  12. 12. External audit, internal control audit, external credit review reports and examinations
  13. 13. Sampling of lending relationships in an effort to understand underwriting and risk management practices
  14. 14. 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</li></ul>Each bank is scored 1 – 5 on each criteria, with 1 excellent and 5 worst, and an overall performance score calculated.<br />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.<br />Everett advisory services<br />10/13/2010<br />Everett Advisory Partners<br />9<br />
  15. 15. Comprehensive Review of Credit and Risk Management Practices & Controls<br />Assess, review and implement changes to current underwriting and risk assessment processes, with input from management, auditors, examiners and legal counsel<br /> Roles, responsibilities and internal controls<br />  Information requirements<br />  Quality and accuracy of credit underwriting<br />  Approval process/authorities<br />  Documentation requirements <br /> Management of exceptions<br /> Effectiveness of workout, cross-collateralization and repayment strategies<br /> Ongoing portfolio monitoring , reporting and credit management<br /> Accountability of Chief Credit Officer to the Board of Directors<br />Review Credit and Counterparty Portfolio (loans, leases, swaps, derivatives, L/C's) and recommend remediation steps:<br /> Largest exposures<br /> All Criticized/Watch List/Troubled Debt Restructurings<br /> Concentration risks - relationship, industry, geography, loan and collateral type<br />Evaluate adequacy and recommend changes to:<br /> Current risk rating structure<br /> Counterparty exposure<br />  Allowance for loan and lease methodologies, FAS 5 and 114 application, charge-offs and write-downs<br /> Recoveries and collection management processes, including on-going monitoring of collateral, financial and structural stability of borrowers  <br /> Information systems and reporting tools to ensure infrastructure can support timely and accurate risk management reports<br />Everett advisory services<br />10/13/2010<br />Everett Advisory Partners<br />10<br />
  16. 16. Everett Advisory Services<br />Residential Mortgage and Mortgage-Backed Securities Assessments<br />The firm focuses on the following areas:<br /> Creating systems and procedures for managing the interest rate and credit risk of mortgage and MBS portfolios<br /> Reviewing asset prices and pricing methodologies<br /> Evaluating mission-critical systems<br /> Aiding institutions in understanding and interpreting market developments<br /> Providing support for upcoming and ongoing litigation<br /> Developing innovative proposals for optimal liquidation of mortgage and MBS holdings<br />10/13/2010<br />11<br />Everett Advisory Partners<br />
  17. 17. In-Depth Evaluation of Commercial Real Estate Exposures<br />Commercial Real Estate Credit and Underwriting Expertise<br />Distressed Asset Investing, Valuation and Management<br />Advisory Services<br />Securities Investing and Valuation<br />Everett Advisory Services<br />10/13/2010<br />12<br />Everett Advisory Partners<br />Distressed CRE Lender Services<br />Evaluate Lender Situation<br /><ul><li>Provide coordinated assessment of institution’s current situation and goals</li></ul>Asset Valuation<br /><ul><li>Proprietary analysis and underwriting process for CRE assets to determine expected and stressed valuation subject to desired exit</li></ul>Optimal Resolution<br /><ul><li>Asset-by-asset plan for optimal resolution subject to institution goals, including loan restructuring and/or liquidation</li></ul>Asset Management<br /><ul><li>Advisory services to existing bank team or outsourced asset management services</li></ul>Manage Optimal Liquidation<br /><ul><li>Work with nationally recognized agents to obtain optimal liquidation value</li></li></ul><li>Corporate Governance Review Against Best Practices<br />Board of Directors Governance<br />Composition of board - does it consist of a majority of independent directors and do board members have working knowledge of core business activities<br />Audit, ALCO, compensation, nominating and other key board committees <br />Charters to confirm adequate clarity of purpose, authority and responsibilities<br />Code of ethics for board and employees<br />Board policies and procedures to assure compliance with applicable law and regulation and does an adequate reporting mechanism exist to confirm such compliance<br />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<br />Governance provisions that can make fielding a bid or raising capital easier and more efficient <br />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<br />Risk Governance<br />Review risk management committee charter to ensure it complies with the following practices:<br />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<br />Sets forth the board's responsibility for reviewing and approving the bank's statement of risk appetite and monitoring the same<br />Establishes criteria for reporting of risk to the board<br />Sets forth the methods by which the board will continually monitor significant risks potentially impacting the bank and its reputation<br />Everett Advisory Services<br />10/13/2010<br />Everett Advisory Partners<br />13<br />
  18. 18. Regulatory Assessment<br />Our team is uniquely qualified in regulatory matters and can help with:<br />Strategizing on most effective approach to regulators on regulatory orders, restructurings, portfolio deterioration or restatements<br />Guidance on improving relationship with regulators<br />Interpretation and response to new legislation, recent regulatory reports and findings, including any orders & directives issued by regulators<br /> Applications and regulatory approval for new board members or senior executives <br /> <br /> Review of departure payments for compliance with the FDIC's golden parachute regulations <br /> <br /> Notices & applications seeking permission for new investment areas, products or activities <br /> Review and update of policies and procedures to ensure compliance with regulatory guidelines<br /> <br /> Assist with development of reports of compliance for regulatory orders and agreement<br /> Decoding regulatory language<br /> <br />Everett Advisory Services<br />10/13/2010<br />Everett Advisory Partners<br />14<br />
  19. 19. Performance Enhancement & Profitability Improvement Opportunities<br />Everett will work with you to assess, optimize and implement enhancements to profitability and performance: <br /><ul><li>Evaluating organic growth alternatives to identify cross sell strategies or opportunities for new products and services
  20. 20. Optimization of retail branches – location, operational costs and sales performance
  21. 21. Market and peer group reviews to assure product pricing and fee collection policies and procedures are consistent with customer expectations
  22. 22. Identifying alternatives which improve net cash flows, enabling growth in assets and liquidity
  23. 23. Enhancements to deposit offerings which encourage increases in core deposit flows and decrease the cost of funds
  24. 24. 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
  25. 25. Investment methods to improve yields on liquid assets and investments while reducing levels of non-earning liquid assets
  26. 26. Enhancements to fee income that balance customer satisfaction with potential regulatory changes
  27. 27. Review of fee disclosures and policies to actual results across all products to identify potential points of leakage
  28. 28. 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</li></ul>Everett’s advisors can lead your team through the conceptualization, planning and execution of these types of strategies<br />Everett Advisory Services<br />10/13/2010<br />15<br />Everett Advisory Partners<br />
  29. 29. Workouts, Loss Mitigation and Enhanced Recovery Processes<br /><ul><li>Keen ability to understand and address recovery process “Pain Points” and develop curing strategies
  30. 30. Holistic loss mitigation expertise, focused in the following areas:
  31. 31. Underwriting policy
  32. 32. Pre-Delinquency
  33. 33. Early Stage Collections
  34. 34. Pre-foreclosures
  35. 35. Charge-offs
  36. 36. Recoveries
  37. 37. Diligent, two phased recovery process approach
  38. 38. Assessment and analysis of recovery operational baselines
  39. 39. Implementation and measurement of strategies and solutions developed in collaboration with clients team
  40. 40. Ability to identify and prioritize recovery process “Quick Wins” to yield rapid process improvements and significant monetary returns</li></ul>Everett Advisory Services<br />10/13/2010<br />16<br />Everett Advisory Partners<br />
  41. 41. Strategic Planning<br />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. <br />Identifies each bank’s unique characteristics and market niche in the development and refinement of a comprehensive strategic plan. <br />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. <br />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.<br />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.<br />Everett Advisory Services<br />10/13/2010<br />17<br />Everett Advisory Partners<br />
  42. 42. Capital Raising/Liquidity/Buy & Sell-Side Advisory/Asset Sales/Divestitures<br /> 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.<br /> Sample non-core businesses and assets of community banks<br /><ul><li>Insurance subsidiaries/assets/claims
  43. 43. Real estate
  44. 44. Securities Broker-Dealers
  45. 45. Real Estate Brokers
  46. 46. Asset Management
  47. 47. Operations and Servicing Businesses</li></ul>And while not plentiful, capital is available, though at a cost<br /><ul><li>Equity issuance
  48. 48. Private Equity investment
  49. 49. Blind pools
  50. 50. SPAC acquisition – Specified Purpose Acquisition Companies
  51. 51. Conversions of debt into equity</li></ul>Everett Advisory Services<br />10/13/2010<br />18<br />Everett Advisory Partners<br />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<br />
  52. 52. Everett Advisory Services<br />10/13/2010<br />19<br />Everett Advisory Partners – EverettAdvisory.com<br />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.<br />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. <br />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. <br />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.<br />