L.T. Tom Hall, CEO of Resurgent Performance, presented on the topic of Merging Bank Cultures to the Texas Bankers Association. Whether you plan on acquiring, or being acquired, thoroughly understanding how to integrate two unique cultures is critical to success. Please keep in mind that outside of addressing associations, we also present to community bank boards on general High Performance trends, or more specific topics such as culture. The meeting is purposed to augment strategic planning efforts and allow banks to focus on organizational and cultural opportunities, as well as prepare for the great changes in banking.

1. MERGING BANKS &
MERGING CULTURES L.T. (Tom) HALL
President & CEO
Resurgent Performance, Inc.
Alpharetta, GA
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Texas Bankers Association
2015 Human Resources and Operations
Conference – Austin, TX
August 19, 2015

2. WHAT IS CORPORATE CULTURE?
It’s the mission, values,
attitudes, beliefs,
standards, and type of people
that comprise your bank.
Your culture is your foundation.
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3. CULTURE IS WHAT GOES ON WHEN
THE MANAGERS ARE NOT AROUND.
GREAT CULTURES LIVE AND BREATHE ACCOUNTABILITY.
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4. CULTURE IS MORE IMPORTANT TO THE BANKING INDUSTRY THAN EVER
BEFORE.
 Troubles of the Great Recession are mostly over,
but a new banking model is emerging
 The number and value of bank mergers are rising,
but not at the meteoric pace that some had
predicted in 2010
 NEW focus areas: Culture, Growth and Changing
Customer Preferences
 The changing industry is requiring banks to have a
solid culture adaptive to continuous improvement
 Weak Culture = Failure
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5. *Deloitte M&A Institute “2015 Banking M&A Outlook”
2000-2014 M&AActivity:
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6. 36
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2012 2013 2014
2012-2014 Open Bank Acquisitions: Texas
SO FAR IN 2015, TEXAS
HAS EXPERIENCED
EIGHT COMMUNITY
BANK
ACQUISITIONS.
TEXAS OPEN BANK ACQUISTIONS
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7. 7
OPERATING FINANCIALS IN TEXAS, AS WELL AS INDUSTRY
TRENDS, SUGGEST MORE CONSOLIDATION
IS HIGHLY LIKELY
A PERSPECTIVE ON THE CURRENT FINANCIAL PERFORMANCE
OF TEXAS BANKS IS HELPFUL.

8. Q2 2015 Texas Performance Summary
Provided by Bank Trends / Spotlight Financial
On a pretax ROA basis, 97% of Texas
banks were profitable in the second-
quarter of 2015
• For the 492 Texas-chartered banks,
median Pretax ROA was 1.17% in Q2
• Median Pretax ROE was 11.23% during
the quarter and median Net Interest
Margin was 3.6%
• Year-over-year median loan balances
increased 8.9%; median Loans-to-
Deposits ratio was 65%
• Median Noncurrent Loans ratio was
0.37%
• Median Noninterest Income to Earning
Assets was 0.62%; median Noninterest
Expense to Earning Assets was 3.0%

9. 9
HIGH PERFORMANCE ENABLES AND FACILITATES:
• Independence from potential acquisition
• Creates a model for future organic and/or strategic growth
• Drives greater share value and solid mergers/combinations
• BEST in BREED Culture

10. 10
LIVE OAK BANK
WILMINGTON, NC
670M
NICHE: SPECIALTY LENDING
HIGHLIGHTING A SPOT-ON CULTURE:
• #1 On American Banker’s “Best Banks to Work For” List
• Very Strong Financials
• Accountability is Key
• Strong emphasis on employee appreciation and
empowerment
• Executives are totally transparent about bank performance

11. WHAT ABOUT
MERGING TWO
DIFFERENT
CULTURES?
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12. • Most research indicates that M&A activity has an overall success rate of
about 50%—basically a coin toss.
• In surveys conducted in recent years, the percentage of companies that
failed to achieve the goals of the merger reached 83 percent.
• According to Gallup, there is an 8% average customer attrition rate for
banks post acquisition. It can be even higher.
Without Cultural Compatibility And Strength, These are
REAL Risks.
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13. MERGING CULTURES: THE GOOD, THE BAD, & THE UGLY
Failure to Realize Anticipated Benefits:
 Cost savings not realized
 Marketing / Sales synergies missed
 New processes, policies and procedures not integrated
 Asset quality diminished
 New technologies sub-optimized
 Culture and work environment weakened
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14. MERGING CULTURES: THE GOOD, THE BAD, & THE UGLY
Failure to Realize Anticipated Benefits, Continued:
• Human resource potential not realized
• Compliance and risk management approaches differ
greatly
• “Us versus Them” scenario develops
• Key people from both sides leave
• Customer frustration and concern reduces engagement
• Other on-going projects and initiatives slow progress
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15. Managing Cultural and Functional Integration Effectively:
• Everyone understands their new roles and goals
• It feels more like a partnership than an acquisition
• Best-in-Breed practices and processes are adapted across the
organization
• A sense of new or re-invigorated Purpose and Vision
• Communication exceeds everyone’s expectations, including
customers
• 1+1 can equal 3…. Unthought-of synergies are found
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MERGING CULTURES: THE GOOD, THE BAD, & THE UGLY

16. Managing Cultural and Functional Integration Effectively, Continued:
• Economic benefits realized - a more profitable bank is a better employer
• New products developed or better marketed across the new organization
• A model for future organic and strategic growth is enhanced
• Everyone will not be happy, but the Greater Good is satisfied
• Duplicative tasks and functions are reduced
• Greater focus on the customer realized
• In time, “acquired employees” understand changes
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MERGING CULTURES: THE GOOD, THE BAD, & THE UGLY

17. RESEARCH, PATIENCE, PREPAREDNESS, AND AN
OPEN MIND ARE KEY TO INTEGRATING TWO
CULTURES.
ANOTHER KEY: THE HR DEPARTMENT
• M&A transactions are often led by individuals with strong financial sense.
• Frequently, the “soft side” of M&A is disregarded.
• HR is essential in navigating the looming cultural differences.
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18.  DO YOUR DUE DILIGENCE
• Organizational Structure
• Compensation
• Employee Attitude
• Review Process
• Measurement of Results
• Way of Thinking
• Decision Making
• Customer Service
• Accountabilities / Metrics
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ALONG WITH IN-DEPTH RESEARCH OF FINANCIALS, MARKETS, PROCESSES,
PRODUCTS, ETC., THERE MUST BE A THOROUGH REVIEW OF THE CULTURE:
What are the over arching cultural themes of the bank to be acquired and
how do they align with your culture?

19. ALWAYS BE OPEN TO THE
POSSIBILITY THAT THE BANKS MAY
BE TOO
CULTURALLY DIFFERENT TO
SUCCESSFULLY MERGE.
No acquisition is better than a bad acquisition.
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20.  TAKE THE BEST FROM BOTH SIDES
Whether it’s organizational
structure, compensation methods,
employee review methodology, or
anything else, always be willing to
bring in the best practices from
BOTH banks. Everyone gets a shot at
CHANGE.
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21.  PREPARE EMPLOYEES FOR CHANGE
• Many months before the merger goes live,
the conversation needs to begin
• Communication is key to developing trust
and rallying employees around the change
• Give your employees a forum to ask
questions
• Let them know early on how their
role/department/compensation will change
• Continually foster an “US” mentality and not
an “Us Vs. Them” mentality
• ALWAYS be positive
FEAR OF THE UNKNOWN CREATES DISTRUST AND UNHAPPINESS
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22.  START THE INTRODUCTIONS
EARLY
CREATING A COHESIVE CULTURE STARTS WITH
CREATING ONE TEAM.
Whether it be lunch meetings, training
sessions, or kickoff events, let employees from
the separate banks get to know each other
early on.
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23. EMPLOYEE DISENGAGEMENT IS A
KEY SIGN OF POST-MERGER
DYSFUNCTION.
KEEP THEM ENGAGED AND IN THE LOOP.
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24.  CREATE A TRANSITION TEAM
• Continually communicate
changes/updates/information to employees
pre, during, and post merger
• Rally employees around change
• Put together, with help of executive team, a
thorough merger checklist and timeline
• Ensure checklist is executed
Pick a group of experienced employees with positive attitudes from all
different areas of both banks to:
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25. Because Cultures Are Quirky…
Cultures can be sub-optimized with illogical , inconsistent decision
making.
• Don’t assume consistency
• Use confidential employee questionnaires and interviews to
identify issues
Some cultures are dominated by compliance, credit, administration or
risk management; others by sales or finance.
• Your due diligence team should understand the prevailing cultural
aspects and how that impacts integration into the surviving culture
and bank
Cultures vary in terms of how they treat customers relative to pricing,
relationship management, exceptions handling, etc.
• Integration teams must be prepared to address these on Day 1
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26. POST MERGER AND INTEGRATION
• Excessive number of similar vendors
• No staff and management performance expectations
• Redundant and non-value adding functions
• Low morale and contribution – pervasive or limited
• Duplicative ancillary systems
• Unclear goals and mission
• Excessive controls and unwarranted administrative burden
• Diminished pipeline of new business, sales, and marketing
• Integration of the core system with inconsistencies
• Customers failing to understand the benefits of the bank combination
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Sample of Unfavorable Merger / Culture Integration
Outcomes:

27. THE PRESCRIPTION:
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Whether you plan on acquiring, being acquired, or
remaining independent, your bank can benefit from an
Cultural - Organizational Assessment by:
• Going into a deal with your eyes wide open
• Addressing your shortcomings relative to best practices and high
performance earlier in the cycle
• Helping Management to focus on the critical areas of vulnerability,
regulator focus, and risks
• Understanding leadership and communication improvement
opportunities
• Identifying under-utilized talent and organizational potential

28. QUESTIONS?
L.T. (TOM) HALL
CEO
Resurgent Performance, Inc.
770-664-9239
LTHall@ResurgentPerformance.com
www.ResurgentPerformance.com 28