DO’S and DON’TS FOR BANK DIRECTORS June 20, 2018 TITLE OF PRESENTATION CLIENT/LATERAL NAME DATE

DO KNOW YOUR FIDUCIARY DUTIES Duty of Care Duty of Loyalty Good Faith

DON’T forget your most important job: maximizing shareholder value Achieving returns in line with peers 10% to 12% return of equity 1% return on assets Generating shareholder liquidity Oversight of sound bank operations

DO NOT GET COMPLACENT

DO be proactive in building a better board Orientation for new board members Ongoing education for existing members Use committees appropriately Utilize board portals and technology Annual evaluation of board and/or committee service Evaluate board as a whole or individual service Self evaluation vs. peer evaluation Management participation Evaluation form vs. discussions Potentially discoverable

DO MAKE SUCCESSION PLANNING A PRIORITY

DON’T forget take care of existing talent Understand what your options are and what your competition offers Equity vs. cash incentive Vesting based on time vs. performance Create a vibrant and competitive incentive compensation plan aligned with your bank’s culture Tie performance metrics to the strategic plan Ensure that metrics are based on sound policy Monitor for fraud and compliance (Wells Fargo) But be careful and get help Understand impact on M&A of overly generous packages Numerous tax pitfalls

DO DELIBERATE, ASK QUESTIONS, AND CHALLENGE THE STATUS QUO

DON’T talk out of school Sharing confidential information outside the board room is never a good idea Leaked mergers Insider trading

DO UNDERSTAND THE RIGHT STRUCTURE FOR YOUR BANK Bank Holding Company? Public or Private? Subchapter S? Branch Footprint?

DO KNOW AND BE REALISTIC ABOUT WHAT YOUR BANK IS WORTH

DON’T sell your bank for cash without a market check Higher legal duties (“Revlon”) apply when selling the bank for cash 50% cash/50% stock: Revlon 30% cash/70% stock: Revlon not applicable 51% stock – 69% stock: ? Board’s decision to sell the bank subject to enhanced scrutiny standard Board must act to get to the highest value reasonably available for the shareholders

DO PLAN AHEAD IF YOU BELIEVE A SALE COULD BE ON THE HORIZON

DO know what kind of buyer will you be Cash vs. stock If cash existing capital raise new capital (debt or equity) If stock What are your options to issue stock to the target’s shareholders Barriers to issuing additional equity Structure of the company (e.g., sub s) Limitations in charter or bylaws Securities laws

M&A: DO NOT “WING IT”

DO CALL US WITH QUESTIONS Beth Sims Adam Smith (615) 651-6733 (615) 651-6730 beth.sims@butlersnow.com adam.smith@butlersnow.com DO CALL US WITH QUESTIONS