1. RESURGENT PERFORMANCE, INC.
MERGING BANKS
&
MERGING CULTURES
PRESENTATION BY:
RESURGENT PERFORMANCE, INC.
 2017 Resurgent Performance, Inc.

2. Your culture is your foundation!
It’s the mission, values, attitudes, beliefs, standards, and type of people that comprise your bank.
Your culture is your foundation!
WHAT IS
CORPORATE CULTURE?
 2017 Resurgent Performance, Inc. 2

3. GREAT CULTURES LIVE AND BREATHE ACCOUNTABILITY.
Culture Is What Goes On When the Managers Aren't Around.
GREAT CULTURES LIVE AND BREATHE ACCOUNTABILITY.
 2017 Resurgent Performance, Inc. 3

4. CULTURE IS MORE IMPORTANT TO THE BANKING INDUSTRY THAN EVER BEFORE.
Banks, while profitable today, are challenged for growth and truly acceptable returns on equity,
as over 60% of all banks are currently earning single digit returns on equity.
Banks with overly operational/risk avoidant environments and weak service and sales cultures
will continue to struggle.
Many analysts predict continued considerable consolidation, as margins, stock valuations, and rising costs of operations all favor increased scale.
Point blank: Banks that don’t keep up with developing technologies, process changes, training needs, while fostering a service/sales culture, will not survive long-term, just as we have seen in other industries.
 2017 Resurgent Performance, Inc. 4

5. *Deloitte, “Banking & Securities M&A Outlook”, 2017
BANK M&A…
STEADY AS SHE GOES
TOTAL DEALS:
2011: 240
2012: 272
2013: 243
2014: 308
2015: 286
2016: 249
 2017 Resurgent Performance, Inc.
*Deloitte, “Banking & Securities M&A Outlook”, 2017 5

6. As of June 30th, 133 bank mergers & acquisitions have occurred in the United States in 2017.
M&A is Happening- Are you ready?
 2017 Resurgent Performance, Inc. 6

7. Can Culture Kill a Deal? Absolutely.
“As a potential BUYER, which of the following factors have caused your board to turn down a potential target institution?”
*Bank Director’s 2016 M&A Survey
 2017 Resurgent Performance, Inc. 7

8. Sellers Care About Culture, Too. A Lot.
“As a potential SELLER, which of the following factors have caused your board to turn down the sale of your institution?”
*Bank Director’s 2016 M&A Survey
 2017 Resurgent Performance, Inc. 8

9. Considering Buying or Selling?
First thing first, assess your Bank’s culture for improvement opportunity BEFORE considering a deal
Is the bank’s processes, policies, procedures, and products consistent with today’s industry best practices and high performing competitors?
Does the bank have process and product owners that are driving continuous improvement?
Is there balance between sales and risk management within the bank’s culture?
Does the bank’s culture promote innovation and constant improvement?
Is accountability the cornerstone of the bank’s culture?
 2017 Resurgent Performance, Inc. 9

10. Next, Assess Their Culture.
Along with in-depth research of financials, markets, processes, products, etc., there must be a thorough review of the culture:
Organizational Structure
Compensation
Employee Attitude
Review Process
Measurement of Results
Way of Thinking
Decision Making
Customer Service
Accountabilities / Metrics
What are the overarching cultural themes of the buying/selling bank and does your bank’s culture align with theirs?
 2017 Resurgent Performance, Inc. 10

11. No acquisition is better than a bad acquisition.
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.
 2017 Resurgent Performance, Inc. 11

12. What about merging the two different cultures?
Once a deal is finalized...
What about merging the two different cultures?
 2017 Resurgent Performance, Inc. 12

13. According to Deloitte’s 2016 M&A Trends Year-end Report:
“Effective integration planning is considered the number one factor in ensuring that deals work.”
It’s common practice to plan for technology, process, and operations integration, but culture integration is often forgotten or deemed of low importance, which causes serious short and long-term issues.
 2017 Resurgent Performance, Inc. 13

14. Lack of Culture Consideration and Merger Planning Consequences
Cost savings not realized
Marketing / sales synergies missed
New processes, policies, and procedures
not integrated
Asset quality diminished
New technologies sub-optimized
Work environment weakened
 2017 Resurgent Performance, Inc. 14

15. Lack of Culture Consideration and Merger Planning Consequences
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
 2017 Resurgent Performance, Inc. 15

16. Effective Culture Consideration and Merger Planning Benefits
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 discovered
 2017 Resurgent Performance, Inc. 16

17. Effective Culture Consideration and Merger Planning Benefits
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 17

18. Another Key? Human Resources
RESEARCH, PATIENCE, PREPAREDNESS, AND AN OPEN MIND ARE KEY TO INTEGRATING TWO CULTURES.
Another Key? Human Resources
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.
Your HR team will be key drivers of the following Culture Integration steps…
 2017 Resurgent Performance, Inc. 18

19. TAKE THE BEST FROM BOTH SIDES.
Whether it’s organizational structure, compensation methods, employee review methodology, or anything else, always be willing to acknowledge and bring in the best practices from BOTH banks.
 2017 Resurgent Performance, Inc. 19

20. 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
Ensure all communication from upper-management is highly positive
 2017 Resurgent Performance, Inc. 20

21. START THE INTRODUCTIONS EARLY.
CREATING A COHESIVE CULTURE STARTS WITH CREATING ONE TEAM.
Whether it be lunch meetings, training sessions, or kickoff events, give employees multiple opportunities from the separate banks- especially matching departments- to get to know each other early on.
 2017 Resurgent Performance, Inc. 21

22. KEEP THEM ENGAGED AND IN THE LOOP.
EMPLOYEE DISENGAGEMENT IS A KEY SIGN OF POST-MERGER DYSFUNCTION.
KEEP THEM ENGAGED AND IN THE LOOP.
 2017 Resurgent Performance, Inc. 22

23. CREATE A TRANSITION TEAM.
Pick a group of experienced employees with positive attitudes from all different areas of both banks to:
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
 2017 Resurgent Performance, Inc. 23

24. 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
 2017 Resurgent Performance, Inc. 24

25. THE PRESCRIPTION
Whether you plan on acquiring, being acquired, or remaining independent, your bank can benefit from RPI’s Organizational Effectiveness Evaluation by:
Helping the bank fulfill its potential relative to best practices and High Performance
Identifying critical areas of vulnerability and risks that management should focus on
Understanding leadership and communication improvement opportunities for organizational growth
Fully optimizing shareholder value
 2017 Resurgent Performance, Inc. 25

26. Interested in an Organizational Effectiveness Evaluation?
MERGING BANKS
&
MERGING CULTURES
Natalie Brooke
VP Client Relations
(404)
Interested in an Organizational Effectiveness Evaluation?
 2017 Resurgent Performance, Inc.