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

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

3. 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

4. DO NOT GET COMPLACENT

5. 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

6. DO MAKE SUCCESSION PLANNING A PRIORITY

7. 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

8. DO DELIBERATE, ASK QUESTIONS, AND CHALLENGE THE STATUS QUO

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

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

11. DO KNOW AND BE REALISTIC ABOUT WHAT YOUR BANK IS WORTH

12. 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

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

14. 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

15. M&A: DO NOT “WING IT”

16. DO CALL US WITH QUESTIONS
Beth Sims Adam Smith
(615) (615)
DO CALL US WITH QUESTIONS