2013 A Year of Transition - FinPro...Thresholds/ Tolerances Horizontal Risk Capital Assessment Asset Quality Liquidity Sensitivity +’s Model Base Case Scenario Manage-ment Earnings

© 2013 – FinPro, Inc.020 Church Street Liberty Corner, NJ 07938 P: (908) 604-9336 F: (908) 604-5951 [email protected] www.finpronj.com

2013 – A Year of TransitionAnnual Presidents and Directors Conference

April 4, 2013

© 2013 – FinPro, Inc.

1. Table of Contents . . .

A. Return to value creation

1. Change mindset

2. Do not reinvent the wheel

B. FinPro’s Core Principal

1. Risk

2. Corporate governance

3. Regulatory

4. Customer

5. Market

6. Franchise

C. Driving value - 7 ways to build value

1. Grow deposits & diversify the mix

2. Grow loans & diversify the mix

3. Grow and diversify noninterest income

4. Control expenses

5. Enhance the franchise

6. Increase number of, and penetration within, customers

7. Utilize capital markets tools.

D. Final thoughts

1


A. We must return to value creation . . .

Change the mindset from defense to offense

Stop fretting over regulation, governance and risk

FinPro has built the tools to allow you to manage these areas

We must control our destiny, DO NOT ALLOW others to seize it

Everything we do should:

Enhance Tangible Book Value Per Share (TBVS)

Enhance Core Earnings Per Share (CEPS)

Enhance the Franchise Value (Core Deposits, Delivery Channels)

2


B. Start by re-adopting the FinPro value model . . .

3


B1. Risk

4

Enterprise Risk Management

Asset Liability Management

Compliance Findings

Allowance for Loan and Lease Loss

Methodology

Asset Migration

Liquidity Stress Test

Contingency Funding Planning

Satisfaction of Requirements of 939A of the

Dodd-Frank Act

Safety and Soundness Compliance Review

Investment Advisory

Quarterly Economic Update and Webinar


1. Take control of our destiny . . .

5

Merge ERM, planning, budgeting, ALCO and stress testing

Break down SILOs

Integrate processes

Single model

Forward looking stress testing


ERM is the integrated umbrella that delineates linkages among various risks

currently managed in a SILO environment and provides the foundation for

planning . . .

Enterprise Risk Management

CCapital Plan

ACredit Concentration Plan

Loan Migration Analysis

Loan-to-one-borrower Analysis

Management Succession Plan

Compensation Plans

Budget

Business Plan

M

E

Contingency Funding Plan

Wholesale Funding and Funds Management PlanL

Interest Rate Risk Analysis

S

Litigation Mitigation Plan

Response to Regulatory Order+

Public Relations Plan

Investor Relations Plan+

Internal Audit

Internal Controls and Procedures+

IT Controls and Testing Plan+

Compliance Plan+

6


FinPro developed an ERM approach utilizing the regulatory CAMELS+ process

and tracking the (“COSO”) process . . .

7

Phase One: Combine modeling into ONE process

Phase Two: Identify enterprise risk in

the CAMELS+ approach

COSO Step Four:

Conduct the Initial

Enterprise-wide Assessment

and Develop an Action Plan

Phase Three: Prioritize risks

Phase Four: Ensure data integrity

COSO Step Five:

Inventory the Existing

Risk Management Practices

COSO Step Seven:

Develop the Next Phase of Action

Plans and Ongoing Communications

Phase Seven: Establish people, policies

and procedures.

Phase Eight: Review in context of overall

enterprise risk management

COSO Step Six:

Develop Your Initial

Reporting System

Phase Five: Prepare alternative plan scenarios

Phase Six: Conduct stress tests

Enterprise

Risk

Management

COSO recommends that these initial steps be followed before the ERM process is started: COSO Step One: Seek Board and Senior Management Leadership, Involvement and Oversight.

COSO Step Two: Select a Strong Leader to Drive the ERM Initiative.

COSO Step Three: Establish a Management Risk Committee or Working Group.


Implementation of ERM is an eight phase process as shown graphically

below . . .

Identify and

Quantify Risk

Set Risk

Thresholds/

Tolerances

Horizontal

Risk

AssessmentCapital

Asset

Quality

Liquidity

Sensitivity

+’s

Model

Base

Case

Scenario

Manage-

ment

Earnings

Prioritization

of Risk

Vertical Risk

Assessment

Phase 1: Combine Modeling Into One Process & Phase 4: Ensure Data Integrity

1. Variable

Stress Tests

2. Enterprise

Wide Stress

Tests

Two

Approaches:

Stress

Test the

Base

Case

Pre-Phase Phase 8

Model

Alternative

Scenarios

Pro Forma

CAMELS+

Assessment

CAMELS+

Assessment

FinPro Regulatory Review

Identify

Trigger

Events

Mitigation

Strategies/

Policies/

Procedures

Phase 7Phase 6Phase 5Phase 3Phase 2

Setup Risk

Committee

Adopt

CAMELS+

Approach

8


We need to change the way we manage liquidity . . .

9

1. Avoid a continued inverse liquidity crisis

Prepare to stop shrinking

Follow the 2, 10, and 20 rule

Allocate collateral in most efficient manner

Update Contingency Funding Plan and incorporate stress tests

2. Manage investment portfolios

By now, Banks should have underwritten and documented whether their

investments are “investment grade”

Investment purchases should be pre-planned. Buy in bigger chunks and less

frequently

Stay with a defensive posture


We need to continue to work out our problem loan portfolios . . .

10

1. Complete detailed asset migration analytics

Cash flow every classified asset

2. Fix credit documentation now

3. Examine potential for bulk sales

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14

Total NPL and Coverage Ratio: Plan and Actuals

Projected Total NPL Actual Total NPL Projected ALLL/NPL Ratio Actual Total ALLL/NPL Ratio


B2. Governance

11

FinPro Central Hub

Board Filing Cabinet

Board Education, Training, and Retreat

Moderation

Management Succession

Management and Board Review

Organization Structure Review and Planning

Community Reinvestment Act Performance

Review

Compensation Analysis


Board member selection should include some parameters (in priority order) . . .

12

Shareholder

Expertise

Business Generation

Local

Diversity

Sharepoint toolbar (ribbons and navigation)

John Smith

Home Policies FinPro Expertise Network Groups Major Events Industry Resources FinPro Capital Advisers Bank Portal

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Mini Models

Capital Growth

Branch Profitability

Value Creation

Director Training

Module One

Module Two

Module Three

Interactive Applications

Policies

FinPro Expertise

Network Groups

My Central Hub

My Bank Portals

Major Events

FinPro Industry Resources

FinPro Capital Advisors (FCA)

4/4/2013 – Annual Conference

4/11/2013 – Scott PolakoffPresenting at ABA RE Lending Conference

4/26/2013 – Scott PolakoffPresenting at NJ Bankers Conference

Important Events

1. NEW! – Your Policy Guideline Is Now Available

2. NEW! – Your Policy Guideline Has Been Reviewed

1. NEW! – Your Ask A Regulator Inquiry Has Received a Response

2. 3/27/2013 – Interest Rate Policies Have Been Updated

1. NJ Bankers – Jane Doe Has Requested To Join Your Group

2. ABA – New Industry Report Has Been Uploaded To Your Group

Upgrade Your Account To Access This Service

1. NEW! – Accredited Investor List Has Been Updated

Upgrade Your Account To Access This Service

1. NEW! – April Edition Of “Musso Minute” Has Been Uploaded

2. NEW! – Don Musso’s “Banking 101” Article Has Been Published

1. NOTE – Registration For Annual Conference Closes 3/20/2013

2. NEW! – Date for Economic Webinar Announced: 5/12/2013


FinPro will offer Certificate of Director Credits for attendance at this conference

as well as other conferences . . .

13


Boards set strategic direction. As such, they must establish several key

principals which will drive strategic decision making. For example . . .

No TBVS dilution

Grow EPS significantly

12% compounded annual return on TBVS over next 3 years

Only consider sale today if:

The offer is very strong and is from an acquirer with a strong currency

Market “double dips”

Continue to improve asset quality position

Goal of <3% NPAs/Total Assets

Goal of <50% Classified Asset coverage ratio

Become a “2” rated institution

Eliminate regulatory orders (consent or MOU)

Achieve 8.5% tangible equity capital ratio at the holding company over time

Shift the holding company capital structure away from debt and toward more common

Goal is 33% debt / total capital

Look to replace interest and dividend bearing instruments with new capital after Company is rated a “2” and can raise capital that is accretive to current TBVS

14


Effective governance requires effort . . .

Loan

Asset Liability Management

Audit and Compliance

BSA and AML

CRA

Investment

Capital

Liquidity

Contingency Funding

IT

ERM

ALLL methodology

Accounts Payable

Code of Business Conduct

Reg. B

Reg. D

Reg. O

Reg. Z

RESPA

Reg. DD

Information Security and Internet

Usage

Vendor Management

Etc…

15

Maintaining Policies and Procedures:


Regulatory Consulting

Board Resolution, MOU, C&D Mitigation and Compliance

Regulatory Consulting

Negotiate Regulatory Agreements

Expert Witness Testimony

Policy Review

Capital Planning

“Ask FinPro”

B3. Regulatory

16


Regulatory . . .

Current Issues:

BASEL III

Dodd-Frank Implementation

Enterprise Risk Management and stress testing

Asset Quality Issues: Classifications, Concentrations & Credit

Administration

Bank Secrecy Act/Anti-Money Laundering

Qualified Mortgages and Servicing

Interest Rate Risk

Cyber Security

Earnings

Margin Compression

17


B4. Market

18

Branch Improvement

Market Ranking Studies

Strategic Market Assessment

Peer Market Composition analysis

Site Studies & Branch Applications


A geographic market area is defined for each branch (illustrated as pushpins

below). This example will look at the branch identified as the red pushpin

below . . .

19


The branch market (defined as the zip code) is illustrated below. This market

definition reflects natural boundaries but is irregular and overlaps onto adjacent

branches . . .

20


The branch market (defined as a 3 mile radius) is illustrated below. This market

definition would overlap onto adjacent branches and does not take into account

apparent natural boundaries . . .

21


The branch market (defined as a 5 minute drive time) is illustrated below. This

market definition more accurately reflects the reach of the branch office, but

also overlaps onto adjacent branches and extends over natural boundaries . . .

22


The core deposit customers for the branch are overlaid below . . .

23


And the 60% of the core deposits closest to the branch are

identified . . .

24


The branch market (defined as the Natural Market) is illustrated below. This

market definition reflects the actual customer distribution of the branch office, or

the area that the branch has historically drawn

from . . .

25


Competition in the market needs to be analyzed to determine deposit

marketshare and to rank the facility compared to the competition. A detailed

market tour and data collection will help to determine the strengths and

weaknesses . . .

INSTNAME TYPE ADDRESS CITY ST ZIP 2002 2003 2004 2005 2006

TOTAL: 831,384 905,925 964,615 1,031,481 943,258

TD Banknorth NA Bank 21 Market St Poughkeepsie NY 12602 73,944 70,954 84,461 82,674 73,253

TD Banknorth NA Bank 703 Main St Poughkeepsie NY 12601 46,710 49,428 67,416 71,073 65,587

HSBC Bank USA NA Bank 1 La Grange Ave Poughkeepsie NY 12603 66,088 71,118 75,191 79,381 83,568

JPMorgan Chase Bank, NA Bank 576 Albany Post Rd Hyde Park NY 12538 29,605 29,376 27,217 30,080 31,416

JPMorgan Chase Bank, NA Bank Rt 55 Apple Valley Shoppi Poughkeepsie NY 12603 25,085 24,841 26,205 30,341 28,919

KeyBank NA Bank 830 Main St Poughkeepsie NY 12603 38,769 36,819 41,171 39,480 40,912

Bank of America NA Bank 45 Market St Poughkeepsie NY 12601 13,418 10,959 10,596 9,405 7,082

Bank of America NA Bank 11 Raymond Ave Poughkeepsie NY 12603 11,602 10,939 12,063 10,960 13,748

Manufacturers & Traders TC Bank 289 Main Mall Poughkeepsie NY 12601 19,434 22,049 26,514 43,395 28,595

Manufacturers & Traders TC Bank 4 Jefferson Plz Poughkeepsie NY 12601 37,025 39,345 35,681 31,719 37,820

Riverside Bank Bank 11-13 Garden St Poughkeepsie NY 12602 53,948 69,249 66,253 75,714 78,054

HSBC Bank USA NA Bank 347 Main St Poughkeepsie NY 12601 83,843 78,445 76,095 58,708 49,535

KeyBank NA Bank 20 Cannon St Poughkeepsie NY 12601 19,732 13,532 11,963 11,596 21,918

Citizens Bank NA Bank 3650 Rt 9W Highland NY 12528 29,353 28,983 34,562 32,698 31,440

JPMorgan Chase Bank, NA Bank 130 North Rd Poughkeepsie NY 12601 29,613 28,908 21,970 18,247 0

JPMorgan Chase Bank, NA Bank 285 Main St Poughkeepsie NY 12602 82,174 99,904 109,033 117,647 125,464

Manufacturers & Traders TC Bank 10 Milton Ave Highland NY 12528 144,366 184,507 196,622 244,336 172,007

Rhinebeck Savings Bank Savings Bank 3432 North Rd Rt 9 Poughkeepsie NY 12601 14,697 22,900 27,853 29,208 39,250

Sawyer Savings Bank Savings Bank 71 Vineyard Ave Highland NY 12528 11,978 13,669 13,749 14,819 12,805

Citizens Bank NA Bank 2540 South Rd Poughkeepsie NY 12601 0 0 0 0 1,885

Market Area: Market Share by Institution TypeTotal ($000's) Mkt Share $ Growth % Growth Avg Branch Branch Perf

Institution 2006 2006 2002 - 2006 2002 - 2006 2006 Count Index

Total $943,258 100.00% $111,874 13.46% $49,645 19 1.00

Commercial Banks $891,203 94.48% $86,494 10.75% $52,424 17 1.06

Savings Banks $52,055 5.52% $25,380 95.15% $26,028 2 0.52

Thrifts $0 0.00% $0 0.00% $0 0 0.00

Credit Unions $0 0.00% $0 0.00% $0 0 0.00

Market Area: Market Share by InstitutionTotal ($000's) Mkt Share $ Growth % Growth Avg Branch Branch Perf

Institution 2006 2006 2002 - 2006 2002 - 2006 2006 Count Index

Total $943,258 100.00% $111,874 13.46% $49,645 19 1.00

TD Banknorth NA $138,840 14.72% $18,186 15.07% $69,420 2 1.40

Manufacturers & Traders TC $238,422 25.28% $37,597 18.72% $79,474 3 1.60

HSBC Bank USA NA $133,103 14.11% ($16,828) -11.22% $66,552 2 1.34

JPMorgan Chase Bank, NA $185,799 19.70% $19,322 11.61% $61,933 3 1.25

KeyBank NA $62,830 6.66% $4,329 7.40% $31,415 2 0.63

Bank of America NA $20,830 2.21% ($4,190) -16.75% $10,415 2 0.21

Riverside Bank $78,054 8.27% $24,106 44.68% $78,054 1 1.57

Wachovia Bank NA $0 0.00% $0 0.00% $0 0 0.00

Citizens Bank NA $33,325 3.53% $3,972 13.53% $16,663 2 0.34

Rhinebeck Savings Bank $39,250 4.16% $24,553 167.06% $39,250 1 0.79

Sawyer Savings Bank $12,805 1.36% $827 6.90% $12,805 1 0.26

26


Establish the appropriate brand . . .

FBT INVESTMENTS,

INC.

BANKING Operational Services Financial Services

Systems

Accounting

Strategy

Human Resources

Marketing

Risk Management

Delivery Channels

PeoplesL O U I S I A N A

Bank

Capital Trust

Mortgage L.L.C.

FBT INVESTMENTS,

INC.

27

http://www.fbtmonline.com/index.php

http://www.fbtmonline.com/index.php


A market ranking tool can be utilize to find specific markets based on desired

market or customer characteristics. The process would be the same once the

market was identified . . .

28


B5. Customer

29

Customer Segmentation Analysis

Product Propensity Analysis

New Product Development

Incremental Cost of Funds Analysis


Customer segments should be analyzed to determine the customer base. So

let’s look at an example in Jersey City, NJ . . .

07307 Jersey City MKT

DESCRIPTION HSHLDS PCT HSHLDS PCT SHARE HSHLDS PCT

Globetrotters 8 0.1% 26 2 0.0% 24.0% 6 0.1%

Business Class 1 0.0% 34 0 0.0% 12.0% 1 0.0%

Golden Agers 4 0.0% 31 1 0.0% 14.0% 3 0.0%

Civic Spirits 3 0.0% 32 1 0.0% 32.0% 2 0.0%

Retiree Chic 37 0.2% 22 10 0.2% 28.0% 27 0.2%

Big Spenders 35 0.2% 23 6 0.2% 18.0% 29 0.3%

Jumbo Mortgagees 18 0.1% 25 6 0.1% 32.0% 12 0.1%

Prosperous Parents 94 0.6% 16 23 0.5% 24.0% 71 0.6%

Leisure Land 73 0.5% 17 16 0.4% 22.0% 57 0.5%

Home Sweet Equity 7 0.0% 27 1 0.0% 8.0% 6 0.1%

Travel & Antiques 6 0.0% 29 0 0.0% 6.0% 6 0.0%

New Money 5 0.0% 30 1 0.0% 28.0% 4 0.0%

Comfortably Retired 41 0.3% 21 11 0.3% 28.0% 30 0.3%

Active Empty Nesters 406 2.6% 13 85 2.0% 21.0% 321 2.8%

Suburban Scramble 7 0.0% 27 2 0.0% 27.0% 5 0.0%

Early-Bird Specials 68 0.4% 18 15 0.4% 22.0% 53 0.5%

Conservative Couples 49 0.3% 20 15 0.4% 31.0% 34 0.3%

Senior Solitaire 25 0.2% 24 4 0.1% 15.0% 21 0.2%

Retirement Ready 0 0.0% 35 0 0.0% 0.0% 0 0.0%

Fiscal Rookies 1,023 6.6% 6 256 6.1% 25.0% 767 6.7%

Khakis & Credit 1,052 6.8% 5 158 3.8% 15.0% 894 7.8%

Family Sprawl 662 4.2% 9 132 3.2% 20.0% 530 4.6%

Old Homesteaders 140 0.9% 15 25 0.6% 18.0% 115 1.0%

Urbanistas 628 4.0% 10 75 1.8% 12.0% 553 4.8%

Forever Young 569 3.7% 11 40 1.0% 7.0% 529 4.6%

Settling Down 2,140 13.7% 3 556 13.4% 26.0% 1,584 13.9%

Loan Rangers 959 6.2% 7 201 4.8% 21.0% 758 6.6%

Urban Essentials 2,409 15.5% 2 964 23.2% 40.0% 1,445 12.7%

Country Cottages 2 0.0% 33 0 0.0% 9.0% 2 0.0%

Social Insecurity 416 2.7% 12 42 1.0% 10.0% 374 3.3%

City Strivers 700 4.5% 8 203 4.9% 29.0% 497 4.4%

Young & Thrifty 2,446 15.7% 1 832 20.0% 34.0% 1,614 14.1%

Economizers 65 0.4% 19 20 0.5% 31.0% 45 0.4%

Young Urban Renters 1,235 7.9% 4 383 9.2% 31.0% 852 7.5%

Bottom-Line Blues 252 1.6% 14 76 1.8% 30.0% 176 1.5%

15,585 100.0% 4,162 100.0% 26.7% 11,423 100.0%

BANK DIST POTENTIAL

Customer Segment Distribution - By Life Cycle

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

24 OR YOUNGER 25-34 35-44 45-54 55-64/PRE

RETIRED

65 OR

OLDER/RETIRED

07307 Jersey City

New Jersey

This immediately says we need to cater to a younger retail

customer, if we want to be successful

30


As such we need to understand the following customer segments . . .

07307 Jersey City MKT

DESCRIPTION HSHLDS PCT HSHLDS PCT SHARE HSHLDS PCT

Globetrotters 8 0.1% 26 2 0.0% 24.0% 6 0.1%

Business Class 1 0.0% 34 0 0.0% 12.0% 1 0.0%

Golden Agers 4 0.0% 31 1 0.0% 14.0% 3 0.0%

Civic Spirits 3 0.0% 32 1 0.0% 32.0% 2 0.0%

Retiree Chic 37 0.2% 22 10 0.2% 28.0% 27 0.2%

Big Spenders 35 0.2% 23 6 0.2% 18.0% 29 0.3%

Jumbo Mortgagees 18 0.1% 25 6 0.1% 32.0% 12 0.1%

Prosperous Parents 94 0.6% 16 23 0.5% 24.0% 71 0.6%

Leisure Land 73 0.5% 17 16 0.4% 22.0% 57 0.5%

Home Sweet Equity 7 0.0% 27 1 0.0% 8.0% 6 0.1%

Travel & Antiques 6 0.0% 29 0 0.0% 6.0% 6 0.0%

New Money 5 0.0% 30 1 0.0% 28.0% 4 0.0%

Comfortably Retired 41 0.3% 21 11 0.3% 28.0% 30 0.3%

Active Empty Nesters 406 2.6% 13 85 2.0% 21.0% 321 2.8%

Suburban Scramble 7 0.0% 27 2 0.0% 27.0% 5 0.0%

Early-Bird Specials 68 0.4% 18 15 0.4% 22.0% 53 0.5%

Conservative Couples 49 0.3% 20 15 0.4% 31.0% 34 0.3%

Senior Solitaire 25 0.2% 24 4 0.1% 15.0% 21 0.2%

Retirement Ready 0 0.0% 35 0 0.0% 0.0% 0 0.0%

Fiscal Rookies 1,023 6.6% 6 256 6.1% 25.0% 767 6.7%

Khakis & Credit 1,052 6.8% 5 158 3.8% 15.0% 894 7.8%

Family Sprawl 662 4.2% 9 132 3.2% 20.0% 530 4.6%

Old Homesteaders 140 0.9% 15 25 0.6% 18.0% 115 1.0%

Urbanistas 628 4.0% 10 75 1.8% 12.0% 553 4.8%

Forever Young 569 3.7% 11 40 1.0% 7.0% 529 4.6%

Settling Down 2,140 13.7% 3 556 13.4% 26.0% 1,584 13.9%

Loan Rangers 959 6.2% 7 201 4.8% 21.0% 758 6.6%

Urban Essentials 2,409 15.5% 2 964 23.2% 40.0% 1,445 12.7%

Country Cottages 2 0.0% 33 0 0.0% 9.0% 2 0.0%

Social Insecurity 416 2.7% 12 42 1.0% 10.0% 374 3.3%

City Strivers 700 4.5% 8 203 4.9% 29.0% 497 4.4%

Young & Thrifty 2,446 15.7% 1 832 20.0% 34.0% 1,614 14.1%

Economizers 65 0.4% 19 20 0.5% 31.0% 45 0.4%

Young Urban Renters 1,235 7.9% 4 383 9.2% 31.0% 852 7.5%

Bottom-Line Blues 252 1.6% 14 76 1.8% 30.0% 176 1.5%

15,585 100.0% 4,162 100.0% 26.7% 11,423 100.0%

BANK DIST POTENTIAL

• Fiscal Rookies

Segment:

– Young couples and

families.

– Relatively high incomes

– 25- to 44-year-olds

– Not saving a lot of money

– Average levels of income-

producing assets.

– Carry debt from student

and auto loans

– First home mortgages

– Dabbling in investment-

style insurance and

mutual funds for their

401(k)s.

31


The needs profile for the Fiscal Rookies looks like this . . .

Offer some form of custom loan, a term loan secured by real estate for borrowers with good credit but little or no equity to use as an alternative to costly student loans or for other debt consolidation.

Consider higher LTV loans with approach of underwriting borrower vs. collateral, when direct payment is made from a bank checking account. Also consider offering interest only periods and some fixed number of options for the customer to convert some or all of the outstanding line into a fixed term loan.

A checking account with a low minimum or no minimum balance requirement, no fees, free internet banking, unlimited check writing, automatic overdraft protection, and tied to a savings account.

32


Product delivery . . .

Technology, Technology, Technology:

Internet and Electronic banking – low usage rate of traditional brick and mortar

Link all accounts together and offer some form of a unified statement as well a free and unlimited electronic access to accounts

These customers have high ATM usage rates (next generation ATMs)

Convenience, Convenience, Convenience:

Direct deposit of payroll checks into a Bank account

Location near retail draws, walking patterns, and stops for the Bergen Hudson Light Rail

Free ATM usage at any Bank locations

A dual credit card/debit/ATM card should be offered

Type of Media:

Radio

Entertainment, Fitness, and Airline Magazines

Affinity relationships

Business Finance section of the newspaper

Search Engine

NO Television

TOP 10 Lifestyle Index

Prof Furniture Clnrs LstYr (1.8%) 278

Used Baby Foods Last 6 Mos (5.8%) 271

Go Downhill Skiing (3.6%) 269

Go Scuba/Skin Dive/Snorkel (2.5%) 244

Play Softball (5.3%) 238

In-Home Preg Test Lst 12Mos (5.9%) 237

Rntd Fam/Kid Videos Lst Mo (10.0%) 233

Exercise at Club 2x a Week (6.5%) 231

Buy Medium Rock Music (8.7%) 230

Buy Hard Rock Music (5.9%) 215

TOP 10 Media Index

Baby Mags: Net Aud (3.8%) 268

Entertain/Perf Art Mag (3.8%) 268

Classic Rock: Net Audience (8.5%) 233

Progressive Rock: Net Aud (13.7%) 215

Fitness Mags: Net Aud (4.0%) 188

Computer Mags: Net Aud (6.6%) 158

VH1: Net Audience (11.7%) 156

TV Col Basketball: NetAud (15.6%) 154

Airline Mags: Net Aud (4.6%) 151

Radio Col/Pro Bsktbl:NetAud(5.8%) 148

33


And we should get even more detailed . . .

NEWSPAPER Index RADIO Index Programming Index

Top 20% Newspaper: Net Aud (20.0%) 92 Top 20% Radio: Net Audience(20.0%) 132 Adult Contemp: Net Aud(20.6%) 134

Bottom 20% Newsppr: Net Aud(20.0%) 68 Bottom 20% Radio: Net Aud (19.8%) 44 News: Net Audience (4.8%) 81


Read Business/Finance Sec (30.3%) 128 Radio M-F 6am-10am: Net Aud(55.8%) 127 Black: Net Audience (1.5%) 27

Read Classified Section (35.5%) 124 Radio M-F 10am-3pm: Net Aud(36.9%) 113 CHR/Rock: Net Aud (12.0%) 136

Read Comics Section (34.2%) 113 Radio M-F 3pm-7pm: Net Aud (42.7%) 144 Classic Rock: Net Audience (8.5%) 233

Read Editorial Section (34.7%) 90 Radio M-F 7pm-12am: Net Aud(16.4%) 105 Classical: Net Aud (2.1%) 85

Read Fashion Section (18.2%) 99 Radio M-F 12am-6am: Net Aud(5.2%) 112 Country: Net Aud (21.4%) 124

Read Food/Cooking Section (28.9%) 98 Radio S-S 6am-10am: Net Aud(29.5%) 112 Easy List: Net Aud (1.3%) 54

Read General News Section (59.8%) 110 Radio S-S 10am-3pm: Net Aud(38.0%) 126 Golden Oldies: Net Aud(12.8%) 123

Read Home/Furn/Garden Sec (23.0%) 119 Radio S-S 3pm-7pm: Net Aud(28.5%) 131 Jazz: Net Audience (3.7%) 68

Read Movie Listngs&Reviews (29.9%) 115 Radio S-S 7pm-12am: Net Aud(14.0%) 92 Nostalgia: Net Aud (2.6%) 38

Read Science/Tech Section (19.0%) 111 Radio S-S 12am-6am: Net Aud(3.2%) 85 News/Talk: Net Aud (17.9%) 112

Read Sports Section (32.5%) 126 Relig/Gospel: Net Aud (4.5%) 91

Read TV/Radio Listings (34.0%) 90 Soft Contemp: Net Aud (2.5%) 144

Spanish: Net Aud (2.2%) 18

MAGAZINE Index Urban Contemp: Net Aud(6.5%) 54

Top 20% Magazines: Net Aud (20.0%) 107 Variety: Net Aud (1.5%) 73

Bottom 20% Mags: Net Aud (20.1%) 75

TELEVISION Index Programming Index

Airline Mags: Net Aud (4.6%) 151 Top 20% Total TV: Net Aud (19.8%) 42 A&E: Net Audience (32.8%) 86

Automotive Mags: Net Aud (10.7%) 130 Bottom 20% Total TV: NetAud(19.9%) 122 Amer Movie Classics: NetAud(19.0%) 64

Baby Mags: Net Aud (3.8%) 268 BET: Net Audience (6.2%) 71

Boating Mags: Net Aud (2.5%) 132 TV M-F 6am-7am: Net Aud (5.1%) 80 Bravo: Net Audience (2.2%) 64

Bridal Mags: Net Aud (3.7%) 59 TV M-F 7am-9am: Net Aud (7.8%) 62 Cartoon Network: Net Aud (6.6%) 140

Bus/Finance Mags: Net Aud (22.7%) 139 TV M-F 9am-10am: Net Aud (8.8%) 52 CNBC: Net Audience (14.0%) 90

Computer Mags: Net Aud (6.6%) 158 TV M-F 10am-1pm: Net Aud (10.3%) 32 CNN: Net Audience (58.8%) 97

Entertain/Perf Art Mag (3.8%) 268 TV M-F 1pm-4pm: Net Aud (12.1%) 30 Comedy Central: Net Aud (10.9%) 146

Epicurean Mags: Net Aud(5.1%) 102 TV M-F 4pm-4:30pm: Net Aud (12.2%) 31 Country Music TV: Net Aud (11.7%) 103

Fish/Hunt Mags: Net Aud (14.2%) 103 TV M-F 4:30pm-5pm: Net Aud (12.4%) 35 Court TV: Net Audience (4.6%) 80

Fitness Mags: Net Aud (4.0%) 188 TV M-F-5pm-5:30pm: Net Aud (16.8%) 53 C-Span: Net Audience (12.8%) 95

Fraternal Mags: Net Aud (2.8%) 32 TV M-F 5:30pm-6pm: Net Aud (18.4%) 56 Discovery Channel: Net Aud (47.3%) 95

Gardening Mags: Net Aud (4.1%) 60 TV M-F 6pm-6:30pm: Net Aud (28.6%) 55 E!: Net Audience (9.9%) 121

Gen Editorial Mags: Net Aud(53.9%) 90 TV M-F 6:30pm-7pm: Net Aud (30.2%) 58 ESPN: Net Audience (40.3%) 119

Health Mags: Net Aud (9.6%) 74 TV M-F 7pm-7:30pm: Net Aud (34.9%) 63 ESPN2: Net Audience (5.8%) 131

Home Svcs Mags: Net Aud (33.0%) 122 TV M-F 7:30pm-8pm: Net Aud (35.3%) 67 Family Channel: Net Aud (28.1%) 89

Mens Mags: Net Aud (16.1%) 127 TV M-F 8pm-11pm: Net Aud (52.3%) 96 Headline News: Net Aud (28.9%) 103

Motorcycle Mags: Net Aud (3.1%) 106 TV M-F-11pm-11:30pm: NetAud(27.3%) 89 Home Shopping Club:Net Aud (5.5%) 115

Music Mags: Net Aud (9.3%) 112 TV M-F 11:30pm-12am: NetAud(15.0%) 87 Learning Channel: Net Aud (12.2%) 104

News Weekly Mags: Net Aud (50.7%) 100 TV M-F 12am-12:30am: NetAud(7.7%) 82 Lifetime: Net Audience (25.0%) 96

Newspaper-Distrib Mags: NetAud(61.4%) 107 TV M-F 12:30am-1am: Net Aud(4.2%) 74 MTV: Net Audience (18.5%) 114

Parenthood Mags: Net Aud (8.7%) 125 TV M-F 1am-2am: Net Aud (1.9%) 63 Nick at Nite: Net Audience (16.7%) 132

Photographic Mags: Net Aud (1.3%) 77 TV Sat 7am-10am: Net Aud (3.5%) 74 Nickelodeon: Net Audience (15.8%) 124

Science/Tech Mags: Net Aud (7.4%) 99 TV Sat 10am-1pm: Net Aud (7.0%) 74 Nostalgia TV: Net Aud (1.5%) 0

Sports Mags: Net Aud (13.5%) 139 TV Sat 1pm-4:30pm: Net Aud (11.7%) 67 Prevue Guide Channel:NetAud(9.4%) 119

Travel Mags: Net Aud (7.2%) 99 TV Sat 4:30pm-6pm: Net Aud (14.1%) 73 QVC: Net Audience (5.1%) 88

Womens Mags: Net Aud (45.4%) 114 TV Sat 6pm-7:30pm: Net Aud (19.5%) 63 TBS: Net Audience (36.0%) 105

Womens Fashion Mags: NetAud(6.2%) 84 TV Sat 7:30pm-8pm: Net Aud (22.7%) 61 TNN: Net Audience (25.6%) 82

TV Sat 8pm-11pm: Net Aud (36.8%) 77 TNT: Net Audience (35.4%) 94

TV Sat 11pm-11:30pm: NetAud(14.4%) 72 Travel Channel: Net Aud (3.5%) 137

TV Sat 11:30pm-1am: Net Aud(4.8%) 108 USA Network: Net Audience (39.2%) 102

TV Sunday 7am-10am: Net Aud(3.3%) 76 VH1: Net Audience (11.7%) 156

TV Sun 10am-1pm: Net Aud (6.9%) 87 Weather Channel: Net Aud (41.4%) 96

TV Sun 1pm-4:30pm: Net Aud (16.0%) 106 WGN-TV: Net Audience (18.9%) 105

TV Sun 4:30pm-6pm: Net Aud (17.2%) 85 Cinemax: Net Audience (11.3%) 87

TV Sunday 6pm-7pm: Net Aud (22.2%) 73 Disney Channel: Net Aud (8.3%) 106

TV Sun 7pm-11pm: Net Aud (40.0%) 93 HBO: Net Audience (26.2%) 92

TV Sun 11pm-11:30pm: NetAud(14.4%) 92 Movie Channel: Net Audience(5.3%) 55

TV Sun 11:30-1am: Net Aud (3.1%) 74 Showtime: Net Audience (10.9%) 83

TELEVISION Index Programming Index

Top 20% Total TV: Net Aud (19.8%) 42 A&E: Net Audience (32.8%) 86

Bottom 20% Total TV: NetAud(19.9%) 122 Amer Movie Classics: NetAud(19.0%) 64

BET: Net Audience (6.2%) 71

TV M-F 6am-7am: Net Aud (5.1%) 80 Bravo: Net Audience (2.2%) 64

TV M-F 7am-9am: Net Aud (7.8%) 62 Cartoon Network: Net Aud (6.6%) 140

TV M-F 9am-10am: Net Aud (8.8%) 52 CNBC: Net Audience (14.0%) 90

TV M-F 10am-1pm: Net Aud (10.3%) 32 CNN: Net Audience (58.8%) 97

TV M-F 1pm-4pm: Net Aud (12.1%) 30 Comedy Central: Net Aud (10.9%) 146

TV M-F 4pm-4:30pm: Net Aud (12.2%) 31 Country Music TV: Net Aud (11.7%) 103

TV M-F 4:30pm-5pm: Net Aud (12.4%) 35 Court TV: Net Audience (4.6%) 80

TV M-F-5pm-5:30pm: Net Aud (16.8%) 53 C-Span: Net Audience (12.8%) 95

TV M-F 5:30pm-6pm: Net Aud (18.4%) 56 Discovery Channel: Net Aud (47.3%) 95

TV M-F 6pm-6:30pm: Net Aud (28.6%) 55 E!: Net Audience (9.9%) 121

TV M-F 6:30pm-7pm: Net Aud (30.2%) 58 ESPN: Net Audience (40.3%) 119

TV M-F 7pm-7:30pm: Net Aud (34.9%) 63 ESPN2: Net Audience (5.8%) 131

TV M-F 7:30pm-8pm: Net Aud (35.3%) 67 Family Channel: Net Aud (28.1%) 89

TV M-F 8pm-11pm: Net Aud (52.3%) 96 Headline News: Net Aud (28.9%) 103

TV M-F-11pm-11:30pm: NetAud(27.3%) 89 Home Shopping Club:Net Aud (5.5%) 115

TV M-F 11:30pm-12am: NetAud(15.0%) 87 Learning Channel: Net Aud (12.2%) 104

TV M-F 12am-12:30am: NetAud(7.7%) 82 Lifetime: Net Audience (25.0%) 96

TV M-F 12:30am-1am: Net Aud(4.2%) 74 MTV: Net Audience (18.5%) 114

TV M-F 1am-2am: Net Aud (1.9%) 63 Nick at Nite: Net Audience (16.7%) 132

TV Sat 7am-10am: Net Aud (3.5%) 74 Nickelodeon: Net Audience (15.8%) 124

TV Sat 10am-1pm: Net Aud (7.0%) 74 Nostalgia TV: Net Aud (1.5%) 0

TV Sat 1pm-4:30pm: Net Aud (11.7%) 67 Prevue Guide Channel:NetAud(9.4%) 119

TV Sat 4:30pm-6pm: Net Aud (14.1%) 73 QVC: Net Audience (5.1%) 88

TV Sat 6pm-7:30pm: Net Aud (19.5%) 63 TBS: Net Audience (36.0%) 105

TV Sat 7:30pm-8pm: Net Aud (22.7%) 61 TNN: Net Audience (25.6%) 82

TV Sat 8pm-11pm: Net Aud (36.8%) 77 TNT: Net Audience (35.4%) 94

TV Sat 11pm-11:30pm: NetAud(14.4%) 72 Travel Channel: Net Aud (3.5%) 137

TV Sat 11:30pm-1am: Net Aud(4.8%) 108 USA Network: Net Audience (39.2%) 102

TV Sunday 7am-10am: Net Aud(3.3%) 76 VH1: Net Audience (11.7%) 156

TV Sun 10am-1pm: Net Aud (6.9%) 87 Weather Channel: Net Aud (41.4%) 96

TV Sun 1pm-4:30pm: Net Aud (16.0%) 106 WGN-TV: Net Audience (18.9%) 105

TV Sun 4:30pm-6pm: Net Aud (17.2%) 85 Cinemax: Net Audience (11.3%) 87

TV Sunday 6pm-7pm: Net Aud (22.2%) 73 Disney Channel: Net Aud (8.3%) 106

TV Sun 7pm-11pm: Net Aud (40.0%) 93 HBO: Net Audience (26.2%) 92

TV Sun 11pm-11:30pm: NetAud(14.4%) 92 Movie Channel: Net Audience(5.3%) 55

TV Sun 11:30-1am: Net Aud (3.1%) 74 Showtime: Net Audience (10.9%) 83

NEWSPAPER Index

Top 20% Newspaper: Net Aud (20.0%) 92

Bottom 20% Newsppr: Net Aud(20.0%) 68

Read Business/Finance Sec (30.3%) 128

Read Classified Section (35.5%) 124

Read Comics Section (34.2%) 113

Read Editorial Section (34.7%) 90

Read Fashion Section (18.2%) 99

Read Food/Cooking Section (28.9%) 98

Read General News Section (59.8%) 110

Read Home/Furn/Garden Sec (23.0%) 119

Read Movie Listngs&Reviews (29.9%) 115

Read Science/Tech Section (19.0%) 111

Read Sports Section (32.5%) 126

Read TV/Radio Listings (34.0%) 90

RADIO Index Programming Index

Top 20% Radio: Net Audience(20.0%) 132 Adult Contemp: Net Aud(20.6%) 134

Bottom 20% Radio: Net Aud (19.8%) 44 News: Net Audience (4.8%) 81


Radio M-F 6am-10am: Net Aud(55.8%) 127 Black: Net Audience (1.5%) 27

Radio M-F 10am-3pm: Net Aud(36.9%) 113 CHR/Rock: Net Aud (12.0%) 136

Radio M-F 3pm-7pm: Net Aud (42.7%) 144 Classic Rock: Net Audience (8.5%) 233

Radio M-F 7pm-12am: Net Aud(16.4%) 105 Classical: Net Aud (2.1%) 85

Radio M-F 12am-6am: Net Aud(5.2%) 112 Country: Net Aud (21.4%) 124

Radio S-S 6am-10am: Net Aud(29.5%) 112 Easy List: Net Aud (1.3%) 54

Radio S-S 10am-3pm: Net Aud(38.0%) 126 Golden Oldies: Net Aud(12.8%) 123

Radio S-S 3pm-7pm: Net Aud(28.5%) 131 Jazz: Net Audience (3.7%) 68

Radio S-S 7pm-12am: Net Aud(14.0%) 92 Nostalgia: Net Aud (2.6%) 38

Radio S-S 12am-6am: Net Aud(3.2%) 85 News/Talk: Net Aud (17.9%) 112

Relig/Gospel: Net Aud (4.5%) 91

Soft Contemp: Net Aud (2.5%) 144

Spanish: Net Aud (2.2%) 18

Urban Contemp: Net Aud(6.5%) 54

Variety: Net Aud (1.5%) 73

MAGAZINE Index

Top 20% Magazines: Net Aud (20.0%) 107

Bottom 20% Mags: Net Aud (20.1%) 75

Airline Mags: Net Aud (4.6%) 151

Automotive Mags: Net Aud (10.7%) 130

Baby Mags: Net Aud (3.8%) 268

Boating Mags: Net Aud (2.5%) 132

Bridal Mags: Net Aud (3.7%) 59

Bus/Finance Mags: Net Aud (22.7%) 139

Computer Mags: Net Aud (6.6%) 158

Entertain/Perf Art Mag (3.8%) 268

Epicurean Mags: Net Aud(5.1%) 102

Fish/Hunt Mags: Net Aud (14.2%) 103

Fitness Mags: Net Aud (4.0%) 188

Fraternal Mags: Net Aud (2.8%) 32

Gardening Mags: Net Aud (4.1%) 60

Gen Editorial Mags: Net Aud(53.9%) 90

Health Mags: Net Aud (9.6%) 74

Home Svcs Mags: Net Aud (33.0%) 122

Mens Mags: Net Aud (16.1%) 127

Motorcycle Mags: Net Aud (3.1%) 106

Music Mags: Net Aud (9.3%) 112

News Weekly Mags: Net Aud (50.7%) 100

Newspaper-Distrib Mags: NetAud(61.4%) 107

Parenthood Mags: Net Aud (8.7%) 125

Photographic Mags: Net Aud (1.3%) 77

Science/Tech Mags: Net Aud (7.4%) 99

Sports Mags: Net Aud (13.5%) 139

Travel Mags: Net Aud (7.2%) 99

Womens Mags: Net Aud (45.4%) 114

Womens Fashion Mags: NetAud(6.2%) 84 34


And create a culture which rewards service quality, but separates service from

sales . . .

Implement tracking system

Create appropriate metrics to monitor performance, for example:

Total Accounts

Total Households

Accounts per Household

Products per Household

Loan $ per Household

Deposit $ per Household

Create incentive compensation for the branch manager based on selected metrics.

Utilize data mining of current customers to identify cross sell potential and calling lists for branch staff

Fiscal Rookies

07307 Jersey City

HSHLDS

W/ACCT

% MKT

HSHLDS

AVG

BALANCE

POTENTIAL

MARKET % MIX INDEX

DEPOSIT PRODUCTS:

Non-interest DDA 603 58.9% $7,121 $4,292,576 20.2% 1.22

Interest DDA 524 51.3% $7,888 $4,136,514 19.4% 1.07

Total Transaction/DDA 992 97.0% $8,497 $8,429,090 39.6% 1.12

Savings - Regular 903 88.3% $10,354 $9,349,599 43.9% 1.28

Money Market 192 18.8% $10,873 $2,090,229 9.8% 1.07

CD 110 10.8% $11,315 $1,248,288 5.9% 0.78

IRA-CD 18 1.8% $9,842 $179,420 0.8% 0.63

Total Savings 937 91.6% $13,735 $12,867,536 60.4% 1.24

TOTAL DEPOSIT PRODUCTS 1,020 99.7% $20,885 $21,296,626 100.0% 1.08

LOAN PRODUCTS:

Mortgage 618 60.4% $115,379 $71,322,198 334.9% 1.49

2nd Mortgage 60 5.9% $28,111 $1,683,804 7.9% 1.20

Home Equity LOC 97 9.5% $18,577 $1,807,602 8.5% 1.09

Total Real Estate Secured 630 61.6% $118,708 $74,813,604 351.3% 1.40

Auto 620 60.6% $16,602 $10,286,481 48.3% 1.79

Student 356 34.8% $22,138 $7,888,164 37.0% 3.03

Other Personal Loans 77 7.6% $10,945 $847,348 4.0% 1.44

Total Installment Credit 769 75.2% $26,910 $19,021,994 89.3% 1.73

Bank Credit Card 944 92.3% $4,359 $4,116,864 19.3% 1.27

Overdraft 234 22.9% $3,865 $905,882 4.3% 1.37

Other PLOC 52 5.1% $8,160 $423,096 2.0% 1.50

Total Revolving Credit 960 93.8% $7,559 $5,445,842 25.6% 1.24

TOTAL LOAN PRODUCTS 1,008 98.5% $98,485 $99,281,440 466.2% 1.18

35


B6. Franchise

36

Management Succession

Holding Company, Exchange Registration and Charter Analysis

Branch network restructuring

Market share acquisitions

Branch network in-fill


Staff are the most important element of banking . . .

37

Investors don’t invest in banks, they invest in management teams

We are like Republicans – Old grumpy men

A management review is a good thing

True staff planning is essential

Migrate to organizational structure for the future, not today

Which will necessitate organization wide management succession, and

Individual management succession

Must identify training needs and build it in house

We should hire outside the industry, we need new ideas


All banks need to relook at their compensation plans . . .

Number of and provisions in employment agreements

Value effect of stock plans

Shift to total compensation management

38

C. Compensation Grid

Management

Position: Chief Executive Officer

Name: John Doe

Actual Actual Actual Projected

2010 2011 2012 2013

Base Salary $ - $ - $ - $ -

Cash Bonus $ - $ - $ - $ -

Medical Benefits $ - $ - $ - $ -

401K Contribution $ - $ - $ - $ -

Outstanding LTIP $ - $ - $ - $ -

New LTIP $ - $ - $ - $ -

Total

Compensation $ - $ - $ - $ -


Corporate infrastructure needs to be re-evaluated . . .

39

Eliminate Holding Company, if not utilizing it

Select appropriate charter

Deregister and delist

Ensure that you have enough authorized but unissued shares for both common stock

and preferred stock

Plan to fix your capital structure

2/3 common

1/3 in dividend or interest bearing form

Potential adjustment to $2.5 billion from $500 million cut off


Eliminate the holding company unless there is a real need for it . . .

You need a HC if:

You want multiple bank charters

You have, or want, subsidiaries at the HC level

You currently have a complex capital structure

To take full advantage of anti-takeover provisions (super majority votes)

Possibly, you are an active acquirer

Eliminating the HC will:

Save considerable expense, $200k for a $500 million bank

Eliminate the Federal Reserve as regulator

Exempt from SEC Registrations

Clean up legal structure

40


Review charter choices and select the optimal one . . .

41

State State National

Member Non Member Bank

Bank Examination State State OCC

Federal Reserve FDIC

If Holding Company Federal Reserve Federal Reserve Federal Reserve


Evaluate the cost and effectiveness of the current systems . . .

42

In-house vs. outsourcing

The Cloud

Data management

Contract reviews to avoid astronomical early cancellation fees

FinPro Central Hub

FinPro Online Applications


Ensure the Bank has the appropriate services and sales channels . . .

43


C. Value Creation

44


2. Grow loan & diversify the mix


4. Control expenses

5. Enhance the branch network and

alternative delivery options

6. Increase number of and penetration

within customers

7. Utilize capital market tools


C1. Grow Deposits &

Diversify the Mix

45

Deposit disintermediation study

Decay analysis

Beta analysis

Deposit concentration analysis 1. Grow deposits & diversify the mix



4. Control expenses




within customers



From a funding perspective, we need to grow deposits and diversify the mix . . .

46

1. Today, diversifying mix is much more important than deposit growth. Deposit growth is a function of:

Need to pay down non core funding, and/or

The ability to grow loans

2. Minimize non core funding but some, in moderation, is acceptable

Brokered deposits are preferable to wholesale borrowings

3. Conduct deposit disintermediation study

Relationship

Tenure

Location

Transactions

Price

Size

4. Conduct new deposit decay and beta analyses

FDIC - Statistics on Depository Institutions

Report in (000's)

2007Y 2008Y 2009Y 2010Y 2011Y 2012Y

Transaction accounts 786,653,638$ 924,718,053$ 983,511,046$ 1,048,325,569$ 1,401,141,927$ 1,586,458,938$

Money market deposit accounts (MMDAs) 2,695,036,295 2,876,802,186 3,283,086,020 3,586,758,445 4,029,255,861 4,315,419,516

Other savings deposits (excluding MMDAs) 832,266,809 870,962,858 1,065,307,646 1,259,875,003 1,505,890,420 1,817,372,457

Total time deposits 2,598,896,528 2,823,780,238 2,364,766,203 1,978,335,575 1,821,712,372 1,727,746,993

Total Domestic Deposits 6,912,853,270$ 7,496,263,335$ 7,696,670,915$ 7,873,294,592$ 8,758,000,580$ 9,446,997,904$


In fact, the last time rates rose quickly was from 2004 to 2007 . . .

47

Total Interest Expense for Industry (In Millions)

128,786

102,060 102,455

171,530

271,443

317,097

218,055

126,190

93,664 75,094 65,927

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2002Y 2003Y 2004Y 2005Y 2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y

Source: SNL Financial

Implied Beta = 55%

1.00%

3.00%

5.00%5.25%

1.78%

2.72%

3.94%4.11%

2.75%

4.38%

5.00%4.71%

4.24% 4.39%

4.71%

4.04%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2004Y 2005Y 2006Y 2007Y

Fed Funds Interest Expense to Average Costing Liabilities 1 Year Treasury Rate 10 Year Treasury Rate


C2. Grow Loans &

Diversify the Mix

48

Loan concentration analysis

Risk vs. Profitability analysis

New product white papers

Prepayment speed analysis 1. Grow deposits & diversify the mix



4. Control expenses




within customers



From a Lending perspective, we need to grow loans and diversify the mix . . .

1. Need expertise, systems, processes and

controls

2. Migrate from investments to loans

3. Need to hire loan producers

4. Loan participations are okay only if

underwritten by purchaser

5. Establish solid concentration limits and

granularly stratify whenever appropriate

FICO

Geography

LTV (funded and fully drawn) Stress Test:

5%, 10%, 15%

Purchased vs. Refinance

Non owner vs. owner (CRE)

Industry, NAICS code

DSC

49

Gross Loans

Annual Quarterly

$6,626

$7,321

$7,579

$7,241 $7,350

$7,466

$7,698

$7,413 $7,515

$7,580

$7,698

$6,000

$6,200

$6,400

$6,600

$6,800

$7,000

$7,200

$7,400

$7,600

$7,800

2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2012Q1 2012Q2 2012Q3 2012Q4


And continue to reduce asset quality concerns . . .

2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2012Q1 2012Q2 2012Q3 2012Q4

Total Assets Past Due 30-89 Days 64,955$ 94,259$ 148,137$ 138,755$ 117,398$ 100,865$ 89,189$ 89,884$ 84,092$ 87,072$ 89,189$

Total Assets Past Due 90+ Days 21,850 30,851 72,448 131,519 130,463 133,862 124,168 131,907 128,379 130,370 124,168

Total Nonaccrual Assets 30,883 65,677 147,976 264,284 229,066 181,333 154,832 175,493 167,130 164,761 154,832

Total OREO & Repos Assets 5,365 10,148 24,615 41,130 52,543 46,194 38,631 44,924 41,882 41,165 38,631

Total 123,053$ 200,936$ 393,175$ 575,688$ 529,471$ 462,254$ 406,821$ 442,208$ 421,483$ 423,368$ 406,821$

Percent Change 63.29% 95.67% 46.42% -8.03% -12.70% -11.99% -4.69% 0.45% -3.91%

Annual Quarterly

Asset Quality Trends

(In millions)

Asset Quality Migration Trends ($ in millions)

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Total Assets Past

Due 30-89 Days

Total Assets Past

Due 90+ Days

Total Nonaccrual

Assets

Total OREO &

Repos Assets

50


C3. Grow and diversify noninterest

income

51

Wealth management

Mortgage operation

Alternative fee opportunities

Small Business Investment

Companies1. Grow deposits & diversify the mix



4. Control expenses




within customers



Analyze fee income opportunities . . .

52

Stop waiving fees

Is this a competitive weapon?

Charge fees on small balance

Charge fees on single relationship accounts to make them profitable or move them out

Cyclical fee income will receive a lower earnings multiple

Consider purchasing RIA’s

Ultimately, fees may help but they are not the Panacea

Source: SNL Securities

Industry Median Noninterest Income / Average Assets (Excluding Security Sale Gains or Losses)

Annual Quarterly

0.63% 0.61% 0.60%

0.53%0.51%

0.49%0.51% 0.50% 0.50%

0.53% 0.54%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2012Q1 2012Q2 2012Q3 2012Q4

Target a 50+ basis point non interest income to average assets ratio


C4. Control Expenses

53

GL line item review

Transaction cost savings analysis

Organizational efficiency study

Branch profitability study1. Grow deposits & diversify the mix



4. Control expenses




within customers



Implement expense control measures . . .

Conduct a general ledger line item review

Everyone says they can’t cut and yet when

pressed all can and do

Remove sacred cow excuse

Lead by example – Board fees and executive

compensation

Sell or close unprofitable branches

Eliminate multiple layers of organization – Flatten

organization chart

Conduct branch, account and customer

profitability analytics

Recognize pickup from reduced asset quality

problems: FDIC insurance, Legal and carry costs,

and provision

Ensure your Bank has the appropriate Charter

Determine need, and usage of, Holding Company

If possible, de-register

54Source: SNL Securities

Industry Median Noninterest Expenses / Avg. Assets

Annual Quarterly

2.98%2.99%

3.00%

3.04%

3.01%

2.99%

2.95%

2.91%2.92%

2.91%

3.02%

2.80%

2.85%

2.90%

2.95%

3.00%

3.05%

2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2012Q1 2012Q2 2012Q3 2012Q4


C5. Enhance the branch network

and alternative delivery options

55

Branch Improvement

Market Ranking Studies

Strategic Market Assessment

Peer Market Composition analysis

Site Studies & Branch Applications




4. Control expenses




within customers



C6. Increase number of and

penetration within customers

56

Customer Segmentation Analysis

Product Propensity Analysis

New Product Development

Incremental Cost of Funds Analysis1. Grow deposits & diversify the mix



4. Control expenses




within customers



C7. Utilize capital market tools

57

Mutual Conversions

Capital Raise

ESOP and other stock valuations

Stock Repurchases

Dividend analytics

Intangible Valuation and Impairment

ASC 805 Mark-to-Market

Merger and Acquisition Advisory & Fairness Opinions

Branch Evaluations, Acquisitions, Sales, Consolidations & Swaps

Strategic Alternatives Review

Sell-Side Pre-Due Diligence Review

Buy-Side M&A Pro Forma Enterprise Risk Assessment




4. Control expenses




within customers



In M&A, you need to maintain discipline and be principled . . .

Any buy-side M&A deal must be:

Less than 10% TBVS dilutive (preferably less than 7.00%)

Immediately EPS accretive

Less than 5 year TBVS workback period (preferably 3 years)

To play in buy-side M&A, the Company must be a pro forma “2” rated institution

Always remember that Investment Bankers would sell you anything to get a fee

Do not fall in love with the deal, only execute transactions that fit your strategy and

build value

Must, must, must maintain key business producers

Monitor your position as both a buyer and a seller – Use the FinPro Quarterly Value

Book

58


Raising capital is going to remain a primary strategic thrust for most institutions

for the foreseeable future . . .

59

1. Build a value creation and detractor matrix

2. Understand investor preferences

3. Build shareholder list and analyze it

4. Compile an accredited investor list (local and national)

5. Compile a list of Private Equity players

6. Only raise the amount of capital that can be effectively deployed in 1 to 3 years

7. Think twice before highly dilutive capital raises


Build Value

60




4. Control expenses




within customers



All strategic initiatives must be measured as to value creation . . .

There are three ways to realize value:

Dividend Policy (Both Cash and Stock)

Trading Price Appreciation (Growth in EPS and TBV per share)

Takeout Value (Branching or any other long term strategy)

There is a 30% to 50% premium for takeout over trading values.

61


To build value the Bank needs to focus on TBVS and EPS . . .

62

Quarterly Tangible Book Value per Share ($)

Historical Projections

8.3

2

7.9

4

8.1

2 7.4

9

7.5

4

7.8

7

6.0

2

5.6

7

5.61 5.475.18 5.23 5.12 5.02

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13

High Low Moderate Peer Group 1 Median FinPro Community Bank Con Base Case Con Bulk Asset Sale ConAsset Sale and Capital Raise


Value creation also incorporates market multiples . . .

63

A B C=A+B D E=C+D F G=E+F H I=G+H

Pro Forma Pro Forma Pro Forma Pro Forma

Value Today

Fix Risk

Profile

Fix Risk

Profile

Enhance

Performance

Enhance

Performance

Capital

Raise

Capital

Raise Sale Sale

Tangible Common Equity 23,359$ - 23,359$ 500 23,859$ 5,000 28,859$ - 28,859$

Core Earnings 28.60$ - 29$ 500 529$ 150 679$ - 679$

Common Shares Outstanding 3,927 - 3,927$ - 3,927$ 748 4,674$ - 4,674$

Average Fully Diluted Shares 3,927 - 3,927$ - 3,927$ 748 4,674$ - 4,674$

TBVS 5.95 5.95 6.08 6.17 6.17

EPS 0.01 0.01 0.13 0.15 0.15

Stock Price Based on TBVS

TBVS Multiple 60.00% 85.00% 95.00% 110.00% 130.00%

Stock Price 3.57$ 5.06$ 5.78$ 6.79$ 8.02$

Capital Raise

Proceeds 5,000$

Price Per Share 6.69$

Opp Cost of Cash 3.00%


Together we can measure . . .

Total Investor Return, which is

Trading Appreciation

Plus: Dividend Yield

Equals: Direct Return

Plus: Takeout Value Appreciation

Equals: Total Investor Return

64


D. Final Thoughts

65


All strategic decisions should be compiled and modeled utilizing a decision tree

methodology . . .

Loan

Generation

Capability

Yes

No

Today

Strong Capital

Position

Strategies

- Demonstrate ability to manage risk

- Hire lenders or lending teams

- Evaluate accretion/dilution of cash

dividends or repurchases

- Evaluate acquisition opportunities with

a focus on loan growth capability

Strategies

- Continue growth

- Keep/hire the right team

- Setup buckets to manage

portfolio concentrations

- Consider match funding

strategies

- Consider sales if quota filled

Constrained

Capital Position

Evaluate Other

Strategies

1. Funding Strategies

- Run off wholesale funding

- If possible, lower offering rates

- Eliminate certain CD product offerings

- Run off “hot money” (high rate municipal

deposits for many institutions)

2. Investment Portfolio Management

- Stay in plain vanilla instruments

- Look at corporates selectively (ensure pre-

purchase analysis)

- Evaluate short term ladder strategies

- Keep duration short to intermediate term

3. Deleveraging/Cost Reduction

- Consider branch sales/closings

- Org. chart review and analysis

- Consider eliminating Holding Co.

- Outsource problem asset services

- Manage risk for lower FDIC insurance

4. Consider Sale or Merger

- Evaluate synergies

- Potential “double dip” for shareholders

66


The implementation of certain strategies is dependent on time and risk . . .

67

A. Raise

Capital

B. Remain

Independent

C. Sale Today

Probability: 0%

Probability: 90%

Probability: 10%

Today

A. Raise

Capital

B. Remain

Independent

C. Sale Today

Probability: 30%

Probability: 60%

Probability: 10%

12-18 Months

A. Raise

Capital

B. Remain

Independent

C. Sale Today

Probability: 33%

Probability: 33%

Probability: 33%

36 Months

SAMPLE BANK


Together, we have lots of work to do. I encourage you to have FinPro in to

discuss your specific needs and to integrate all activities that build value . . .

34

YOUR

BANK

Management

Succession

Corporate Governance

FOLA Board Training and File

Cabinet

Secondary Offerings

ERM

Balance Sheet

Management

Strategic Advisory

FinPro Central Hub

De novo Consultation

Mergers and Acquisitions Stock Valuations

Market Feasibility

Regulatory


To meet your ongoing needs, FinPro continues to improve its offerings . . .

2007 – Partnership

2008 – RAMP UP

2009 – Asset Migration

2010 – Single Engine Full Integration

2011 – Enterprise Risk Management

2012 – FinPro Capital Advisors

2013 – FCA: Secondary Offerings

– Expanding internet presence by offering FinPro Central Hub and FinPro Online Applications

Director Training

Board File Cabinet

ERM online

ALM online

Mini models online

Individual management succession

69


We have great speakers today with incredible expertise . . .

Lending Panel – Moderated by Steve Musso

Elizabeth Magennis - Chief Lending Officer and EVP of ConnectOne Bank

John J. Patrick – Chairman, President and CEO of Farmington Bank

William B. Young – Vice Chairman and CEO of Virginia Partners Bank

Regulatory Panel – Moderated by Nick Ketcha

Nancy Graves – Assistant Division Director of New Jersey Department of

Banking and Insurance

Grace Vallacchi – Assistant Deputy Comptroller of the Office of the

Comptroller of the Currency

Gregory Wyka – Assistant Regional Director of the Federal Deposit

Insurance Corporation

70


We have great speakers today with incredible expertise . . .

Case Studies in Value Creation

Scott Polakoff and Matt Miller

Capital Markets Issues Panel – Moderated by Dennis Gibney

Larry Seidman - Director of Union Center National Bank and Stonegate

Bank

Jay Sidhu – Chairman and CEO of Customers Bancorp, Inc. and Customers

Bank

Donald Musso – Chief Bottle Washer and Proctologist

Private Equity Panel – Moderated by Frank Sorrentino IV

Wayne Goldstein – Co-President of Endicott Management Company

Michael High – Managing Principal of Patriot Financial Partners, L.P.

71

Documents

2013 A Year of Transition - FinPro...Thresholds/ Tolerances Horizontal Risk Capital Assessment Asset Quality Liquidity Sensitivity +’s Model Base Case Scenario Manage-ment Earnings