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Media Mentions – July 24, 2012

With attorneys and staff worldwide, Bryan Cave attorneys are often quoted in the news.  Recent Media Mentions of Financial Institutions Group attorneys include:

Achenbach in American Banker

Ken Achenbach was quoted in a July 2 article in American Banker regarding the decline in FDIC Loss-Sharing Deals for failed-bank buyers as the economy improves. Achenbach said “If the FDIC loss share backstop is there, it certainly mitigates the risks involved in taking the portfolio . . . Given the limited amount of diligence you’re able to do in these deals, and particularly earlier in the economic cycle where there was much more price uncertainty in the real estate markets, people actively wanted that safety net. Over time, however, bidders may be becoming more comfortable with asset pricing and may be assigning less value to the protections of loss-sharing. In addition, the FDIC is now encouraging banks that are comfortable doing so to make non-loss share bids.”

Hightower in Bank Safety & Soundness Advisor

Jonathan Hightower was quoted July 2 by the Bank Safety & Soundness Advisor concerning new Basel III capital rules, and how community bankers might need to prepare for the changes sooner rather than later.  Hightower said the new rules probably won’t change acquisition, development and construction (ADC) lending behavior now, when so few banks are making ADC loans.  But he said it will impact future lending plans.  “Where you’ll really see a difference is when the market  comes back and banks get more comfortable thinking about reentering this market,” he said.  “there are lenders out there who know the business and have done this kind of lending for a long time.  But now, unless those loans meet some focused requirements, they’ll be subject to those higher risk weights.”

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Jim McAlpin and Rob Klingler to Present at PKM’s CFO Peer Group Meeting

On Tuesday, May 22, 2012, Atlanta partners Jim McAlpin and Rob Klingler will be presenting at Porter Keadle Moore’s CFO Peer Group meeting.

Jim will present “Risk Management from a Legal Perspective.”

The regulators are raising the bar for enterprise risk management at community banks. Bank boards and senior management need to be thinking of how to satisfy these requirements within the context of the limited resources that community banks can deploy.  One more area of focus is being added to an already crowded Board agenda.

Rob will present “The Impact of the Jobs Act on Community Banks.”

In a time of ever increasing regulation, Congress has passed the Jobs Act, a significant piece of deregulation of the federal securities laws. Public and private offerings are both impacted, and likely to be permanently changed. Capital is still hard to raise, but at least a few obstacles have been relaxed.

Please click here for more information or to register for the event.

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Building Value in a Changing Environment

A Letter to our Clients and Friends in the Financial Institutions Industry (Spring 2012)

Walt Moeling and Jim McAlpin spoke at the 2012 Acquire or Be Acquired Conference sponsored by Bank Director Magazine. Their topic was “The Path to Recovery – Building Value in a Changing Environment.” In preparation for their presentation at the AOBA conference, Walt and Jim surveyed a group of leading industry observers to obtain their insights. (A printer-friendly version of the Letter to Clients is also available.)

We thought you would be interested in what we heard this year in response to these questions, and the following is an excerpt from Walt’s and Jim’s presentation at the AOBA Conference:

Background

6,800 commercial banks (91% of all U.S. banks) have assets of less than $1 billion. Only 560 banks have assets between $1 billion and $10 billion, and only 106 institutions have assets greater than $10 billion. 2,500 banks (33% of all U.S. banks) have assets less than $100 million.

Both ROE and ROA for banks with less than $10 billion in assets improved in 2011, but still were about 65% to 70% of historical averages.

Economists surveyed by The Wall Street Journal expect U.S. GDP growth of just 2.3% for 2012. [The Wall Street Journal, December 22, 2011.]

2012 Bryan Cave Survey

We surveyed 50 industry thought leaders, including bank consultants and advisers, investment bankers and partners at private equity firms. We asked them to look forward over the next few years and give us their thoughts on factors considered by bankers and boards of directors when conducting strategic planning. We received more than 40 responses from across the country. Many of our respondents have allowed us to share their comments either with attribution or anonymously.

What will be the pace of growth in the U.S. economy and in bank assets over the next 3 years?” 

Survey respondents consistently predicted the pace of growth in the U.S. economy over the next 3 years to be between 2% and 3%.

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Media Mentions – March 23, 2012

With attorneys and staff worldwide, Bryan Cave attorneys are often quoted in the news.  Recent Media Mentions of Financial Institutions Group attorneys include:

Klingler in American Banker

Atlanta Partner Robert Klingler was quoted March 15 in American Banker regarding an agreement reached between the U.S. Treasury Department and Pacific Capital.  UnionBanCal has agreed to buy Pacific Capital for $1.5 billion in cash, with the Treasury getting about $165 million in exchange for its 11 percent stake.  That would be about 90 cents on the dollar of the bailout money the Treasury invested in Pacific Capital through the Troubled Asset Relief Program.  Klingler said the deal is probably a good one for the Treasury.  “The ability to recoup an investment that is stressed at its face value is extremely difficult,” Klingler said.  “If the bank goes into receivership, the Treasury is looking at pennies — and that might be generous.  So the Treasury has shown a willingness to strike a deal that makes it more likely for the company to either find new capital or someone willing to acquire it.”

Moeling in SNL

Atlanta Partner Walt Moeling was quoted March 8 by SNL Financial regarding the fact that the FDIC increasingly has asked those bidding on failed banks to up their offers in order to help stem losses to the deposit insurance fund.  The practice is called “the best and final round” and has been used in 14 failed-bank transactions since July 2011.  The best and final round of bidding is a case of the FDIC acting like a “businessperson,” Moeling said.  “They’re charged with getting the best price.  They’ve done this some all along.  I don’t think it’s truly exceptional but I think they’re very focused on the fact that they have a deposit insurance fund valuation issue here.”  Click here to read the full article.

Blanchard in Safety and Soundness Report

Atlanta Partner Jerry Blanchard was quoted extensively March 5 in The Safety and Soundness Report regarding Pearson v. Delta Credit Union.  Delta Credit Union in Atlanta was hit with a $75.4 million damage award in a lawsuit filed by a Florida developer.  The two sides disagreed over what various terms of the loan documents meant, including whether the promissory note in question constituted a demand note.  Commentators suggested that some of the problems could have been adverted by more artful contract drafting.  Blanchard pointed out that if a note is called a demand note but contains terms and conditions that more closely resemble a term note there is a substantial risk that a court might conclude the parties entered into a term loan rather than a loan payable on demand.

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Georgia Super Lawyers and Rising Stars 2012

Although service to clients will always remain more important than peer reviews, we are proud to announce that partners Walt Moeling, Kathryn Knudson and Jim McAlpin were each selected for inclusion as bank regulatory attorneys in Georgia Super Lawyers 2012. Walt was further honored as one of the Top 100 attorneys in Georgia, while Kathryn was selected as one of the Top 50 female attorneys in Georgia.  In all, attorneys in Bryan Cave’s financial institutions practice constituted half of the bank regulatory attorneys identified as Super Lawyers in Georgia. In addition, partner Rob Klingler was named to the Georgia “Rising Stars” list for 2012.

Super Lawyers lists the top 5 percent of attorneys in a state or region who have attained a high level of recognition and professional achievement. Honorees are identified through peer surveys, independent research and a blue-ribbon panel review.   “Rising Stars” are chosen by their peers as being among the top up-and-coming lawyers (40 years old or younger, or in practice 10 years or less). Only 2.5 percent of the lawyers in the state were selected.

In total, 28 Bryan Cave lawyers in the Atlanta office were named Georgia Super Lawyers and an additional 11 were named “Rising Stars.”  A complete list of Bryan Cave’s Super Lawyers and Rising Stars is available here.

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McAlpin and Moeling Present at Acquire or Be Acquired

On January 29, 2011, Bryan Cave partners Jim McAlpin and Walt Moeling presented at the 2012 Bank Director Acquire or Be Acquired conference in Phoenix, Arizona.  Their presentation was titled, “The Path to Recovery – Building Value in a Changing Environment.”

The presentation includes an overview of the results of the 2012 Bryan Cave Survey of investment bankers and bank consultants to assist in providing strategic advice to clients.  A sampling of results include:

  • “In my opinion, the calendar just needs to turn another 3 to 6 more months and more signs of credit stabilization just need to naturally occur. We think folks will be pleasantly surprised to see the natural “mating process” happen on its own in 2012. [This will] start really slow but moderately gain momentum as 2013 unfolds, and by 2014 it will be a great deal different.” – Chris Marinac, FIG Partners
  • “Failed bank opportunities need to disappear (still two more years of this in the Southeast); more healthy buyers need to appear; private equity will become much more involved; buyers prices need to improve; Banks with TARP will likely have to sell as capital markets will not open up in time.” – Bill Wagner, Raymond James
  • “Dominate its ‘micro’ market as it relates to deposits and their lending competency and try to achieve critical mass (~$750m).” – Jeff Brand, KBW
  • “Sometimes the blocking and tackling basics are a competitive advantage – provide the services desired on par with the big banks with care and concern.” – Phil Moore, Porter Keadle Moore

A copy of their PowerPoint presentation is now available online.

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Media Mentions – December 19, 2011

With offices all over the world, Bryan Cave attorneys are often quoted in the news.  Recent Media Mentions of Financial Institutions Group attorneys include:

Hightower on BankDirector.com

Atlanta Associate Jonathan Hightower authored an article Nov. 18 for BankDirector.com concerning the pitfalls for banks negotiating lease renewals with insiders. “During the mid-2000s, it was commonplace for a bank, particularly a de novo bank, to lease some or all of their bank facilities from an entity controlled by the bank’s directors,” he wrote. “Most bank directors understand their duty to act in the best interests of the bank, but they are also facing personal financial exposure if the lease is not renewed on terms that allow the [director-owned] entity to continue to service its debt obligations. In addition, given public scrutiny of directors and officers who are perceived to have profited at the expense of the bank they serve, creating a proper process to manage these situations has never been more important.”  Click here to read the full article.

McAlpin on BankDirector.com

Atlanta Partner Jim McAlpin authored the second article in a series on “best practices” for bank directors Dec. 2 for BankDirector.com.  “A bank board is like any other working group in that the direction and decisions of a board can be heavily influenced by members who dominate the conversation, or by members who actively discourage discussion or dissent,” wrote McAlpin, who offers tips to help all board members achieve meaningful participation.  Click here to read the full article.

Moeling in Bank Director

Atlanta Partner Walt Moeling was quoted in the fourth quarter 2011 issue of Bank Director on challenges facing new directors now and in the near future. “Business plans become much more realistic when they start out with the big picture rather than “do we really want a Wal-Mart greeter in the lobby?”  Moeling said.  “Are we going to build for five years and sell? Are we going to acquire? Are we going to stay local or expand?”

 

 

 

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Media Mentions – December 2, 2011

With offices all over the world, Bryan Cave attorneys are often quoted in the news.  Recent Media Mentions of Financial Institutions Group attorneys include:

McAlpin on BankDirector.com

Atlanta Partner Jim McAlpin authored the first in a series of articles concerning best practices of bank boards Oct. 25 for BankDirector.com. McAlpin said “there has never been a greater need for well-functioning, informed and courageous boards of directors of banks and bank holding companies. There has also never been a more important time for board members to keep in mind that their responsibilities can be boiled down into one simple goal: the creation of sustainable long-term value for shareholders.” This also was the lead article in the BankDirector November e-mail newsletter.  Click here to read the full text.  The second installment in the series will be published by BankDirector in early December.

Moeling in American Banker, Atlanta Journal-Constitution

Atlanta Partner Walt Moeling was quoted at length Nov. 17 by American Banker regarding the new perception businesspeople have toward serving on a bank board. “Most of them joined because it is one of the great clubs in an area and there is an opportunity to help people in your community. But after four years of foreclosing on your neighbors, watching your friends lose their jobs and seeing your investment lose its value, you’re done,” said Moeling, adding that banks still can find local people to serve, but those directors will have to be prepared to roll up their sleeves a lot. “The compliance burden is huge. Regulators are going to expect directors to be on top of things. The meetings will be longer and more detailed. It will be a lot more demanding than it ever was in the past and it is not going to be as much fun.” He also was quoted Nov. 7 in The Atlanta Journal-Constitution concerning the reasons for the failure of Decatur First Bank in Decatur, Ga. The bank’s quest for growth (it opened subsidiary banks in the mid-2000s in the once-booming Lake Oconee area, about 80 miles east of Atlanta) provided a windfall for a few years until the housing market crashed.

ReVeal on BankDirector.com

DC Counsel John ReVeal was interviewed for two videos now being used on the BankDirector.com Web site. One video focuses on the Bank Secrecy Act (BSA) and how violations are perceived today by regulators. The other, which outlines what a bank board should know about BSA, has become the group’s official training piece concerning BSA and is located in a password-protected section.  Click here to view ReVeal’s video on BSA and regulators.

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Can You Improve Your D&O Insurance Coverage?

There is a common presumption among community banks, and their directors, that D&O insurance coverage is a commodity.  That presumption is inaccurate; there can be significant differences in the scope and quality of D&O coverage between policies and among carriers.  D&O insurance policies can, and should, be negotiated to improve the coverage for directors and officers.

On March 24, 2011, the ABA’s Banking Journal published an article by Bryan Cave attorney Jim McAlpin, “How good is your bank’s D&O policy?

In the article, Jim highlights ten possible enhancements that you may be able to obtain in your D&O coverage, including:

  • limiting the definition of “Application” in the policy to public filings for the past 12 months;
  • expanding the definition of “Claim” in the policy;
  • obtaining non-rescindable Side A coverage;
  • limiting insured vs. insured carve-backs for derivative suits and bankruptcy;
  • carving back defense costs from regulatory exclusions; and
  • including coverage for punitive damages.

Read the complete article on the ABA’s website for all ten possible enhancements, as well as additional information regarding potential improvements to your bank’s D&O insurance coverage.

If you’d like to discuss further, please consider reaching out to Jim McAlpin or any other member of Bryan Cave’s Financial Institutions practice.

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The Path to Full Profitability by 2013

A Letter to our Clients and Friends in the Financial Institutions Industry

Walt Moeling and Jim McAlpin spoke at the recent Acquire or Be Acquired Conference sponsored by Bank Director Magazine. Their topic was “The Path to Full Profitability by 2013.” In advance of their talk at the conference, Walt and Jim sought input from a group of industry observers on what they foresee as likely developments over the next few years. (A printer-friendly version of the Letter to Clients is also available.)

We thought you would be interested in what we heard in response to these questions, and the following is an excerpt from Walt and Jim’s presentation at the AOBA Conference:

Background

  • There are more than 6500 commercial banks in the U.S. Only 500 of these banks have assets of more than $1 billion, and only 110 have assets of more than $10 billion. In other words, over 90% of U.S. banks have assets of less than $1 billion. Also of significance to this discussion, one third of U.S. banks have less than $100 million in assets.
  • In connection with this presentation we sent a survey to a number of our contacts at investment banking firms and also to a group of bank consultants. We asked them to look forward over the next few years and project what the landscape will look like in community banking. We received responses from over 30 industry observers from across the country, and our respondents have allowed us to share their comments either with attribution or anonymously.

“What will the ideal community bank look like by year end 2013?”

  • Adam Aspes of Sterne Agee provided an answer that sums up most of what we heard in response to this question: “The ideal community bank will either: (i) have a dominant market share in a rural slow growth market, or (ii) if located in an urban market, have enough scale and product offering to compete for deposits with the larger banks.”
  • Jennifer Demba of SunTrust Robinson Humphrey responded: “Investors will value concentrated market share community banks, not fragmented networks.”
  • One community bank consultant wrote in response “$1 billion in asset size will not be a large bank by 2013.” We consistently heard in response to this question that, in all but rural markets, a minimum necessary asset size will be $500 million.
  • Chris Marinac of FIG Partners wrote: “While not universally applicable, in general we think the regulatory costs of operating a bank have increased such that it is difficult to produce adequate long-term returns for a bank below $500 million in assets. There are exceptions, and some private bank investors find a single-digit Return on Equity to be acceptable. However, we think the demands for 11% to 14% ROEs create a $ billion+ size threshold for surviving banks.
  • Another investment banker told us that his firm has modeled the impact of increased compliance costs on smaller community banks: “If you assume an increase of [direct and indirect] compliance costs of $100,000, and then factor in growth of only 5% to 8% per year, it is hard for a smaller bank to get to 1% ROA, much less double digit ROE.”
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