Bob Calvert

PROGRAM 11

Effective Use of Community Bank Directors©

A One-Day Workshop

Discuss the organization’s official groups (and how they need to work with each other within the total organization) - Participants will discuss each of the three types of official groups, their mission, their overall responsibilities, and how the CEO coordinates each group, keeps them informed, and keeps them separate without losing the synergistic effect.

a. Holding Company Board
b. Bank Board
c. Advisory Council
Develop Board Member Selection Criteria - In addition to twelve specific criteria the leader has developed for effective directorship, participants will develop other criteria, discuss empowering a limited number of directors as the recruiting team, outline a presentation of qualified candidates to the full board which will include a discussion of the following:

a. Size, mix (inside/outside), minority representation, composition, compatibility, and contribution needed,
b. How the CEO manages the process in the best interest of the bank and its stockholders, and
c. How to seek and obtain regulatory approval of candidates.
Construct a Board of Directors Covenant - The purpose of this Covenant is to clearly define the duties and responsibilities of the board member, and to delineate the demarcation line between governing/directing the bank and managing the bank. Over-zealous regulators have blurred the line between management and board responsibilities.

a. Setting goals and targets with management
b. Monitoring the bank's operations
c. Director training and participation
d. Board succession, retirement, and selection
e. Conflicts of interest, ethics, and a code of conduct
f. Board and Committee meeting guidelines and expectations
g. Reports to the Board
h. Expectations in business development and community involvement
i. Commitments to the bank by each board member
Build a Balanced Working Relationship Between the Board & the CEO

a. How to evaluate senior management's performance,
b. What the CEO does if Board members interfere with
c. What the CEO does if Board members interfere with the day-to-day operations of the bank and intercede on behalf of specific employees,
d. What to do when the Board has or wants to have meetings without the CEO, and
e. Recommended contents of a CEO Employment Contract.
Work Within a Board Committee Structure for Efficiency - Setting up and working through board committees is crucial for an efficient operation of the banks decision-making and control process. Directors must design committee charters, discuss membership make-up, determine authority limits, and how to select and replace committee members. The primary committees covered are:

a. Executive (Includes Nominating, Strategic Planning, and Budgeting)
b. Loan
c. Funds Management
d. Audit, Exam, and Compliance
Manage the Board and Management Process or "M" in the CAMEL -

a. Strategic planning implementation and monitoring (from CEO/coach's Perspective)
b. Policy making (simplified process of writing & updating)
c. Personnel administration (recruiting, training, supervising, etc. key senior officers)
d. Control systems (audits, loan reviews, other compliance areas)
e. Management Information System (focusing on management and board reports)
Select and Use Your Professional Advisors with Care - More CEO's and Boards are using "Outsourcing" or outside consultants; this can be an efficient way to assist management. In addition to the usual attorney(s), CPA, and Management Consultants; banks are using consultants in Data Processing, Insurance, Operational Cost Containment, Investments, Appraisers, and a wide variety of other advisors. This session will covering the following:

a. Researching and Reference Checking Professionals,
b. Writing the Engagement Agreement (Key Ingredients Including Fee Arrangements and Targeted Results),
c. Progress Reports and Responsiveness to Changes, and
d. Results - Long Term and Short Term.
Current Director Liability Issues, Regulatory Relationships, and Bank Ratings Significant law and regulatory changes continue to burden banks. Courts vacillate between being strict and lenient. Regulators have much of their former discretion eliminated. Some bank ratings have little or no meaning; however, the CAMEL rating is an FDIC risk rating with a continued amount of clout! We will also discuss a strategy of "going on the offense" to manage the bank examination process and working with the regulators in a way that will enhance the bank's value and eliminate much of the hassle factor.
Understand Takeovers, Mergers, Branching, and Acquisitions - We are in the midst of a consolidation of financial institutions that will leave three kinds of banks:

a. Mega Banks (those over $5 Billion)
b. Local Community Banks (those under $300 Million)
c. Regional Community Banks (somewhere between the above two)

The fastest growing organization is the Regional Community Bank; it is the best of both worlds - it can know its customers and give personal service while being able to afford certain economies of scale through consolidation of some backroom operations. We will discuss and develop some guidelines as well as a step-by-step procedure when a bank wants to acquire, be acquired, or stay the same. We will also discuss alternatives to "brick & mortar" branching.
Assess the Performance of the Board & Build an Effective Compensation Program - One of the most beneficial tasks a CEO can assist the Board in building is an effective Board self-assessment program.

a. Incentive Plans for Directors
b. Deferred Benefit Plans for Directors
c. Stock Appreciation Rights for Officers and Employees

Calvert Consulting, P.O. Box 8, 2619 Pilgrim Rest Church Road, Alford, FL 32420
(850) 579-2400 Fax (850) 579-2442
bob@bobcalvert.com

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