FisherBroyles A LIMITED LIABILITY PARTNERSHIP

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Caroline Clarissa Horton
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1 Financial Institutions Update Happy 2015 (how is that possible) and welcome to the latest, LLP, Financial Institutions Update. In preparing this update for you, which is forward focused, we also looked back, to the summer of At that time, I asked many of you: Has your institution experienced the recovery that has been so widely reported in the media? While some of our clients have reported turning the corner, with sustained revenue and the lifting of their regulatory orders, many others continue to struggle through legacy credit concerns and flat loan demand. Revenue generation continues to be difficult. At [a summer 2011 conference], we heard many of the leading financial institutions in the Southeast tell different stories of generating revenue through their loss- share arrangements, through their trust departments, and through their correspondent banking services. However, no one spoke of generating revenue through good, old- fashioned banking: taking deposits and making loans. Our clients have seen some signs of light, with current strategic transactions including mergers, branch acquisitions, and new loan programs. FINANCIAL INSTITUTIONS UPDATE Page 1 February 2015 info@fisherbroyles.com Contributors: Jim Wheeler Direct: (404) jwheeler@fisherbroyles.com Marty Robins Direct: (847) mrobins@fisherbroyles.com Rob Hoskyn Direct: (770) rhoskyn@fisherbroyles.com How is your bank, or the banks with whom you come in contact, doing in 2015? While most of us believe that times are better than they were during the summer of 2011, some things have not changed much. Loan demand remains flat. Regulatory obligations continue to tax limited resources. Revenue generation remains challenging. Many institutions are looking at strategic transactions as the most viable option. What are you doing today to make 2015 better? To make 2016 better? Two proactive tips before we get into our content for this issue: Business Plan. Dust off your business plan. Don t just change the dates to move ahead one year and scale back your projections that may have come up short last year. Think through it. Start from scratch if necessary. What is working and what isn t? Where do you want to be this time next year, or the next? Does your business plan provide you a useful map for getting there? If not, it s time to create a useful map to help you achieve what you need and want.

Page 2 Training. Are your people your most valuable resource? Plan out the necessary training that you and your staff need for 2015.

2 Page 2 Training. Are your people your most valuable resource? Plan out the necessary training that you and your staff need for Do you need training on improving information storage and protection from data breaches? Technical legal rules? Process improvement? Whatever you and your staff require for training, your time spent on training, if planned properly, inevitably pays off. About This Issue This month, our featured content focuses on diversifying revenue through leasing, together with the outlook for For more information about our firm and our attorneys, please visit us at Investment Banking Outlook Two of the leaders in the financial institutions investment banking space in the Southeast were gracious enough to share their outlooks for Bill Herrell of the Burke Group For larger and regionals banks: Hope to keep stock prices in the current range as they struggle with the earnings impact of a flattening yield curve and lethargic loan demand. Likely see further acquisitions to fuel growth as long as buyers valuations remain in their current territory. For community banks: Continue to struggle generally with limited loan demand and competition from larger rivals leading to diminished loan yields and tough earnings outlook. Regulatory environment and increased costs are not helping. For those still struggling with asset quality, they may also be facing payment defaults on holding company leverage. Expect more consolidations and bankruptcy filings at the holding company level. Bill tells us that in the last year, The Burke Group has helped smaller healthy institutions exit at nice multiples and several distressed institutions shrink through branch divestitures as well as helping them renegotiate holding company obligations. For more information, you can contact Bill at: Bill Herrell The Burke Group 3715 Northside Parkway Building 400, Suite 475 Atlanta, Georgia main mobile fax info@burkegrp.com bherrell@burkegrp.com

3 Page 3 Ward Rice of Hovde Group We expect consolidation to continue at a good pace in 2015, particularly among banks between $500 million and $5 billion in assets. If stock prices hold up, we will see a continued increase in pricing, which we have already seen over the past 3 years. Larger deals (i.e., greater than $500 million in deal value) are back and will continue. Conversely, the smallest community banks could struggle to find buyers. This could result in more merger- of- equals activity among smaller community banks. On the capital front, there is still a lot of capital ready to be put to work in the community bank space. The focus is less on stabilizing balance sheets and more on growth opportunities, both organically and through M&A. As stock prices continue to rise, we expect to see an uptick in the number of IPOs, as banks and management try to take advantage of the increased optimism in the markets. Additionally, we expect the number of private placements to increase, as these banks will use that additional capital to bolster organic growth and/or inorganic growth, through M&A, in the hopes of an eventual sale or IPO at a higher price compared to what they could achieve today. Ward says that Hovde Group has been assisting community banks in their strategic initiatives for over 25 years and is the #1 representative of selling banks over the past decade. Hovde has recently assisted its clients with mergers, private placements, IPOs and follow on offerings, and has added equity research coverage to twenty- nine community banks. For more information you can contact Ward at: Ward Rice Director Hovde Group One Glenlake Parkway, Suite 700 Atlanta, Ga Office: Mobile: wrice@hovdegroup.com Enhance Revenue with Leasing One of our financial institutions partners in our Chicago office, Marty Robins, has extensive industry experience assisting our clients with leasing initiatives, and provides the following information about how to enhance and diversify your revenue. As our financial institutions clients look to enhance and diversify revenue, many have sought to explore establishing equipment leasing subsidiaries. Among other benefits, institutions may be able to charge origination fees on new leases that exceed traditional commitment fees, and typically realize implicit interest income built into the rent on each lease. Such income is often higher than would be paid by the lessee if they were borrowing the same amount for the same duration under a traditional credit facility. Depending on the nature of the equipment and prevailing market conditions, it is also possible for a lessor to realize a gain (or loss) on disposition of equipment at lease expiration.

Page 4 It is often possible for a leasing subsidiary to utilize different underwriting standards and covenants than its institutional owner, thereby allowing better client service which can drive

Leases may be written on virtually any type of equipment from computers to medical equipment to phones to trucks to retail point of sale items.

4 Page 4 It is often possible for a leasing subsidiary to utilize different underwriting standards and covenants than its institutional owner, thereby allowing better client service which can drive additional traditional lending and wealth management business from a satisfied customer. Leases may be written on virtually any type of equipment from computers to medical equipment to phones to trucks to retail point of sale items. They may be written for any duration, although it is rare to see leases for less than 18 months. Fundamentally, they be written as either operating leases where, in general, the present value of the fixed term rent is less than 90% of the equipment cost or financing leases where nearly the entire equipment cost is recouped from fixed term rental payments and the lessee is able to purchase the item for $1 at lease expiration. While proposals for change are pending in the accounting field, lessees often strongly desire operating leases which allow them to avoid carrying the equipment and corresponding liability on their balance sheets. As with any credit decision involving collateral, when the lessor writes an operating lease, it must be sure to conduct adequate due diligence on the equipment and its market, such that it has a reasonable expectation of recouping from the original lessee or someone else in a sale or new lease, the residual value which was not covered by the rent. The financial institution must also have the ability to properly supervise the leasing operation to meet regulatory safety and soundness requirements. Institutions interested in pursuing leasing opportunities should seek legal counsel at an early stage to discuss regulatory, documentation, and structuring considerations, to ensure approval and enforceability. For more information contact Marty at: Marty Robins, LLP (847) mrobins@fisherbroyles.com Spotlight on Litigation Our litigation partners across many of our offices have assisted our financial institutions clients with all manner of litigation matters. At, our litigation team has assisted our financial institution clients with extensive representation in foreclosures, suits on notes, loan restructurings, and have secured seven figure summary judgment victories in actions to enforce bank notes and other loan documents and in defending various lender liability claims across the country. For more information, contact Rob Hoskyn at: Rob Hoskyn Fisher Broyles, LLP (770) rhoskyn@fisherbroyles.com

Page 5 Services We continue to offer our very successful program of ongoing training sessions, including social media policies, Regulation FD training, Board of Director training, lending pitfalls,

5 Page 5 Services We continue to offer our very successful program of ongoing training sessions, including social media policies, Regulation FD training, Board of Director training, lending pitfalls, creditors rights strategies, data security, employment issues, and more. Of course, there s never any cost to you for having us come and present to you and your staff. Please call me to arrange one for your institution. We also continue to offer our Legal Review Project, allowing us to highlight solutions to improve your operations and strategic business plan. We focus the review on your existing documents and policies, such as your underlying governing documents, your policies and procedures, your board and shareholder structure, your loan documents, your compliance programs, your employment practices, your board meeting agenda, your strategic business plan, your committee charters and policies, and virtually any other area you would like us to target, and provide you with a proposed action item list. We would welcome the opportunity to learn more about you, your financial institution, and the issues it faces. Please contact me if I, or any of our partners, can ever be of service to you. Jim Wheeler Fisher Broyles, LLP jwheeler@fisherbroyles.com (404) The Fisher Broyles Financial Institutions Team Please visit us at services- lending for biographies and information about our financial institutions attorneys. Founded in 2002,, LLP is a full- service, cloud- based national law firm with attorneys across the country. Conceived as the Next Generation Law Firm, eliminates unnecessary overhead that does not add value to clients and instead offers a more cost- effective solution to clients across all industries. Visit our website at to learn more about our firm s unique approach and how we can best meet your needs. This newsletter has been prepared for the general information of clients and friends of. It is not intended to provide legal advice for a specific situation or create an attorney- client relationship. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered advertising material. The choice of a lawyer is an important decision and should not be based solely upon advertisements.

For many years we were happy to spend too freely, borrow too much and

For many years we were happy to spend too freely, borrow too much and hand our money over to someone else to manage, hoping to ride a market that always went up. Well, times have changed and today building