RMA SAN DIEGO CHAPTER

COMMUNITY BANKING IN 2015

JANUARY 14, 2015

THE FINDLEY GROUPGary Steven Findley, Esq.

3808 E. La Palma Ave.Anaheim, California

92807(714)630-7136

INTRODUCTION & THOUGHTSCOMMUNITY BANKING IS CHANGING

Where Are We Now? Regulatory Hot Topics 2015 Predictions Landscape Next Five Years What Does It Take To Be

Exceptional? Local Bank Thoughts

WHERE ARE WE NOW? -2014 / 2015GENERAL COMMENTS

Performance Improving But Still Illusionary For Some - - Core Profitability Questionable

Dodd-Frank and Compliance a Burden - - Burden Index

Loan Growth Improving But Is Still a Challenge For Some - - Where Do You Find?

ALLL Earnings Driver in 2014 - - 2015? Strategic Direction For Some Still a Mystery Bank Number to Reduce Further Question of Viability Remains - - Who Is Last

Bank Standing? Further Separation Between Banks

Continues!

WHAT ARE REGULATORYHOT TOPICS?

Rising Interest Rates Cyber Security Compliance & Operations / BSA &

AML Further Economic Shock Strategic & Succession Planning Credit Losses in Areas of Rapid

Growth CRE Concentration Levels (Repeat?)

Hot Topic Radar

2015 PREDICTIONS

GDP 2% To 2.5% Interest Rates - Flat to 0.25 Enforcement Actions 20% Mergers - 14 Recapitalizations - 7 Branch / Subsidiary Sales - 8 Failures - 0 New Bank - 0 ?

WHAT WILL LANDSCAPE LOOK LIKE IN FIVE YEARS?

Further Reduction In Numbers Focus Remains On Efficiency Ratio and

NII Return Will Improve But Still Marginal

Due to Cost & NIM Compression Market Value Will Continue to Improve Regulatory Burden to Remain Still Capital Focused / But Some

Loosening

PERFORMANCE FOCUS NEXT 3+ YEARS (AFTER TAX) - 2015

ROAA 0.70 to 1.10

ROAE 6.00% to 12.00%

MV/BV 1.00 to 1.40

Numbers Depend Upon Size and Focus!

Merger Prices Will Improve Slightly

No Big Payday For Smaller Banks!

Price Improves With Size

Most Deals Will Be Among Smaller Size Entities –

Building Mass

Regulatory Burden Will Remain

- Impact On ROAA / ROAE

Significant (.30+ ROAA)

- While They Say It Doesn’t Apply

- - Often It Does

CHALLENGES TO BUILDING VALUE OVER NEXT FIVE YEARS

Succession - - Board & Management

Economic Changing Clientele Regulatory Other

WHAT ARE BOARDS TALKING ABOUT

Capital Plan Shareholder Value Human Capital Banking Succession Planning Technology Customer Needs Mergers & Acquisitions

WHAT DOES IT TAKE TO BE EXCEPTIONAL?

Starts With People - -

Aligning to a Common Vision Who

Always Looks to Get Better - -

Don’t Settle!

Investing in Human Capital

Depositors

Borrowers

Regulators

Staff

Management

Other Directors

Shareholder

Community

DIRECTORS

UNDERSTANDING EXPECTATIONS WHAT IS EXPECTED FROM PARTNERS?

LOCAL THOUGHTS

SAN DIEGO / IMPERIAL / SOUTH ORGANGE COUNTIES

9 BANKS

Question & Answer Period

Thank you – Open to comments, thoughts,

suggestions and questions.