PART 1: SITUATION ASSESSMENT
Checklist Item Required/Optional √ Comments
I. Overview: Strengths, Weaknesses, Opportunities and Threats
Summary of the situation assessment of the Bank O
Identify staffing issues and production responsibilities O
Overview of Bank’s specific strengths R
Overview of Bank’s specific weaknesses R
Overview of Bank’s specific opportunities R
Overview of Bank’s specific threats R
II. Internal Environment
Summary of historical chronology. O
Overview of safety and soundness ratings from examinations along with review to ensure all issues
identified by the regulators have been acted upon. R
Overview of compliance and CRA ratings from regulators. R
Listing of Directors with their experience, term and committee memberships. R
Listing of officers with their job function and tenure with Bank. R
Trend of FTE’s. O
Summary of organization structure and responsibilities O
Summary of major lines of business with product descriptions. R
Overview of current marketing programs. O
Summary of Bank facilities. R
Overview of Bank systems. R
Definition of Bank trade area. R
Summary of Bank’s current balance sheet and income statement. R
Summary of Bank’s loan, investment, deposit and borrowing portfolios. R
Identification and summary of all material pending legal proceedings. R
Identification of capital structure (public, MHC, MHC no stock, mutual). R
Delineation of legal hierarchy chart. R
Delineation of primary and secondary regulators for both Holding Company (if applicable) and
Bank. R
List of parent company and all subsidiaries. R
Identification of all affiliations with their purpose. R
III. External Environment
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PART 1: SITUATION ASSESSMENT
Checklist Item Required/Optional √ Comments
Listing of current regulatory issues with their potential impact on the Bank. R
Summary of current interest rate environment and forward looking projections. R
Summary of current economic market. O
IV. Asset Liability Position Analysis
Review of capital levels for adequacy and compliance. R
Analysis of spread and margin. R
Review and analysis of GAP position. R
Review and analysis of NPV or EVA position and trends. R
Discussion of asset/liability mix. O
Delineation of strategies to address interest rate risk. R
V. Community Reinvestment Analysis
Definition and characteristics of assessment area. R
Review of CRA performance including evaluation of loans to deposits ratio, HMDA and small
business lending trends. R
VI. Bank Secrecy Act Analysis
Delineation of BSA Officer and responsibilities R
Description of Bank systems utilized to support BSA R
Discussion of the Bank's SAR reporting capabilities R
Identification of the Bank's ongoing BSA training R
Discussion of the Bank's risk assessment strategies R
VII. Franchise and Market Analysis
Definition of targeted market(s). R
Delineation of market demographics in the defined market areas R
Summary of competitive trends at State, County and/or local market levels. R
Identification and analysis of deposit competition in market. R
Identification and analysis of loan competition in market (may need to break down by loan type). R
Identification and analysis of other lines of business competition in market. R
Delineation of customer segments in the defined market areas O
Delineation of product propensities in the defined market areas O
Delineation of business segments in the defined market areas O
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Page 2
PART 1: SITUATION ASSESSMENT
Checklist Item Required/Optional √ Comments
Conduct a branch tour of each market and detail the branch's competitive positioning in terms of:
accessibility, visibility, location, facility, ATM, drive-up lanes, parking, night and depository
capability. O
Analysis of the hours, rates and products offered at each branch compared to the competition O
Conduct branch profitability analysis to determine underperforming and unprofitable branches O
VIII. Customer Analysis
Identification of market retail and commercial customers. R
Geo coding of Bank Customers and/or accounts. O
Segmentation of Bank retail and commercial customers O
Delineation of products and product relationships per household O
Delineation of retail customer segment penetration in the defined market areas O
Delineation of commercial segment penetration in the defined market areas O
Delineation of product penetration in the defined market areas O
IX. Quarterly Performance Analysis
Description of screens utilized in peer/comparable selection process. O
Comparison of peers/comparables to Bank on key financial and operating criteria. O
Analysis of financial trends. R
Summary of key positive and negative trends. R
Identification and normalization of any one time events that may distort historical performance. R
X. Quarterly Capital Markets Analysis
Overview of capital market trends that may impact the Bank R
Comparison of Bank to benchmark groups (comparison should be done based on nation, region, size,
and industry type) R
Discussion of trading P/E and P/TB multiples as well as acquisition P/E and P/TB multiples R
Discussion of stock price performance O
Analysis of the Bank's total return based upon market multiples: stock price appreciation plus
dividends plus acquisition premium. O
XI. Historical Building Value
Analysis of the Bank's historical ability to grow deposits and diversify the mix O
Analysis of the Bank's historical ability to grow loans and diversify the mix O
Analysis of the Bank's historical ability to grow and diversify noninterest income O
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Page 3
PART 1: SITUATION ASSESSMENT
Checklist Item Required/Optional √ Comments
Analysis of the Bank's historical ability to control expenses O
Analysis of the Bank's historical ability to enhance the branch network and alternative delivery
options O
Analysis of the Bank's historical ability to increase the number of, and penetration within, customers
O
Analysis of the Bank's historical ability to utilize capital markets tools (if applicable) O
20 Church Street Liberty Corner, NJ 07938 P: (908) 604-9336 F: (908) 604-5951 finpro@finpronj.com www.finpronj.com
Page 4
PART 2: STRATEGIC PLAN
Checklist Item Required/Optional √ Comments
I. Executive Summary
Description of planning process utilized. R
Summary of current mission statement. R
Summary of major thrusts. R
Identification of planning objectives. R
Identification of quantifiable goals to measure performance against objectives. R
Identification of strategies to achieve objectives. R
Definition of tactics to implement strategies. O
Assignment of timelines and responsibilities to strategies and/or tactics. O
Overview of any proposed transactions (charter, change of control, merger, etc.). R
Use of proceeds section for capital raises R
Summary balance sheet and income statements from all scenarios created (scenarios should be
created for different rate environments and shocked based upon volume assumptions) O
Description of risks inherent in the plan and how the strategies and implementation mitigate them R
II. Value Creation
Discussion about the value created by the business plan R
Growth in earnings per share, tangible book value per share, and dividends per share O
Analysis of the projected trading and acquisition prices over the next 1, 3, and 5 years O
Analysis of these factors to determine the internal rate of return for the Bank over the next 1, 3, and
5 years O
III. Deposits
Description of all assumptions about deposit growth O
Delineation of all strategies and tactics for deposit growth O
Analysis of overall deposit growth in dollars and percent O
Analysis of overall mix shift of deposits O
Analysis of deposit growth by cost center and strategy (This gives the Bank specific goals for each
manager and a timeline in which to achieve these goals) O
III. Loans
Description of all assumptions about loan growth R
Delineation of all strategies and tactics for loan growth O
Analysis of overall loan growth in dollars and percent O
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PART 2: STRATEGIC PLAN
Checklist Item Required/Optional √ Comments
Analysis of overall mix shift of loans and concentrations O
Analysis of loan growth by cost center and strategy. This gives the Bank specific goals for each
manager and a timeline in which to achieve these goals O
IV. Non interest income
Description of all noninterest income assumptions R
Analysis of overall noninterest income growth in dollars, percent, and percent of average assets O
Delineation of all strategies and tactics for noninterest income growth O
V. Non interest Expense
Description of all noninterest expense assumptions R
Analysis of overall noninterest expense growth in dollars, percent, and percent of average assets O
Delineation of all strategies and tactics for noninterest expense growth O
VI. Franchise and Markets
Description of all franchise and market assumptions R
Delineate all new alternative delivery options R
Revised organizational chart to delineate major changes to the management structure O
Decsription of any branch openings and closures O
Discussion of the market ranking document and process (appendix c) O
VII. Customer
Delineate detailed target customer segment(s) (business and retail) R
Delineate the products and services desired by this customer segment(s) O
Identify potential growth from this segment(s) O
Create specific product bundles and/or marketing approach to attract the segment(s) O
VIII. Capital Markets
Decription of all capital markets assumptions R
A. Modeling Output and Assumptions
Determine if starting numbers are SEC or Regulatory. O
Map starting point (i.e. GL, regulatory report) to financial model for audit trail purposes. O
Compile projections at a sufficient level of detail. R
Define and support all major assumptions. R
Ensure that estimates of operating results are reasonable. R
Make certain that planning assumptions are realistic given the local and financial markets. R
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PART 2: STRATEGIC PLAN
Checklist Item Required/Optional √ Comments
Utilize cash flows for each individual major product type (loans is too broad, mortgages is too
broad, 1 year COFI ARMs is probably the right level) R
Utilize known financial data such as CD maturities, investment maturities, puts, and calls. R
Tie adjustable rate products to appropriate indices with spreads R
Plan operating expenses down to a sufficient level (postage, advertising, etc.) and tied to volume
assumptions where appropriate O
Plan at a cost center, customer segment level, staff level and/or strategy level O
Compile pro formas for 1, 3 and 5 years including balance sheet, income statement and key ratios.
R
Compile these projections on a monthly basis for year 1 (budget), on a quarterly basis in years 2
and 3 (business plan), and a yearly basis thereafter (strategic plan) R
Run multiple planning scenarios based upon changes to the rate environment and volume shocks
R
B. Cost Center and Strategic Alternative Summary
Detailed balance sheet and income statement of all cost centers and strategic alternatives O
Utilized by management to track each strategy/cost center's performance and hold individuals
responsible O
Determines break-even and profitability point for each new strategy O
C. Market Ranking Analysis
Conduct a market ranking analysis to determine future branch locations O
Identify desired area for possible branch locations (within a 20 mile radius, a county, etc…) O
Create the desired characteristics for demographics, products, segments, businesses, and
competition. O
Rank the importance of each characteristic O
Run the ranking to determine the top quartile markets based upon desired characteristics O
Plot the results on a map and look for geographic clusters and opportunities O
Tour the markets and find site locations O
Involvement and Review
Involvement of management and board in the planning process. R
Attendance of dedicated planning sessions (off-site, special board meetings, etc.). R
Compile and review periodic variance analysis. R
20 Church Street Liberty Corner, NJ 07938 P: (908) 604-9336 F: (908) 604-5951 finpro@finpronj.com www.finpronj.com
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PART 2: STRATEGIC PLAN
Checklist Item Required/Optional √ Comments
Utilize dashboard reports to track and evaluate performance O
Compare existing plan and current situation to previous plan. R
20 Church Street Liberty Corner, NJ 07938 P: (908) 604-9336 F: (908) 604-5951 finpro@finpronj.com www.finpronj.com
Page 8
PART 1: SITUATION ASSESSMENT
Questionnaire
I. Overview: Strengths, Weaknesses, Opportunities and Threats
Are the strengths and weaknesses clearly defined?
Are they formulated through consensus or by accumulation?
Were they discussed in detail by all participants?
Were all weaknesses mitigated or addressed in the plan?
Were the strengths capitalized upon?
How did the Bank overcome the stated constraints? How did it take advantage of the opportunities?
II. Internal Environment
Does the Bank have a holding company?
Who is the regulator?
What powers is the organization utilizing?
Are there any affiliated transactions between legal entities?
What is the Banks regulatory ratings for safety and soundness, CRA, and Compliance?
Does the Bank have any experience with change?
Does the Board have any young new members? If not, what is the plan for succession?
Does the Board generate business for the Bank?
Does the Board set policy? Are they involved in day to day decisions?
Do the officers delegate well or is it a dictatorial environment?
Is the organization chart set up by function, L.O.B., or relationship?
Is the Bank’s trade area representative of where its loans and deposits are coming from? Is the area different for loans and
deposits?
Are the Bank’s earnings dependent on margin or is it diversified with non interest income? Is the expense ratio high or low? Does
the Bank spend money to make money or cut costs to save a dollar? Are there any non recurring items in the income statement?
How is the Bank’s provision for ALLL?
What legal issues are outstanding? Are any deemed material?
What is the source of data for the regulatory issues? Was the impact on the Bank of each regulatory issue clearly delineated?
III. External Environment
Does the rate forecast include treasuries, LIBOR, conventional mortgage, commercial paper and other rate indices? Are all rate
indices used by the Bank in its products shown in the rate environment and rate forecast? Does the Bank have multiple rate
forecasts? Are they from a reputable source? Were differing points of view presented?
IV. Asset Liability Position Analysis
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PART 1: SITUATION ASSESSMENT
Questionnaire
Does the Bank rely on regulatory reports (OTS IRR Report) or does it have its own internal IRR analysis?
Does the Bank analyze capital levels, spread and margin, GAP, NPA or EVA as well as the overall balance sheet mix?
Are there any immediate transactions contemplated? If so are the expected results projected in detail?
Does the Bank have IRR risk? Funding risk? Option risk? Concentration risk? Basis risk? Other risk?
What is the impact of the plan on the ALM position over time?
Does the historical trend support the IRR position that the Bank projects?
V. Community Reinvestment Analysis
Is the CRA delineated area clearly defined? Does it make sense based upon the actual loan originations of the Bank? Is there any
areas excluded that should be included?
Does the plan have any strategies specifically targeted toward CRA? Are they necessary? Will the strategies be based upon
internal originations or external purchases?
VI. Bank Secrecy Act Analysis
Has the Bank adaquately addressed BSA from a training, systems, staff, policy and procedure standpoint?
VII. Franchise and Market Analysis
Is the targeted market built on this data or on data representing desired customers?
Is the demographic data from the census only or is it based upon yearly research? What is the data used for? Is a summary finding
section provided?
Does the Bank utilize product propensity data? What products does it suggest will sell in the Banks primary market? Is the Banks
product offering consistent with this finding?
What source of data does the Bank use to analyze its competition? Besides secondary data, did it utilize primary data such as
annual reports, hours, rates, etc...?
Is the competition clearly defined by product type? Is it more than just other Banks and thrifts? What criteria are used to define a
competitor?
Is there any analytical support to justify the Banks relative position competitively?
Does the Bank have the appropriate alternative delivery methods for its customer base?
VIII. Customer Analysis
Does the Bank compile householding data? How is this information obtained?
Does the Bank geo code its accounts or households?
Does the Bank utilize retail customer segmentation? Has it segmentized its own customers? Is it targeting any specific segments?
Does the Bank utilize business customer segmentation? Has it segmentized its own businesses? Is it targeting any specific
segments?
20 Church Street Liberty Corner, NJ 07938 P: (908) 604-9336 F: (908) 604-5951 finpro@finpronj.com www.finpronj.com
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PART 1: SITUATION ASSESSMENT
Questionnaire
Does the Bank know its market share for its various products?
IX. Quarterly Performance Analysis
How do the ratios stack up to peers and to the market?
Is the trend analysis done on a five year basis or on a quarterly basis? What is the basis for the term used?
Was there any significant transactions in the trend history which need to be clearly footnoted? Were the trends adjusted for these?
How was the peer group selected? What is the relevance of the peer group?
Is the peer group consistent with the Bank’s strategy going forward (ie., commercial banks included for a thrift looking to become
more bank like)?
What conclusions were drawn from the analysis? Was the plan designed to eliminate major deficiencies.
X. Quarterly Capital Markets Analysis
Has the Bank identified the major shareholders?
Does it communicate with them regularly?
What was the stock performance in comparison to comparable peer groups, indicies, etc.?
Does the bank perform regular analytics regarding stock repurchase and/or dividend benefits, costs, limitations, etc?
XI. Historical Building Value
Has the Bank been able to grow deposits and diversify the mix?
Has the Bank been able to grow loans and diversify the mix?
Has the Bank been able to grow and diversify noninterest income?
Has the Bank been able to control expenses while growing the organization?
Has the Bank enhanced its branch network and delivery options?
Has the Bank increased its customer base and increase the penetration within those customers?
Has the Bank utilized the capital markets tools available to them?
20 Church Street Liberty Corner, NJ 07938 P: (908) 604-9336 F: (908) 604-5951 finpro@finpronj.com www.finpronj.com
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PART 2: STRATEGIC PLAN
Questionnaire
I. Executive Summary
Are the thrusts realistic? Does the Bank have the capital and human resources to accomplish the thrusts?
Was the planning process comprehensive?
Are there outstanding regulatory issues unresolved?
Do the Board and Management have the expertise to execute the plan? If not, does the plan adequately provide for the obtainment of
the expertise?
Are the objectives, goals and strategies compiled in an hierarchal fashion?
Are all major areas of the Bank covered?
Are the goals quantifiable and measureable? Are they realistic? Achievable? Does each objective have at least one corresponding
goal? Do the goals make sense in light of the overall plan?
Are all strategies spelled out to a corresponding objective? Has each strategy been assigned to a Bank employee? Were timelines and
deadlines established? Were all dependencies delineated clearly?
Do the results move the Bank in the direction of the delineated thrusts?
Was there active involvement by both the board of directors and management in the planning process?
Was there adequate attendance at the strategic planning sessions?
Does every member of the board and management bring an adequate contribution to the organization?
Is the plan monitored on at least a quarterly basis?
Is it meeting the defined goals?
Are strategies reprioritized based upon actual results?
Does management provide reporting on adjustments to the plan for failure to meet specific objectives?
Have there been any random course corrections?
Is the Bank utilizing a dashboard to show variances to plan? What is the Bank utilizing for variance reporting?
II. Value Creation
Is the Bank building shareholder value?
Is EPS growing?
Is TBVS growing?
Are core earnings growing?
Are cash earnings growing?
Is the Bank currently trading on an earnings or tangible book basis? How does this change over time?
Is the Bank paying a cash dividend? How large is it as a percentage of total net income?
Is the Bank repurchasing shares at the appropriate levels?
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PART 2: STRATEGIC PLAN
Questionnaire
III. Deposits
Are deposits growing and diversifying?
Is the growth reasonable based upon the current market conditions and the market areas of the Bank?
Is the Bank hiring additional support staff required to meet the growth projections?
Is the Bank dependent on CD’s? Is there any product concentration risk in the balance sheet?
III. Loans
Are loans growing and diversifying?
Is the ALLL sufficient for the credit risk in a diversifying loan portfolio?
Does the Bank have the current expertise in all projected loan categories? Is the Bank hiring the expertise needed?
Is the Bank hiring additional support staff required to meet the growth projections
How one dimensional is the Bank’s loan portfolio? Is there any product concentration risk in the balance sheet?
IV. Non interest income
Is non interest income a major thrust of the Bank?
Is the Bank's non interest income growing in total dollars and/or as a percent of average assets?
Are non interest income tied to volumes or balances where appropriate? Are the variable rate factors realistic?
Is the Bank planning at the appropriate detailed level for noninterest income?
How much of the Bank's net income is attributable to noninterest income?
V. Non interest Expense
Is the Bank's non interest income declining as a percent of average assets? Is the Bank controlling expenses effectively?
Are non interest expense tied to volumes or balances where appropriate? Are the variable rate factors realistic?
Are benefit plans reasonable?
Is the Bank planning at the appropriate detailed level for noninterest expense?
VI. Franchise and Markets
Is the Bank identifying possible markets for branch expansion?
Has the Bank identified additional staff hires needed to execute the Plan?
Has the Bank identified any management/staff replacements?
VII. Customer
Has the Bank identified potential customer segments?
Has the Bank adaquately addressed their needs, desires, and the appropriate product bundling/marketing approaches?
VIII. Capital Markets
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PART 2: STRATEGIC PLAN
Questionnaire
Is the Bank using cash dividends? Does the Bank have the capital and earnings to support these levels in the future?
Is the Bank using stock dividends?
Does the Bank appropriately address the use of proceeds from a capital raise?
Is the Bank planning on acquiring other Banks or noninterest income subsidiaries?
Is the Bank conducting a repurchase program? Does the Bank have the required capital level to conduct this strategy?
A. Modeling Output and Assumptions
Is the Bank running multiple scenarios, i.e. changes for interest rate and volume assumptions?
Is the Bank planning at the appropriate level of detail: cost center, customer, strategy?
Are the starting numbers tied out to a reliable source such as the actual G.L.? Were adjustments made for extraordinary items or non
recurring items? Was the starting point “mapped” to the model utilized?
What term is used for planning purposes (1, 3, 5 years)? Do they all tie out?
Does the one year budget tie out to the first year of the plan?
Is the rate projection flat as prescribed by regulation or is it variable based upon expectation?
Are known financial data such as CD maturities and investment maturities properly reflected in the model? What about puts and calls?
How is product repricing handled?
Are there cash flows for each individual major product type (loans is too broad, mortgages is too broad, 1 year COFI ARMs is probably
the right level)?
Are adjustable rate products tied to appropriate indices with spreads?
Are the operating expenses down to a sufficient level (postage, advertising, etc.)?
Are non interest expenses and income tied to volumes or balances where appropriate? Are the variable rate factors realistic?
Is the loan loss provision sufficient? Is it correlated to charge-offs? Is it intended to increase the ALLL or based on some formula?
Is the tax rate historically accurate? Is it inclusive of both federal and state? Are all tax deferred products handled properly?
Are all major assumptions highlighted to show whats in any given scenario?
Is a scenario tree developed to highlight how models were built?
Are all major assumptions delineated in detail, such as a de novo branch? Are the assumptions reasonable based on actual experience
or industry benchmarking?
Are all fixed assets properly categorized and amortized according to an appropriate schedule? Are new capital expenditures accounted
for properly?
Is ratio analysis, benchmarking or comparable analysis done to justify assumptions?
Does the Bank perform a branch profitability analysis?
Does the Bank perform a product profitability analysis?
20 Church Street Liberty Corner, NJ 07938 P: (908) 604-9336 F: (908) 604-5951 finpro@finpronj.com www.finpronj.com
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PART 2: STRATEGIC PLAN
Questionnaire
Are personnel levels tied/related to levels of production?
Does the Bank calculate and monitor performance measures per employee (i.e., assets/FTE, income/FTE, revenue/FTE, salary &
benefit expense/FTE, etc)?
Are borrowings being used to match term or are they short term and variable?
Are investments laddered for maturity? For yield?
Is ROE improving?
Is ROA improving?
Is the efficiency ratio improving?
Are operating expenses/average assets decling?
Is noninterest income/average assets increasing or remaining constant?
What is happening to net interest margin and spread?
B. Cost Center and Strategic Alternative Summary
Does the Bank understand the profitability of each strategy?
Is the Bank monitoring the planning at the cost center/strategy level?
C. Market Ranking Analysis
Is the Bank planning on branching without any analysis on potential market areas?
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