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synergy at-a-glance The Synergy Difference Synergy Bank Consulting, Inc. (Synergy) is the independently owned advisory firm financial institutions trust to optimize their risk management processes and business performance. Convenient connection point to credible resources Synergy takes an innovative approach to traditional risk management. We believe better results come through synergy—that’s why we bring together only veteran, industry specialists who work collaboratively with our clients. From attorneys to appraisers to auditors, from workout experts to former bank examiners—they’re all in our think tank and ready to collaborate. Whether you’re a community bank, credit union, thrift, or industry association, the Synergy model readily connects you with expertise that is current, comprehensive, and credible.

ANCIN COOLEY, CIA, CISA

suite of services

Ancin Cooley is the Founder and Principal of Synergy Bank Consulting, Inc. Ancin provides a range of risk management services, including loan reviews, IT audits, internal audits, directors’ exams, and regulatory compliance reviews. He brings clients deep, first-hand experience gained from working for the Office of the Comptroller of the Currency (OCC) as an examiner, performing safety and soundness examinations at community and mid-size banks ranging from $100 million to $8 billion in total assets. After leaving the OCC, Ancin worked for a regional accounting firm where he led loan reviews and internal audits.

Our multi-disciplined approach combines the expertise of attorneys, workout specialists, appraisers, IT and compliance auditors. We handpick teams to meet your needs. A former bank examiner leads and manages all services to ensure solutions are communicated with a regulatory perspective in mind.

When not advising clients, training for triathlons, or hanging out with his family, Ancin designs and conducts trainings for financial institutions.

• Internal Audit

Education & Associations

• Exam Preparation

• M.A., Financial Management, Keller Graduate School • B.S., Business, Morehouse College

• Appraisal Review

Member of the National Bankers Association, Risk Management Association, Appraisal Institute, Institute of Internal Auditors, and Information Systems Audit Control Association

Risk Management

Compliance

• Loan Reviews

• Compliance Reviews & Bank Secrecy Act (BSA)

• ALLL Process Improvement • Credit Analysis Support

• Loss Share Compliance

• Problem Loan Management

Professional Development

• IT Audit

Performance Improvement • Process Improvement • Project Management

• Skill building for finance professionals involved in all aspects of risk management • Specialized courses for Board of Directors, Loan and Audit Committee members, CFOs, compliance personnel and non-accountants

our clients We have consistently found Ancin Cooley’s experience and insight an important resource for structuring effective solutions to meet the many requirements promulgated by each of the regulatory agencies. - Randall S. Svendsen, Chairman, National Bancorp, Inc.

Synergy serves dynamic financial institutions across the United States, primarily focusing on community banks, credit unions, and thrifts in the Midwest and Southern regions. Synergy also collaborates with industry associations to provide educational opportunities for their members. References available upon request. ©2012 Synergy Bank Consulting, Inc.

148 Kimball Street, Elgin, IL 60120 • 224.475.7551 • fax 224.333.1942 • info@synbc.com • www.synbc.com


ANCIN COOLEY, CIA, CISA

current projects

Mr. Ancin Cooley, CIA, CISA, is the Founder and Principal of Synergy Bank Consulting, Inc., the advisory firm financial institutions trust to manage risk and optimize performance.

• Interim Credit Officer for a $550MM financial institution 



Through Synergy, Ancin provides a suite of risk management services, including loan reviews, information technology audits, internal audits, directors’ exams, and regulatory compliance reviews. Ancin brings deep, first-hand experience gained from working for the Office of the Comptroller of the Currency (OCC) as an examiner. During his tenure at the OCC, he performed safety and soundness examinations at community and mid-size banks that ranged from $100 million to $8 billion dollars in total assets. After leaving the OCC, Ancin worked for a regional accounting firm where he led loan reviews and internal audits. When not advising clients, training for triathlons, or hanging out with his family, Ancin designs and conducts trainings for financial institutions. Education & Associations • Master of Accounting and Financial Management, Keller Graduate School • Bachelor of Science, Business, Morehouse College • Member of the Risk Management Association, Appraisal Institute, Institute of Internal Auditors, and Information Systems Audit Control Association

• Providing annual Loan Review for three financial insitutions ranging from a $120MM - $800MM • Providing annual Internal Audit for a four financial institutions

 • Providing annual IT Audit services for four financial institutions 

 • Providing annual Compliance three financial institutions

 • Providing Appraisal Review services for three financial institutions

past events 09.25.12 - Virginia Association
of Community Banks
Credit Risk Bootcamp 09.20.12 - 09.22.12 - CBAI Annual
Convention
 09.19.12 - ALLL: Q Factor
Webinar, with
SageWorks

(over 100 attendees) CBAI Conference - “Is Your Corporate Culture Ruining Your Bank?” CBAI Conference - “Be Proactive! What Examiners Will Be Looking for At Your Next Regulatory Exam” IBA ONE Conference
- “Appraisals: What You Need to Know Before Your Next Regulatory Review”

recent publications

Fall 2011 CBAI Conference - Alice in ALLL-land

10.24.12

Forbes “Stress testing clarity for community banks”

04.27.11 - Illinois Bankers Association “Optimizing Your Loan Review Process”

10.09.12

SageWorks Blog “ALLL Methodology: How to Justify and Document your Qualitative Factors”

Instructor at the 2010 Community Bankers Association of Illinois’ - “Commercial Lenders Institute”

09.06.12

Forbes “Delay of bank stress-tests: What would it mean?”

2009 Institute of Internal Auditors Financial Services Conference “7 Habits of Highly Effective Audit Committees” 2009 Community Bankers Association of Illinois Conference “ALLL for the Non-Accountant”

FOR INFORMATION ABOUT UPCOMING EVENTS AND SPEAKING OPPORTUNITIES, PLEASE VISIT OUR WEBSITE AT WWW.SYNBC.COM

148 Kimball Street, Elgin, IL 60120 • 224.475.7551 • fax 224.333.1942 • info@synbc.com • www.synbc.com


loan review

GOOD LOAN

BAD LOAN

is your radar working?

loan review: detect weaknesses at every level of your underwriting function Common Challenge: “During our last exam, the examiners identified risk-rating differences in 40% of the loans they sampled. Some were double downgrades and other loans were placed on non- accrual. We have our portfolio reviewed twice a year and none of these loans were mentioned as having any weaknesses. Is this normal?” Synergy Says: No. Your loan review process should serve as an early warning system. Although, no one can predict exam findings, a strong loan review process should enable management to proactively address weaknesses before the exam.

SYNERGY’S LOAN REVIEW SOLUTION Independent loan review is the cornerstone of every financial institution’s approach to managing risk and the quality of their credit portfolio. An effective loan review system promptly surfaces credit weaknesses, verifies the appropriateness of the loan classification or credit grade, identifies portfolio trends, evaluates credit policy effectiveness, and provides management with accurate and timely information for regulatory reporting and determination of the allowance for loan and lease losses (ALLL). Synergy’s Loan Review services will have an immediate impact on your credit risk management process, adding value to your organization through: • Early identification of problem loans through continuous portfolio reviews • Validating the methodology for determining the ALLL

Why Synergy Bank Consulting? Synergy focuses solely on risk management for financial institutions like yours. Though every organization wants to avoid surprises with troubled loans, your needs are unique. Our broad experience enables us to tailor the loan review process and outputs to your specific needs so you may confidently prepare for future regulatory and external audit reviews, as well as identify reserve needs. We provide personalized, high quality service you can trust.

• Determining the loans that should be classified as troubled debt restructures (TDRs)

About Synergy Bank Consulting, Inc. Synergy Bank Consulting, Inc., is the advisory firm financial institutions trust to manage risk and optimize performance. For more information, visit www.synbc.com ©2012 Synergy Bank Consulting, Inc.

148 Kimball Street, Elgin, IL 60120 • 224.475.7551 • fax 224.333.1942 • info@synbc.com • www.synbc.com


“second look” credit analysis support

your experienced, expedient, extra set of eyes.

credit analysis support complements your resources Common Challenge: “We need to enhance our credit analysis and underwriting but we can’t afford a full-time credit analyst. In addition, our loan officers can’t meet our loan production needs and perform the annual reviews. What should we do?” Synergy Says: Supplementing your existing resources with expert credit analysis support can help improve the quality of your underwriting, bridge gaps in staffing, and manage loan volume. In the past 12 months, several banks implemented a “postmortem” review of non-accrual loans and charge-offs and learned some surprising weaknesses: • Analysis in the loan presentations was not commensurate with the complexity of the transactions. • Loan presentations and loan approval memos did not accurately describe the risks in the transaction being funded. They determined that using skilled, supplemental support for this function was a cost-effective, higher value alternative to hiring, training, and managing specialized in-house resources .

Synergy’s “Second Look” solution Synergy’s “Second Look” Credit Analysis Support provides financial institutions with a comprehensive solution that supports growth without sacrificing credit quality. On a temporary or permanent basis, we perform an analysis of the

credit-worthiness of the subject borrower and have an immediate impact on your credit risk management process by providing: • Objective pre-funding credit analysis • Early identification of problem loans through continuous portfolio reviews • Improved underwriting and credit quality for less than the cost of a full-time teller Our service may complement your existing team or act as a fully outsourced solution to replace the need for building an in-house credit staff. We adapt to your needs and provide trained, reliable personnel as your loan volume warrants. Please contact us for a free, onsite consultation or needs assessment.

advantages of credit analysis support • Cost-effective—variable fees adapt with loan production • Bridges resource gaps to expand capacity and accept more deals • Remote and onsite options for on-demand support • Faster turnaround and better utilization of resources • Secure, encrypted file transfer of all data

About Synergy Bank Consulting, Inc. Synergy Bank Consulting, Inc., is the advisory firm financial institutions trust to manage risk and optimize performance. For more information, visit www.synbc.com ©2012 Synergy Bank Consulting, Inc.

148 Kimball Street, Elgin, IL 60120 • 224.475.7551 • fax 224.333.1942 • info@synbc.com • www.synbc.com


process improvement services

don’t let your institutional knowledge retire with jim.

knowledge lost comes at a hefty cost Consider this anecdote: For years and years, an Italian family passed down its famous tomato sauce recipe from one generation to the next. Grandma would carefully teach the children how to make it and the recipe became a legacy of which all were proud. Then, times changed and the younger family members moved away while the older generation passed on. One day, the younger generation tried to cook the famous recipe “the way Grandma used to make it,” but no one could remember how—it was never written down. Even though Grandma would always be remembered, the recipe was lost forever. Synergy Says: Imagine this story in a business context: what would you do if your Compliance Officer retired? Your IT Director got sick? Or your head of loan operations went on sabbatical? If any of your key employees left tomorrow, would you know the ‘recipe’ to continue business as usual? If not, proactive process improvement is how to anticipate these “what ifs” and formally capture your processes so you aren’t left in a risky position with costly disruptions to your business.

reduce risk, gain insight Often, we’re so busy that we don’t take the time to focus on the value and efficiency gained from enhancing what already works well in our organizations—it’s only when they break that they get our attention. Yet, process

improvement isn’t just about avoiding surprises and preventing loss—it’s also about gaining insight into how well current processes work to preserve your competitive edge. If something can be done better, faster, or cheaper, shouldn’t it?

Synergy’s Process Improvement services Synergy helps clients: • Identify and formalize key employee functions • Define and diagram key tasks showing integration of people, processes and technology • Surface opportunities for process improvement and offer recommendations to reduce risk • Architect new links to bridge any process gaps and redesign processes as needed • Promote knowledge sharing and develop custom training to support a smooth adoption As the advisory firm financial institutions trust to manage risk and optimize performance, Synergy will collaborate with you to implement a soup-to-nuts solution that truly fits your organization.

About Synergy Bank Consulting, Inc. Synergy Bank Consulting, Inc., is the advisory firm financial institutions trust to manage risk and optimize performance. For more information, visit www.synbc.com ©2012 Synergy Bank Consulting, Inc.

148 Kimball Street, Elgin, IL 60120 • 224.475.7551 • fax 224.333.1942 • info@synbc.com • www.synbc.com


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____________________________________________________________________________________________ SEPTEMBER 6 Ÿ 2012 ONLINE EDITION

Delay of Bank Stress Tests: What Would it Mean? BY MARY ELLEN BIERY Contributor

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possible move by federal regulators to allow more time for medium-sized financial institutions to begin new “stress testing” could bring more clarity and efficiency to the risk-management process, industry experts say. Having a little longer to begin conducting the new capital-adequacy testing could also make the test results more informative – for banks, regulators and shareholders, according to Ancin Cooley, an advisory consultant to financial institutions and a former bank examiner with the Office of the Comptroller of the Currency. “It’s about giving institutions the time needed to do the legwork or the upfront work, to make sure the output is meaningful to the regulator and to the investor,” said Cooley, principal of Synergy Bank Consulting Inc. The Federal Reserve, the OCC and the Federal Deposit Insurance Corp. on Aug. 27 said in separate press releases they were considering a delay in implementing the requirements for annual capital-adequacy testing for banks with total assets of between $10 billion and $50 billion. Under the Cooley   agencies’ current timeline for implementing the new rules tied to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act , the medium sized banks would have to report results of their first stress Cooley   tests as soon as January. If the agencies delay action, banks could have until September 2013 to begin reporting results. The biggest U.S. banks are

already undergoing periodic stress tests. “There’s a lot at stake,” said Tim McPeak, director of financial advisory services for Sageworks, a financial information company that provides risk management solutions to financial institutions. There are around five dozen U.S. banks with assets of between $10 billion and $50 billion, including: Synovus Financial Corp. (NYSE: SNV), First Republic Bank (NYSE: FRC), New York Community Bancorp (NYSE: NYB), and Raymond James Financial Inc. (NSYE: RJF). McPeak said banks have expressed concern that despite the high stakes and the expense involved, regulators haven’t more clearly defined the parameters of the testing that will be required. “Regulators have outlined at a high level what their expectations are going to be” in terms of banks testing their loan portfolios under various stressed conditions, McPeak said. But regulators have also indicated it’s not enough to look at the loan portfolio alone, suggesting they also want to know how various scenarios would impact the institution’s plans for raising additional capital, paying dividends and looking for outside investors, McPeak said. “They want all of those questions viewed in the context of the stress tests.” Having more time and a better understanding of what’s expected should allow banks to be more efficient in developing their stress tests, too, McPeak said. “Even for a healthy bank, there will be some expense associated with this,” he said. By and large, a delay should be a good thing, even though there’s the potential for it to mean that bad news about some banks is postponed, McPeak said. “It gives regulators a little more time to figure out what they’re going to ask the banks to do. It also gives banks more time to figure out how they’re going to proceed.”


FORBES   ___________________________________________________________________________________________

Cooley, too, said banks could have more time to learn about what could happen under various test results and about how they can manage those scenarios. A delay may also provide smaller banks in the affected size group the time they’ll need to develop cross-functional teams, he noted. Stress testing will require banks to develop a framework for examining stress across departments – with the credit department McPeak   communicating with finance, and treasury communicating with risk management. “Banks that have already developed enterprise-wide risk management processes are at an advantage because they can leverage those lessons from developing ERM,” he said. Indeed, the Federal Reserve acknowledged those worries in its press release announcing the possible delay. “A number of commenters on the proposal raised concerns about the proposed timing of compliance with the company-run stress test requirements, specifically questioning if all institutions would have the resources, readiness, and ability to conduct stress tests,” the Fed said. “The delay under consideration would help ensure that these companies have sufficient time to develop highquality stress testing programs.”

 


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____________________________________________________________________________________________ OCTOBER 24 ! 2012 ONLINE EDITION

Stress-testing Clarity for Community Banks BY MARY ELLEN BIERY Contributor

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.S. community banks have gotten some much-needed regulatory clarity on how to examine the stability and soundness of their loan portfolios in tougher times. And that clarity from federal banking officials could reduce some of the tension associated with the so-called stress tests, experts say. “The main concern banks have had on this topic is the lack of transparency behind the stress testing process,” said Shea Dittrich, director of business development for financial markets at Sageworks Inc. “This guidance gives community banks more direction on where to start their own stress testing, and it reduces the level of ambiguity we were hearing about from banks.” Indeed, Dittrich said, the Office of the Comptroller of the Currency seemed to understand that even bank examiners had varying expectations among themselves regarding community bank stress testing. “This guidance goes a long way in addressing that,” he said. The OCC in its Oct. 18 guidance emphasized that national banks and federal savings associations with $10 """""""""""""""""""" billion or less in assets should begin their evaluations with a simple """"""""""()**+),-" stress test of their loan portfolio, and the regulators said the test should be conducted at least annually. The OCC also recommended that banks stress test at the individual loan level and on credit concentrations of concern, such as commercial real estate. “For example, a review by senior management may reveal two or three key concentrations in the loan portfolio, such as loans dependent on a type of

agribusiness, loans with construction-related risks, longterm fixed rate municipal securities, commercial mortgage loans dependent on local market values, or consumer residential loans,” the OCC said. “Selecting the appropriate factors to stress depends on the nature of the bank’s concentration risk.” The OCC also said banks should consider at least a two-year projection in their stress-test scenarios “because, in any given credit cycle, losses generally emerge over a two-year period following the downturn.” When properly integrated into a bank’s strategicplanning process and credit culture, stress testing can help community bankers better understand their own risk appetite and can identify concentrations of loans that pose a risk to the bank’s earnings and capital, said Ancin Cooley, principal of Elgin, Illinois,-based Synergy Bank Consulting Inc., and a Sageworks strategic partner. Cooley likened the banks’ tests to a stress test he recently received as part of his routine physical. “I felt fine but, guess what? I learned you can’t see everything from the surface,” he said. “I found out my cholesterol was high. I thought I was pretty fit. Armed with this knowledge I decided to """""""""""""""""""" change my ‘appetite’ for #$$%&'" certain foods.” “Imagine if a financial institution in late '" 2008 stress tested their loan portfolio, and the bank realized that a 20% decline in commercial real estate values would have a significant impact on their earnings and capital,” he said. Do you think that this bank might


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have changed its ‘risk appetite?’ ” The OCC said in a press release that analyzing the potential impact of adverse outcomes on banks’ financial conditions should also help institutions “set concentration limits, adjust strategies, and appropriately plan for and maintain adequate capital level.” Bank-related stress testing gained widespread attention in 2009 as regulators required the largest U.S. bank holding companies to undergo tests demonstrating their ability to maintain minimum capital requirements, even in the event of extreme economic conditions. But even before that, the FDIC in 2006 outlined guidance for institutions to conduct stress tests if 100 percent of their total capital was in loans tied to construction, development and other land deals, or if they had commercial real estate loans representing 300 percent or more of their risk-based capital. However, all banks regardless of size and loan makeup must stress test. The OCC stated in its Thursday guidance that “some form of stress testing or sensitivity analysis of loan portfolios on at least an annual basis is a key part of sound risk management for community banks. Community banks that have incorporated such concepts and analyses into their credit risk management and strategic and capital planning processes have demonstrated the ability to minimize the impact of negative market developments more effectively than those that did not use stress testing.” Dittrich said the guidance clarifies that a smaller bank is likely to have a less complex stress test than bigger banks, because the complexity of the loan portfolios are different. The OCC didn’t recommend one particular method for banks to conduct stress testing, but it outlined elements that will be common among stress tests it considers effective. According to the OCC bulletin, those include: • Plausible “what if” questions about key vulnerabilities, • Reasonable determinations of the impact the stress event or factor might have on earnings and capital; and • Incorporation of the stress test analysis into a bank’s overall risk management process, asset/liability strategies, and strategic and capital planning processes. Community banks have had a lot of questions about exactly what bank examiners wanted as it related to stress testing, Dittrich said. “The community banks’ biggest problem hasn’t been that they have to stress test. It’s that there’s been little consistency behind the process and among examiners,” he said. “They come in and frequently have a different way they expect banks to put the stress tests together.”

“I can’t imagine there’s a bank out there that’s not extremely grateful that they have this transparency,” he said. Sageworks is a financial information company that provides risk management solutions to financial institutions.


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