Grady & Associates, Financial Institutios & Banking Law Practice Grady & Associates
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Summary of Topic Presentations for Educational Seminars

Bounce Protection Overdraft Services: Doing It the Right Way

Bounce protection (the service by which a bank chooses to pay a transaction account customer's NSF item and assess an overdraft fee – not to be confused with a customer's formal overdraft line of credit tied to a transaction account) is the most profitable but most controversial product to hit the bank marketplace for some time. This seminar will teach you the operational realities and risk mitigation strategies that a bank should consider when implementing courtesy overdraft protection. A carefully chosen and well-designed overdraft protection program will assist your bank in managing any increased credit and reputation risk, real or perceived, that accompanies the operation of a managed overdraft protection program.

Done carefully, automated bounce protection programs can be good for customers and for banks. But without understanding how your program will actually operate vis-à-vis the regulatory guidance provided to date, and be seen and judged in your community, not to mention by the banking agencies and courts, courtesy overdraft protection services could become a nightmare. In this seminar, we review legal, bank regulatory and litigation risk associated with bounce protection vendor selection, overdraft fees, program design, marketing, collection and administration.

Branch Purchases and Sales

Back to Top of DocumentThe legal and business implications of purchasing and selling branches to expand and maximize the efficiency of a financial institution's branch network is the subject of this presentation. A typical branch purchase is reviewed in the course of this program. Regulatory requirements and filings, avoidance of entrance and exit fees, branch network and economies of scale advantages for the purchaser, capital-raising advantages for the selling institution, drafting provisions designed to protect the purchaser or seller, purchaser and seller securities disclosure obligations and consumer compliance obligations affecting buyers are reviewed. The importance of depositor communication, good public relations and maintaining staff morale to avoid post-purchase deposit run-off is highlighted.

Grady & Associates has advised over 20 bank and thrift clients with respect to the purchase and sale of branches, both in privately negotiated transactions and from the RTC.

Communicating with Analysts and the Press

The below-peer group stock prices of many institutions may simply be a result of not being known in the marketplace. In order to generate interest in an institution's stock, the institution must routinely communicate with analysts, the press and its shareholders. This program outlines the essentials of good public communication. It is helpful not only for the newly converted savings institution, but also for institutions that have been public companies for a period of time, but whose disclosures have become repetitive and stale as a result of simply "marking up" last year's annual report.

We also discuss in this program how to put the best face on negative news, while fully and accurately disclosing the problem. The importance of complete and timely disclosure, resulting in no surprises to the investing public, is stressed; guidelines for the issuance of current reports on Form 8-K are reviewed.

Community Reinvestment Act

In an era in which (i) unfavorable CRA ratings or (ii) HMDA data showing loan origination or loan rejection disparity between minority and non-minority applications invite negative consequences, possible denial of regulatory Back to Top of Documentapplications and unwanted focus by consumer groups and the press, this presentation is particularly timely. The presentation explains the importance of certain key definitions under the CRA regulations, the lending, service and investment tests by which large institutions are evaluated, the streamlined small bank performance standards, compliance traps for the unwary represented by the data collection and reporting requirements of the revised CRA regulations and the content and availability of the expanded public file requirements.

Mr. Grady, who has spoken on this topic before a number of financial institution trade groups, wrote a 162 page chapter on the revised CRA regulations for Matthew Bender's six-volume Consumer Credit treatise and has been retained by over 30 financial institutions to assist in CRA compliance management.

Compliance Management

Grady & Associates is available to speak on the timely and popular topic of how to establish, monitor and evaluate compliance programs in the areas of regulatory and securities compliance. Policies and procedures must be both effective and acceptable to regulators and the public and efficient in implementation and monitoring for the financial institution's management. The current regulatory environment places increasing emphasis on written policies and procedures, as opposed to ad hoc management determinations. Compliance management affects institutions of all stripes: well-capitalized and well-managed institutions as well as undercapitalized institutions may run afoul of the regulators.

Mr. Grady has spoken at several Compliance Conferences and Real Estate Lending Conferences of America's Community Bankers concerning the latest developments in compliance management and how to establish a compliance management program.

Corporate Stock Repurchase Program

Back to Top of DocumentThis presentation discusses the mechanics of a corporate stock repurchase program. The presentation discusses corporate law and regulatory limitations, shareholder and director approval, Securities and Exchange Commission ("SEC") tender offer rules, state securities law, SEC market manipulation regulations, and the mechanics of issuing a press release announcing a share buy back plan.

Deposit Agreement: A Tool for Risk Mitigation & Enhanced Profitability

Generally speaking, the adequacy of a deposit agreement is the most overlooked aspect of the banking business. It is our experience that very few financial institutions have undertaken a thorough analysis and review of their deposit agreement.

One of the first considerations in an institution's review of its deposit agreement should be whether the agreement gives adequate support for the institution's fee practices with respect to the deposit account. This presentation discusses how a well-crafted deposit agreement can be the means to increase an institution's deposit account-Back to Top of Documentrelated fee income. In addition, Uniform Commercial Code amendments occurring in the 1990s in most of the 50 states permit a financial institution to take advantage of freedom of contract to shift the risk of loss to the customer.

The presentation also discusses the benefits of careful deposit agreement drafting with respect to forgeries or alterations and the risk of loss between the bank and the customer. For example, an institution can shorten the period of time for a customer to report a forgery or alteration from 60 days to 14 days, thereby avoiding tremendous exposure to liability for losses due to forgery and alteration.

Development of a Trading Market for Bank Stock

Perhaps because the stock market is fickle and cannot be controlled, the development of an active and liquid trading market for community bank stock is a task too often neglected by bank management until some sort of crisis develops. Rather than formulating a plan to market bank stock solely to save the bank or its independence, a market development plan for a bank's stock should be adopted before the crisis occurs.

Back to Top of DocumentThis presentation discusses the principal markets in which bank stocks trade. In order of depth and liquidity, these include the following: The over-the-counter market ("OTC"), the "pink sheets" (OTC), the Electronic Bulletin Board (OTC), the NASDAQ Small Cap Market and the National Market System, the American Stock Exchange (the "AMEX") and the New York Stock Exchange (the "NYSE"). With approximately 10,000 banks and 2,000 thrifts in this country, there are approximately 450 listed banks, 450 listed thrifts, 900 "pink sheet" banks and 100 "pink sheet" thrifts. A "listed" bank or thrift refers to an entity trading on the NASDAQ Small Cap Market or National Market System, the AMEX or the NYSE. A "pink sheets" bank or thrift refers to an entity that trades in the OTC pink sheets or the Electronic Bulletin Board.

The benefits of a proactive approach to market development include the following: increased stock valuation, collateral value inherent in an actively traded stock, the merger and acquisition purchasing power that accrues with higher stock price valuations and the cause-and-effect cycle of market performance creating public interest which, in turn, can lead to increased business and increased profits. Because market activity is built over time, this presentation discusses the process of market development and attempts to educate bank directors and management that market activity is not an event -- it is a process. Because fewer than 10 percent of banks and thrifts are widely traded in an active public market, few bankers can afford to miss this presentation on achieving higher market values for their bank's stock.

Directors' Responsibilities

The duties of care and loyalty are analyzed in this presentation, with reference made to statutory and regulatory requirements, recent case law and regulatory pronouncements. Specific areas discussed include the delegation of duties to a committee of the board or management, management oversight and review and informed decision-making -- that is, what questions should the directors pose to management or others working for the institution before approving a project or loan and what is contained in a complete board package. A focus on directors' duties in a proposed acquisition of the institution makes this presentation of particular interest. This presentation was made in February 1995 at the Annual Convention of the Independent Bankers Association of America.

Dividend Reinvestment Plans

The advantages, "how to" and costs of adopting a dividend reinvestment plan, or DRP, are the focal points of this Back to Top of Documentpractical program. In a period of rising rates, declining margins, and thus, pressure from shareholders to maintain stock price, a DRP is a tool to support and bolster share price. A better stock price also helps thwart unwanted takeover attempts. Advantages to the financial institution and the range of design options available in structuring either a new issue or market purchase DRP to meet the needs of the institution and its shareholder profile are discussed.

Environmental Risk Management

This presentation discusses the necessity for a board to adopt an environmental risk management policy and other environmentally related procedures in order to protect the institution from the risk of loss from lending against contaminated real estate collateral. Key provisions of a comprehensive policy and related procedures are detailed and recent case law in the area is reviewed.

Executive Compensation

The design of executive compensation programs involves a delicate balance for the board of directors of an institution – considering both the needs of the institution to maximize shareholder value and the executive's concern for job security. The latest trends in executive compensation are discussed, with the assistance of detailed executive compensation survey material regarding the incidence and features of (i) employment and change-of-control severance agreements and (ii) nonqualified deferred compensation agreements. The general duties and responsibilities of the board of directors in establishing and adjusting compensation packages are discussed candidly, as well as the special issues that arise in connection with a merger or acquisition or a realignment of management functions. Tax limitations on excessive compensation and securities disclosure rules are highlighted.

Back to Top of DocumentGrady & Associates has extensive experience in the design of compensation arrangements, including employment contracts and severance agreements, non-qualified SERP plans and insurance benefits, and stock option and restricted stock plans.

Fair Lending Compliance

While the lending community has long been aware that lending discrimination is not just a "big city" or "big bank" issue, the Justice Department's settlements with several small banks that discriminated against minorities are notable because they involved far smaller banks than the previous Justice Department actions against Decatur Federal Savings and Loan Association in September 1992 and Shawmut Mortgage Company in December 1993. Unlike the Decatur Federal and Shawmut settlements, both the Blackpipe State Bank and the First National Bank of Vicksburg settlements were based on active referrals by the appropriate bank regulatory agency. And in horror of all horrors, Security State Bank of Pecos, Texas signed a Justice Department stipulated judgment solely on the basis that one loan officer, in contravention of company policy, had violated the civil rights of Hispanic borrowers by charging them markedly higher interest rates for consumer installment and single-payment loans. No matter how well intentioned any lender's practices are, every lender can learn from the experience of the institutions charged to date with lending discrimination in reported settlements with the Justice Department. Common themes and practice emerge in the consent decrees imposed against each institution.

Lenders fail to appreciate that a single act of discrimination can be a violation of the Fair Housing Act or the Equal Credit Opportunity Act. This presentation discusses minimum mortgage loan/insurance amounts, PMI policies, secondary mortgage market policies, underwriting guidelines, branch locations, hours and services and advertising policies, as such topics relate to fair lending compliance.

The timely topic of private enforcement of fair lending claims also is covered. Private lawsuits against financial institutions for lending discrimination have begun to gain momentum, and the Justice Department has signaled its intention to assist such plaintiffs. Mr. Grady has made this presentation before (i) the Michigan League of Savings Institutions' Annual Convention at Mackinac Island in Summer 1994, (ii) the 1993 and 1994 Annual Convention and Back to Top of DocumentBusiness Show of America's Community Bankers; and (iii) Fall 1995 seminars in Cleveland, Columbus and Cincinnati before the membership of the Ohio League of Financial Institutions.

Holding Company Formation

This presentation discusses the advantages of the holding company form of ownership, including product diversification, flexibility and acquisitions, financing flexibility, improved take-over protection, improved protection of directors from liability and stock repurchases, the disadvantages of the holding company form of ownership and finally the steps involved in forming the holding company. This formation aspect of the presentation discusses all the bank regulatory application filings, federal securities law compliance and state securities law compliance and stock market listing issues.

Home Equity Lending Program: Design, Operation and Marketing

This presentation provides an explanation from a chronological perspective of how a home equity lending program operates. Beginning with approval by the board of directors, the outline explores all the stages of the lending process: From establishment of underwriting standards by board action, advertising, the application process, application evaluation, applicant notification, consummation, the loan repayment stage and extinguishment of the debt. Aside from being a primer on the basics of home equity lending, the presentation also discusses numerous marketing initiatives used by other home equity lenders.

Negotiated and Hostile Acquisitions

Thrift and bank executives are well aware of the pressures brought to bear on smaller institutions to merge or consolidate with their larger peers. This pressure can be expected to intensify with the advent of interstate bank branching. This program discusses the contents of a "ready response" program and anti-takeover devices available to an institution before an unwanted offer surfaces. The duties and responsibilities of management and the board in Back to Top of Documentconnection with a proposed acquisition are outlined, as well as subjects such as disclosure obligations, including communication with shareholders, the press and employees, and other practical considerations. Emphasis is placed on the negotiation of an acquisition -- letters of intent, final acquisition agreements, board of directors composition, executive positions and compensation, branch consolidations or closing and management philosophy or style.

RESPA and Loan Referral Relationships

This program offers creative ideas to help financial institutions cope with intra-industry and inter-industry competition, emphasizing the benefits that can be derived from loan referral relationships. It also offers home builders, realtors and mortgage brokers ideas for establishing referral relationships with end-loan lenders that will allow these real estate professionals to provide a full range of services to their customers, increase their compensation base, cement customer relationships and provide efficient service to customers. Built upon a properly structured and clear agreement on the terms of the referral relationship, these relationships can be of benefit both to financial institutions and to other real estate professionals such as home builders, Realtors and mortgage brokers.

The program materials offer detailed guidance and solutions concerning the business and legal issues that can arise in these referral relationships. The Real Estate Settlement Procedures Act is foremost among the legal issues that must be addressed, and the program materials offer creative and valuable insights about how to ensure that the Real Estate Settlement Procedures Act will not be an obstacle to a rewarding and longstanding referral relationship.

Subprime Lending: Designing a Broker or Wholesale Correspondent Program

This presentation discusses reasons for considering entry into subprime lending, different methods of conducting a subprime operation, legal and regulatory considerations including fair lending, Community Reinvestment Act, Back to Top of Documentlicensing, truth-in-lending, RESPA, and liability attaching from third parties. Numerous design and operational issues are considered in the context of generating subprime loans through a retail loan office network, a wholesale correspondent program and an independent broker network

Using the Bank Holding Company Profitably and Effectively

In too many cases, bank holding companies have been formed and then set aside without taking advantage of all the benefits of the holding company form of ownership. This presentation discusses capital planning through a holding company, the advantages of holding company debt, flexibility in capital formation, using a comprehensive anti-takeover plan through the holding company charter, considering the estate planning alternatives offered by the holding company, product and service expansion benefits, including the list of permissible "non banking" activities preapproved on the Federal Reserve Board's Regulation Y laundry list. Operational flexibility is also another frequently overlooked aspect of holding company existence. This presentation discusses how a bank holding company may be allowed by law to venture into areas of business prohibited to a bank. Legal lending limits do not apply to holding companies, and this means that the use of the holding company in this area can greatly increase the opportunities to serve loan customers.

Other Specifically Designed Presentations

We would be happy to work with your organization to design other presentations to update your membership on Back to Top of Documentcurrent regulatory or legislative developments. An appropriate seminar may be tailored to fit the requirements and interests of a particular audience.


Regular office hours are:
8:30 a.m. to 5:00 p.m.
Monday through Friday.
We are closed most
recognized holidays.

Our offices are located at
20950 Center Ridge Road
Rocky River, Ohio 44116

Telephone: 440-356-7255
or Fax: 440-356-7254
Contact us via our online web form.