Tri- PR-OM
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MUTARI-brief-appendix.pdf
Southern Bank Acquisition
APPENDIX:
SUMMARY OF DUE DILIGENCE
Private & Confidential
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Northern Bank • 1
PRE-ACQUISITION PROFILES
Key Figures
Northern Southern
Ownership
Public—Institutions with >5%
Public—Other
Founding Family
Management
23%
63%
0%
14%
100%
12%
69%
12%
7%
100%
Financials (at 30th June)
Net Interest Income
Non-Interest Income
Total Income
Non-Interest expenses
Taxes
Net Earnings
$ 314 m
$ 91 m
$ 405 m
$ 239 m
$ 54 m
$ 112 m
$ 231 m
$ 106 m
$ 337 m
$ 229 m
$ 23 m
$ 85 m
Shareholders’ Equity
Non-performing loans (90 days)
Total Loan Portfolio
Total Assets
$ 850 m
$ 72 m
$ 6.9 bn
$ 10.4 bn
$ 502 m
$ 68 m
$ 5.4 bn
$ 8.6 bn
Stock Market Value (11th October) $ 1.5 bn $ 1.1 bn
Qualitative Assessments
The relative effectiveness of the following operating functions and the quality of the following resources was assessed through a benchmarking exercise with the relevant competitors (“1“ = much worse, “3” = similar, “5” = much better).
Northern Southern
Operations (back-office)
Administration (accounting, audit)
Credit underwriting policies
Marketing & Advertising
Customer Service (i.e. tellers, phone)
Information Systems
Location / Facilities
4
3
4
3
3
3
3
2
2
3
4
4
2
4
Northern Bank • 2
MANAGERS
Northern Southern
Total number 56 47
Management style Participative Directive
Average skill levels
- at HQ
- in branches
4
3
5
3
Total compensation costs for managers account for 9% of combined cost structure.
EMPLOYEES
Northern Southern
Total number 850 635
Members of BEU
(Bank Employees Union)
24 %
56 %
Average skill levels
- at HQ
- in branches
4
3
4
4
Total compensation costs for employees account for 35% of combined cost structure.
HUMAN RESOURCE PRACTICES
Northern Southern
Salaries Close to industry average
Fixed for each of 17 grades
Above industry average
Individually negotiated
Bonus Scheme Partly based on individual
performance for most
employees
Bank level profit-related
bonus for management
Contracts Fixed for each grade Individually negotiated
Benefits
- Company car
- Low-interest loan
Above grade 12
All
Directors
No
Expenses Corporate Expense card Reimbursed
Pensions Voluntary contributions
deducted from salary
Bank contributes 3% of
annual salary to employees
with more than 2 years’
seniority
Vacations 20 days + federal holidays 18 days + federal holidays
Northern Bank • 3
BRANCH NETWORKS
1
2
3
4
5
6
11
7
8
15
9
10
12
13
14
16
17
18 19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36 37
38
Northern Bank branch Northern Bank HQ
State Boundary County Boundary
3 Town & town reference number
Southern Bank branch Southern Bank HQ
Northern Bank • 4
BRANCH LIST
County
Town
Northern
Ref/Performance Index
Southern
Ref/Performance Index
A Worcester 01 Shelbey S 01 2
02 Hibbing N 01 3
03 Boisevain N 02 4
B Montagu 04 Maple Creek N 03 4
05 St Joseph S 02 3
C Adelaide 06 White River N 04 3
D Esshow 07 Cobalt N 05 2
E Middel 08 Antigo N 06 5
F Rusten 09 Baraboo N 07 5
G Douglas 10 Randall N 08 4
H Jones 11 Greeley N 09 1 S 03 3
12 Fort Scott N 10 2
13 Newport S 04 3
I Fontein 14 Ardmore N 11 5 S 05 4
J Scotts 15 Perryton N 12 4
K Suffolk 16 Hobbs N 13 4
17 Pecos N 14 5 S 06 4
L Warring 18 Deming N 15 4
M Tobol 19 Mesa N 16 3 S 07 4
20 Platte N 17 3
N Sutherland 21 Warren N 18 4 S 08 5
22 Rutland N 19 4 S 09 4
O Enard 23 Joliette N 20 5 S 10 4
24 Bangor N 21 3 S 11 5
N 22 2
P Trotter 25 Dayton S 12 4
Q Strathe 26 Grangeville N 23 3 S 13 4
27 Klamath S 14 4
R Cromden 28 Franklin S 15 4
29 Puyalop S 16 5
30 Bessemar N 24 3
S Oriol 31 Cordell S 17 3
T Morar 32 Salt Fork S 18 4
U Snizort 33 Leadville S 19 4
34 Sheridan S 20 3
V Boulder 35 Redwing S 21 5
36 Harrisonburg S 22 5
W Dee 37 Orangeton N 25 4 S 23 4
38 Eagle Pass S 24 3
Performance index based on combination of profitability and last 3 yrs' growth in $ value of all retail and corporate loan applications (“1“ = much worse, “3” = similar, “5” = much better)
Northern Bank • 5
PRODUCT PORTFOLIOS
Northern Southern
Deposit Portfolio (by $ size)
Current Accounts
Savings Accounts
56 %
44 %
24 %
76 %
Deposit Portfolio (profitability rating)
Current Accounts
Savings Accounts
4
4
3
5
Loan Portfolio (by $ size)
Commercial/corporate lending
Consumer/retail lending
Mortgage/real estate
Other
30 %
64 %
6 %
38 %
53 %
7 %
2 %
Loan Portfolio (profitability rating)
Commercial/corporate lending
Consumer/retail lending
Mortgage/real estate
Other
4
3
3
4
4
2
2
Each of the banks’ deposit and loan ‘products’ corresponds to a given set of options, terms and conditions
(e.g. interest rate calculation, payment period, guarantee requirements, etc..)
LOAN APPROVAL PROCESSES
Northern Southern
EFFECTIVENESS level of
Credit underwriting policies
4 3
Loans up to … require approval of …
$ 100,000 Branch manager Branch manager
$ 1 million Branch manager County manager
$ 5 million County manager Head of Corporate
$ 50 million Head of Corporate CFO
Primary evaluation criteria Cashflows Collateral
Customer profitability evaluated? Yes No
IT SYSTEMS SYSTEMS
Northern Southern
Computer system
No. of servers
Server operating system
5
Unix
2
Unix
No. of PCs / OS 508 / Windows 8 421 / Windows 7
No. of software programs
- Off-the-shelf
- Custom
33
4
15
0
Performance Rating 3 2
Automated Teller Machines
Number of locations 46 24
Performance Rating 4 3
