Specialized business services for financial institutions

Experience the power of being understood.SM

Helping financial institutions succeedFinancial institutions must manage an array of business

challenges, including ensuring regulatory compliance,

identifying and mitigating risk, monitoring asset quality

and planning strategically for the future. But performing

all such tasks internally isn’t feasible or practical for

many institutions.

For these sensitive functions, partnering with a trusted

firm with experience in your industry allows you to

maintain optimal staffing levels. Additionally, it helps

ensure independence while bringing new perspective to

the integrated, long-term outcomes you need.

Our commitment to your industry

McGladrey serves over 2,000 financial institution clients

nationwide, including banks and savings institutions, trust

organizations, credit unions, mortgage companies, and

finance and leasing companies. Clients range from newly

chartered institutions to institutions with billions of dollars

in assets.

Our audit, accounting, tax and business consulting

professionals are committed to adding value in our

services for these organizations.

McGladrey & Pullen ranks as the fifth largest U.S.

provider of accounting, tax and business consulting

services (source: Accounting Today), with 6,500

professionals and associates in more than 70 offices.

Helping you to better anticipate and manage business risks involves taking a strategic approach to mitigating threats and increasing opportunities to enhance business performance.

Services provided by McGladrey

Assurance services The client service team assigned to your audit will be

composed of professionals with knowledge of financial

institutions. Audit procedures will be tailored to address

risks specific to your institution – enabling a reliable

independent audit that helps you plan for the future and

identify areas where you can become more effective.

Our partners and directors are extensively involved in

the audit process and actively communicate with your

institution’s leadership. We believe regular, partner-level

attention is what you deserve - it’s how we add value to

the audit process.

Tax preparation and planning In the realm of tax preparation and planning, deadlines

and compliance are important. But they are only part

of what you need to consider when taking a business

approach to managing your tax exposure

Our tax professionals will assess your overall tax structure

and help you identify any opportunities to reduce tax

liability. We’ll also take a closer look at key areas of your

operations to ensure you’re doing business in a tax-

advantaged manner, including utilizing all available

tax credits.

Our tax advisors can provide guidance on various issues

related to ownership structure changes. And if you’re

considering an acquisition, merger, sale or liquidation,

our tax professionals can assist you with due diligence

and help you structure complex transactions in the most

advantageous manner.

Risk management strategyYour day-to-day business activity involves analyzing an

array of risks, including those associated with credit,

interest rates, liquidity, security and compliance.

Today, risk management requires testing and assessing a

variety of controls – a process that goes far beyond what

was once adequate. A comprehensive risk management

program for financial institutions encompasses the

following areas:

• Internal audit

• IT security and controls

• Regulatory compliance

• Loan review

Internal auditFor financial institutions, nearly every activity involves risk

– whether it’s making a loan, opening a deposit account,

conducting a wire transfer or purchasing securities.

An internal audit should help management recognize,

evaluate and control risk in these and other areas

of operations.

But for some organizations, maintaining an internal audit

department may not be practical. In resource-strapped

environments, internal auditors may be called upon

to assist with monthly closing of the general ledger or

reporting to the cashier or president – the same people

they are expected to audit.

Lack of expertise or experience in a given area of

operations is another concern. Without adequate

knowledge and a broad base of experience, an auditor

can’t provide value or insight into the department or

function being audited.

To avoid such situations and ensure a knowledgeable,

independent and effective internal audit, many institutions

choose to outsource their internal audit function.

Our approach to internal audit focuses on processes

and procedures established by management. Once we

understand your operations and tone at the top, we tailor

an approach that will align with your risks, as well as your

business objectives.

From this vantage point, we can help you better foresee

and manage risks – thereby allowing you to mitigate

threats and increase opportunities for enhanced

business performance.

IT security and controlsAn information technology failure or breach of security can

cause serious financial damage and harm an institution’s

reputation. For these reasons, as well as legal and

regulatory considerations, financial institutions should

obtain an independent review of general controls, conduct

security testing for Internet-based activities and ensure

adequate business continuity planning.

General controls review. Establishing controls begins

with management and the board of directors who

must determine appropriate policies and procedures.

However, implementation of firewalls and other internal

and external security measures often require significant

technical knowledge.

Many banks simply don’t retain personnel with this level of

technical expertise. Nor is it prudent for staff who manage

and support the bank’s systems to conduct such reviews.

Any information security professionals you engage for

a general controls review should be certified in their

respective areas of practice. Our IT specialists are certified

in a variety of information security areas and participate in

ongoing training and education to maintain the highest

standards of the profession.

Security testing of Internet-based activities. External

threats to your business can take a number of forms.

But Internet-based activities – which often involve

transmission and storage of private customer data – can

present an especially sensitive target.

Our technology risk management professionals will work

with you to assess network and application security and

conduct penetration testing – helping you to effectively

mitigate potential exposure to unauthorized access.

Business continuity planning. It is our view that business

continuity planning is the process of risk identification and

reduction, coupled with advanced planning to ensure your

organization can survive an unforeseen crisis. Business

continuity planning is more than a document; it is a

comprehensive program of identifying and minimizing the

potential for, and impact of, an operational interruption,

coupled with advance preparation. A business continuity

plan does not simply help ensure recovery from a

major disaster such as a fire or flood, computer crime

or terrorism; it also helps assure your critical operations

continue every day, in the face of temporary disruptions

like power or network outages. An optimized business

continuity plan allows your organization to:

• Identify and mitigate risks before a disaster occurs

• Comply with regulatory requirements

• Minimize disruptions to critical operations

• Protect your customers, employees and assets

• Ensure organizational stability

• Provide for an orderly recovery

• Reduce potential legal liability

• Minimize decision-making time during a

disaster event

Our advisors, many of whom are Certified Business

Continuity Professionals (CBCPs), have developed

hundreds of plans for financial service organizations across

the nation. Our comprehensive, industry-focused, business

continuity consulting services include:

• Business impact analysis

• Continuity plan development, review

and enhancement

• Design and facilitation of testing exercises

• Staff training

• Development of plan maintenance strategies

Regulatory complianceThe financial industry has always been subject to its share

of regulation, including those mandated by the FFIEC,

Sarbanes-Oxley legislation, the Bank Secrecy Act and Anti-

Money Laundering legislation

Over the last several years, regulatory agencies have

implemented risk-focused examinations to evaluate

financial institutions’ safety and soundness. Examinations

also assess areas such as internal controls, financial

condition and compliance with applicable laws and

regulations. An institution’s most vulnerable areas receive

the greatest scrutiny.

A comprehensive and effective compliance program will

have the following components:

• Management support

• Functional responsibility

• Internal controls

• Up-to-date information

• Training

• Testing

• Reporting

• Follow up

We also offer risk assessment, operational effectiveness

assessment and program reeingineering as well as

independent testing and technology services for

BSA/AML compliance.

We can perform annual, semi-annual or quarterly

compliance testing related to lending, deposits,

advertising and other areas of concern. Our consultants

can also help you develop policies and procedures and

provide training on regulatory topics.

Our minimally disruptive compliance examinations allow

your personnel to stay focused on business operations.

Loan reviewsA loan review helps ensure your institution is actively

managing and monitoring credit risk within the loan

portfolio. While loan reviews are indispensable for a

number of regulatory and operational reasons, conducting

this process internally presents challenges for financial

institutions of all sizes.

When faced with issues such as limited staffing and

“depth of bench,” we can help you achieve your loan

review objectives.

We offer full-service loan review solutions for a variety

of lending products and services. Whether you need

assistance with assessing documentation and compliance

with established underwriting guidelines, managing credit

risk or another critical function, our services will be tailored

for your needs.

Corporate governanceRegardless of an institution’s size, building strategic board

capabilities is essential. You need a board of directors who

will ensure regulatory compliance, boost customer and

investor confidence, and foster long-term success.

But board development is a time-consuming and

challenging task, and qualified candidates are increasingly

difficult to recruit.

Our consultants can work with you to recruit and assess

candidates while building capabilities of your existing

board. We’ll also help you define roles and responsibilities,

create competency-based assignments and promote a

climate of trust, accountability and communication.

Our services related to corporate governance

functions include:

• Working with management to prepare a

strategic plan

• Developing director and executive

compensation strategies

• Establishing audit and finance

committee processes

• Conducting CEO evaluations and managing

CEO succession

• Evaluating compliance with legal and

regulatory requirements

• Recruiting and assessing board candidates

• Developing a climate of fiscal accountability

We can also conduct a diagnostic review of your existing

corporate governance structure. This involves activities

such as evaluating roles of the board, individual members

and management – and their interaction with each other.

Additionally, we’ll conduct board member orientation

and education, assess board and committee structure and

processes, and review communication and information

protocols to ensure best practices are being upheld.

Executive compensation Compensation plans are integral to attracting, motivating

and retaining top executives. They can also be a valuable

tool in keeping your institution on track toward meeting

performance goals.

While most businesses understand the benefits of a well-

designed compensation plan, developing a successful

program can be a daunting and complex task. We can help

you develop an executive compensation plan that sets you

apart from competitors while providing key advantages for

your institution.

We offer a range of compensation services, including:

• Base salary compensation and administration

• Employee incentive compensation

• Executive and management compensation

• Sales compensation

As part of the plan development process, we identify

guiding principles and compensation program

characteristics that support these principles. Our

consultants assess how well current programs meet these

principles, identify any gaps and develop alternative

approaches as needed.

We consider a mix of fixed and variable compensation

plans and develop a compensation program that’s

aligned with your strategic objectives. This helps support

strategic business objectives while controlling total

compensation costs.

We help build your compensation plan around the

following elements:

• Base salary

• Short-term and annual incentives, including cash

or stock bonuses and individual, team or company-

based performance incentives

• Long-term incentive plans, including stock

options, stock appreciation rights, phantom stock,

performance shares and deferred compensation

• Perquisites

• Fringe benefits, including employee benefits and

qualified profit-sharing/pension plans

Strategic planningStrategic business planning. Financial institutions that

research, develop and implement strategic plans are

positioned to effectively deploy capital. Their decisions

are based on consensus from an informed management

team. And they typically implement change to proactively

manage the institution to stay on track toward achieving

its goals – rather than simply reacting to competition and

other challenges.

Our professionals have the knowledge and skills to

help your organization develop and implement a

comprehensive and detailed strategic plan. We work with

you on all aspects of your strategic planning process to

help you carve out a distinct competitive advantage for

your institution. Strategy consulting services include:

• Comprehensive strategic situation assessments

• Professionally delivered and facilitated strategic

planning retreats

• Leadership coaching and training

• Support services for stakeholder communication

• Co-implementation services

• Plan authorship and documentation services

Our consultants use a planning process that helps you

determine what you want your organization to look like

in the future. With this vision in mind, you’re poised to

optimize potential in the right markets, organize internally

to meet challenges, overcome operational obstacles, and

meet and exceed growth goals.

Strategic IT planning. Your information systems are a

critical resource for your organization, helping you gain

a competitive advantage, bolster staff productivity and

enable your organization to run more effectively. They’re

also continually changing. To keep your information

strategy aligned with your organization’s business goals,

you need a long-range plan that addresses current

and future systems requirements. That’s why strategic

information technology planning is critical to your success.

Our seasoned, financial institution-focused advisors help

to build an information technology plan that is more

closely integrated and aligned with your organizational

strategy. Our approach to strategic information technology

planning often includes the following:

• Analysis of information and needs gathered

through in-depth interviews with your

management team and staff

• Identification of requirements

• Prioritization of system improvement opportunities

• System selection and vendor negotiations

For more information on how McGladrey can work with

your financial institution, visit www.mcgladrey.com.

Power comes from being understood.SM

When you trust the advice you’re getting, you know your next move is the right move. That’s what you can expect from McGladrey. That’s the power of being understood.

800.274.3978www.mcgladrey.com

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