How can we help your bank?Grant Thornton LLP servicesto the industry
Contents 2 Regulatory compliance programs 4 Regulatory reform 6 Loan portfolio reviews and stress testing 7 Foreclosure reviews 8 Internal audit services10 Corporate governance and internal control12 Enterprise risk management13 Mergers and acquisitions16 Corporate advisory & restructuring services17 Performance improvement18 Problem bank services19 Mortgage banking and securitization services20 Valuation services21 SSAE 16/SAS 70 reviews22 Forensic accounting and fraud investigations23 Tax26 Audit28 Accounting30 Grant Thornton resources31 Contact us32 About Grant Thornton
In an era of increased public scrutiny and complex financial Because of this experience with financial institutions andreform and regulatory demands, banks, thrifts, credit unions industry organizations, we can help you assess issues that areand other financial institutions need straightforward business important to your bank. Moreover, we can provide you withguidance delivered ethically and professionally. practical insights to help you improve your overall strategy. At Grant Thornton LLP, our Audit, Tax and Advisory We offer a full range of banking industry services, providingServices professionals are among the most experienced in personalized attention and the highest-quality service to publicthe industry; we have been serving bankers for more than 80 and private banks around the world.years. Our dedicated Banking professionals bring unparalleledindustry knowledge and insight, while our accessibilityand responsiveness mean that relevant business guidance isprovided in a timely manner and that issues are addressedappropriately. We are also strategically committed to the industry. Ourprofessionals are involved in a variety of industry organizations,including ABA, ICBA, NACHA, RMA, MBA, Bank TaxInstitute, the AICPA and its Depository Institutions ExpertPanel, among others.We are strategically committed to the bankingindustry worldwide. Our professionals excel andtake pride in helping financial institutions with theircritical business needs.Jack KatzNational Managing Partner, Financial Services
Regulatory compliance programsWe can assist in the development of a complete compliance Fair lending complianceprogram, as well as keep you informed of emerging regulatory We can help your bank comply with fair lending regulations,developments and share best practices for establishing related including the Fair Housing Act and Equal Creditpolicies and procedures. Opportunity Act.Bank Secrecy Act/Anti-money laundering services Red Flags Rule complianceWe offer leading Bank Secrecy Act/Anti-Money Laundering Businesses are required to comply with the Red Flags Rule(BSA/AML) advisory services. Our Certified Anti-Money regulation (FTC 16 CFR 681) of the Fair and Accurate CreditLaundering Specialists (CAMS) provide assistance to regional, Transactions Act of 2003 (FACT Act), which aims to preventnational and international financial institutions, whether public identity theft. The Federal Trade Commission (FTC) nowor private. requires compliance from all businesses that meet its definition Our BSA/AML practice also works with businesses and of a creditor. Any entity — including a bank — that allows agovernment institutions as they navigate the current regulatory customer to defer payment for goods or services is a creditorenvironment and develop comprehensive and effective BSA/ under the rule.AML programs, including implementing Office of Foreign Our Red Flags compliance services are designed to gatherAsset Control (OFAC) sanctions programs. Our BSA/AML the information banks need to know in order to maintainservices include: compliance. Using a combination of automated surveys,• BSA/AML compliance program development structured interviews, and reviews of available documentation,• Program assessment and review for recommended we can deliver the necessary information you need to evaluate enhancements your Red Flags compliance program.• Independent program testing• Look-back investigations as part of regulator-mandated actions or internal requirements• AML software readiness assessments Recommended reading Beginning Dec. 31, 2010, all companies that send invoices will need to have a red flags compliance strategy in place to help combat identity theft. The Red Flags Rule, a component of the Fair and Accurate Credit Transactions (FACT) Act signed into law in December 2003, requires that financial institutions and creditors implement a plan to identify, detect and respond to attempts to use stolen identity information. Read The Red Flags Rule: What you need to know to find out more about the rule and what to consider when forming a compliance strategy. Visit www.GrantThornton.com/redflags for more.2 How can we help your bank?
Regulation ABRegulation AB addresses three significant areas:• Disclosures required to be made during the securities registration process• Exchange Act reporting requirements for asset-backed securities• Annual servicing assertion and accountant’s attestation report requirements Our professionals have considerable experience advising entitieson the requirements of Regulation AB, as well as performing theservices required in order to issue an attestation report. How can we help your bank? 3
Regulatory reformThe Dodd-Frank Wall Street Reform and Consumer Protection Banks will receive updates on new developments from ourAct mandates sweeping changes across the banking industry. Financial Regulatory Reform Task Force and can also read aboutWe can help banks as they maintain compliance with heightened them on our online Financial Regulatory Reform Resourceregulatory requirements and related issues including: Center at www.GrantThornton.com/financialreform. Learn• New disclosure and reporting requirements more about our numerous resources at the end of this document.• Swaps trading regulations (especially for those designated as “major swap participants”)• Spinning off of derivatives units onto broker-dealer affiliates (and related systems/procedures assessments)• Regulatory examination readiness and remediation• Volcker Rule (pertaining to proprietary trading and fund investments)• Establishment of risk management committees• Reporting responsibilities to the new Financial Stability Oversight Council for large banks• Whistleblower rules• New and enhanced compensation and governance oversight• New or revised capital standards Recommended reading On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act). The Act is significantly reshaping financial regulation in the United States. Our Financial Regulatory Reform Resource Center provides key information about the legislation, its effects and updates on new developments. Visit www.GrantThornton.com/financialreform.4 How can we help your bank?
Our team of dedicated professionals providea unique perspective on the issues financialinstitutions face in the current environment.We have the global resources to help meetyour needs on a broad range of industry-related matters, wherever you do business.Nichole JordanNational Banking and Securities Industry Leader How can we help your bank? 5
Loan portfolio reviews andstress testingRegulators now require many banks to stress test their loan Loan reviews are performed using our establishedportfolios using multiple economic scenarios. Our professionals methodology, which is consistent with current regulatorycan assist with modeling a variety of scenarios. objectives. We can tailor the scope of this review to fit your We can also help your bank conduct loan portfolio reviews, bank’s needs, or we can perform a full-scope assessment of yourperform remediation activities and train personnel. loan portfolio if necessary. Examples of loan reviews include the following: • Watch list review and assessment • Review and assessment of insider loans and processes • Sampling of loans by type and/or loan officer • Review of the institution’s top lending relationships • Review of specific attributes of the loan portfolio, including concentrations6 How can we help your bank?
Foreclosure reviewsWe can assist banks by evaluating their foreclosure processes We can assist with any remediation efforts, particularly forand controls and helping them address related accounting and public banks subject to SOX 404 and Federal Deposit Insurancetax planning issues. Our professionals can help banks apply Corporation Improvement Act (FDICIA) requirements, and wethe Federal Housing Finance Agency (FHFA)’s foreclosure can coordinate with other reviewers.process framework by conducting risk assessments to identify In addition, our foreclosure issues task force is monitoringdeficiencies in documentation. By choosing a third party to this ever-changing situation and can keep our clients up to dateconduct a foreclosure review, banks can instill confidence and on emerging developments.thus minimize the possibility of conflicts with the FHFA orother regulators. Recommended reading Mortgage foreclosures have been making headlines after regulators identified improper foreclosure proceedings for defaulted borrowers. Numerous investigations have been launched into whether homeowners have been subjected to improper foreclosures. Some banks have temporarily halted their foreclosure proceedings in order to review their documentation and processes. This issue of Currency, Strengthening the foundation for foreclosures, explores current foreclosure issues, financial and regulatory issues, FHFA framework and next steps. Visit www.GrantThornton.com/financialservices to learn more. How can we help your bank? 7
Internal audit servicesOur internal audit services can help you backstop the internal Benefits of an internal audit include:controls that safeguard your bank’s valuable business assets and • Increased efficiency, effectiveness and functionality of theprocesses, including data and IT systems. Our professionals can internal audit functionwork with you to assess your corporate-level risk, identify the • Reduced costs of hiring, training and retaining qualityareas of greatest risk, and develop appropriate workplans and personnelaudit programs that you can use to mitigate those risks. • Compliance with applicable laws and regulations • Assessment of the risks associated with SOX as it pertains toFollowing are examples of the internal audit services we offer: internal controls• Full outsourcing of internal audits • Improved risk management, controls and governance• Co-sourcing with the existing internal audit function processes• Internal audit transformation • Implementation of internal controls that help banks achieve• IT auditing their goals and minimize surprises along the way• Process mapping and process reviews • Enhanced communication with the audit committee• Operational audits• Quality assurance reviews• Internal control documentation and testing• Specialized audits• Startup and development advice• Internal audit training8 How can we help your bank?
Staff augmentation Information technology audit servicesFor complex projects, we offer staff augmentation so your Banks today depend upon information systems for nearly allbank will not have to hire additional full-time employees aspects of their financial and operational functions. Accordingly,for temporary needs and special projects. Having external the security of this information is very important to a bank’sprofessionals conducting your internal audit will also provide fiscal and organizational health, as well as to its shareholders,a new perspective in assessing your operations and bring regulators and compliance examiners.technical knowledge to efficiently reach your project goals. Staff With the aid of our IT services, your bank can protect itsaugmentation will also allow you time to interview potential data and overall system architecture from internal and externalcandidates to find the right person or people for your team. threats, while improving its overall IT functionality. Our team Staff augmentation is a cost-effective alternative to of dedicated professionals can help your bank take stock oftemporarily adding staff or adding the wrong staff. Our its current information security environment and develop andprofessionals can complement your internal staff by implement best practices and optimal techniques.providing open communication, schedule flexibility and fresh We can offer you a variety of services, including businessrecommendations and insights. continuity planning, testing, solution selection, cyber security (network security), IT security, IT strategy, IT assessment, IT due diligence, and SAS 70/SSAE 16 reporting assistance. How can we help your bank? 9
Corporate governance andinternal controlPublic banks must comply with the financial disclosure and With experienced professionals that specialize in monitoringinternal control requirements of the Sarbanes-Oxley Act of 2002 risks and controls, Grant Thornton facilitates constructive(SOX) and related SEC rules. Private banks preparing for an interaction among your audit committee, managementIPO or seeking to improve their internal controls would also team, existing external auditor and internal audit group. Ourbenefit from SOX compliance. knowledgeable and accredited professionals help banks reap a Grant Thornton can help banks address their compliance number of benefits:needs and assist audit committees and boards of directors • Effective evaluation, documentation and sign-off procedureswith the establishment of appropriate corporate governance to support management’s design and operation of the internalprocedures. Related services include the following: control system• Internal control documentation and evaluation services — • A foundation from which to start looking at enterprise-wide Documentation of the internal control environment, testing risks, based on recognized COSO standards and evaluation of control effectiveness, assessment of risks, • Improved oversight by the audit committee and board of remediation of inefficiencies, and recommendations for directors improvement and continuous monitoring. • Increased efficiency, effectiveness and overall functionality of• Board of directors/audit committee services — the internal audit function Effectiveness assessments, director education, whistleblower • An industry-recognized framework and risk-based programs, evaluation of codes of conduct, and compensation methodologies structure reviews. Recommended reading In the midst of economic recovery, a major factor in determining future success may lie in one key consideration: risk. Enterprise risk management (ERM) helps align risk with strategy, although its implementation can be a daunting task. Find out what bank executives polled for the 17th Bank Executive Survey view as major risks and how ERM can help manage them in this issue of Currency. Visit www.GrantThornton.com/financialservices for more.10 How can we help your bank?
ComplianceSet® software for governance, risk andcomplianceAchieving cost-effective compliance with the requirementsof SOX is beneficial regardless of where your bank is withinthe compliance life cycle. Grant Thornton’s ComplianceSet®software can help. ComplianceSet® is a Web-based software as aservice, or SaaS, solution that serves as the technical foundationfor a process-based approach to governance, risk and compliancerequirements related to SOX, internal audit and enterprise riskmanagement. The ComplianceSet® application provides management witha real-time view of a bank’s system of internal controls overfinancial reporting (ICFR). The application incorporates provenSOX compliance best practices, work approaches, thoughtleadership, methodologies, accelerators, training materials andprocess-based tools to help banks manage and measure theirongoing compliance processes. How can we help your bank? 11
Enterprise risk managementIn today’s business environment, with its increased market Our ERM methodology is customizable to a bank’scomplexity, rapid globalization and heightened investor particular situation or needs. To help develop a strategy thatexpectations, managing risks while providing value is more works, we ask several specific, probing questions about currentimportant than ever before. All banks — big or small, public or risk management processes:private — have risks that they must manage proactively to succeed. • What are your bank’s strategic objectives, risk management Enterprise risk management (ERM) serves as the leading philosophy, risk appetite and risk tolerance?approach to managing and optimizing risks. This approach • How does management identify strategic, operational,involves strategically identifying, analyzing, overseeing and reporting, compliance and other risks?monitoring the potential risks to a bank. ERM enables a bank to • How does management assess and respond to risks? Doesdetermine how much uncertainty and risk are acceptable when management avoid, reduce, share or accept them?adding value. • What controls are in place to meet management’s risk needs and how does management monitor these controls?Our Professional Standards Group is dedicated tothe details. We can help your bank understand howtechnical accounting issues affect the big picture.Dorsey BaskinNational Technical Banking Partner andCentral Region Partner-in-Charge of the Professional Standards Group12 How can we help your bank?
Mergers and acquisitionsFinancial reform may prompt institutions to consider selling You’ll get the benefit of our experience with variousin order to avoid shouldering additional regulatory burdens. transaction structures:Our professionals can help with all aspects of M&A activity, • Acquisition or divestiture of entire banksincluding integration, due diligence, valuations, regulatory • Carve-outs or spinoffs of specific divisions or product linesapplication process, combined strategic and capital plans, • Leveraged ESOPscombined pro forma financials, and accounting and taxcompliance. In addition, we can assist thrifts with mutual-to- Our professionals can also assist with all due diligencestock conversions. matters in the compressed timeframe required by the FDIC in a failed bank acquisition:Due diligence • Conducting loan reviews and assisting in the identification ofBalancing your strategic and financial goals with opportunities areas of risk and portfolio valuationand exposures when executing mergers and acquisitions can • Using loan sampling techniques to assist with identificationput a strain on your people and your budget. Our Transaction of risk in the loan portfolio during due diligenceAdvisory Services team can provide the support you need so that • Inquiries and assessment of management, credit practices andyou can maximize value for the price paid. banking operations Our team members draw from their extensive experience • Preparing a report or presentation of due diligence results forwith operating businesses and executing transactions to provide management and the boardpractical insight into each transaction. You can expect to workwith professionals who have a solid foundation in accounting,finance and tax, along with significant consulting and bankingindustry experience. You will have instant access to resourcesand quick responses to your needs. We offer you:• Valuable transaction experience• An integrated service offering that covers every phase of the transaction process• A standardized methodology• Easy access to international resources and to banking industry and subject-matter professionals• Strong experience with both financial and strategic buyers How can we help your bank? 13
Failed bank acquisitions and FDIC-assisted transactions Our failed bank acquisition and FDIC-assisted transactionsFailed banks can present growth opportunities for healthy experience includes the following:institutions, with the risk mitigated by FDIC-assisted • Assisting in targeting and negotiations with the FDIC in atransactions. Our professionals can help acquirers with due failed bank transactiondiligence, purchase accounting, and systems and tax issues. After • Preparing regulatory filings, such as the application andan acquisition, we can assist with the integration process, as well business planas compliance with FDIC agreements. • Consulting with respect to determining the elements of the bid • Consulting on all matters related to the due diligence process • Preparation of pro forma financial statements to present to the FDIC • Assisting with the closing weekend and settlement process • Providing integration and valuation services Recommended reading These white papers explore the accounting and tax issues associated with the complexities of FDIC-assisted transactions. Visit www.GrantThornton.com/troubledbanks to learn more.14 How can we help your bank?
Our professionals also have experience working on a contractor Our professionals can assist acquiring banks with reviewingbasis as part of the Receivership Assistance Contract (RAC) loans assumed from a failed bank for potential fraudulentprogram to provide a full range of bank closing support functions: activity. Such a review will include interviewing various bank• Valuation services — Upon acquisition, we can help the personnel and reviewing loan documents, bank policies and acquirer determine the fair value of the assets acquired and board minutes for compliance with loan requirements, as well as liabilities assumed. reporting any fraudulent activity to the appropriate authorities.• Pro forma and settlement services — We can assist in the reconciliation of the FDIC’s pro forma financials to the bank’s Day 1 balance sheet and assist in the settlement process.• Support — We can assist with the integration of the acquired bank by offering accounting, tax and systems services.• Loss-sharing agreement compliance — We can assist the acquiring bank with the establishment of internal controls and processes for loss-sharing agreement (LSA) reporting as required by the FDIC. Additionally, we can provide monitoring services on an ongoing basis in order to provide a third-party assessment of LSA reporting. We can also help implement the processes and controls necessary for ongoing FDIC LSA reports.• Accounting for indemnification assets and SOP 03-3 — Accounting for FDIC-assisted transactions can be extremely complex. Our professionals can assist with accounting for indemnification assets and compliance with AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3 or ASC 310-30), and other issues.• Loan-level tax basis reporting — We can determine relevant tax issues related to failed bank acquisitions and evaluate the impact of an acquisition on income tax positions, capital ratios and other key metrics. How can we help your bank? 15
Corporate advisory &restructuring servicesIn stressful economic situations, banks must carefully measure,report and forecast results, manage cash flow, and monitorcompliance with loan covenants. Our cash management andfinancial modeling specialists address these issues, and developboth short-term and long-term solutions, as well as assist lendersand borrowers in the following areas:• Review and development of business plans• Benchmarking and competitive risk analyses• Cash flow management• Interim financial management• Optimization of capital structure• Assessment and implementation of strategic alternatives and initiatives• Valuation of businesses and assets• Post-merger integration16 How can we help your bank?
Performance improvementOur performance improvement services can help your bank Regulatory examination readiness and remediationimprove the value of its operational and back-office business Tightened regulatory requirements make it increasinglyprocesses. Our comprehensive approach addresses the performance important for any issues arising from regulatory examinationsof people, processes and technology, focusing on methods for to be addressed thoroughly and promptly. We assist banksimproving efficiency, reducing costs and creating value. We help with remediating issues noted in regulatory examinations. Thisbanks improve their business in a number of core areas: assistance includes participating in the development of remedial• Finance transformation — Creating substantial benefits for action plans and testing to determine whether issues have been the entire bank by reinventing the finance and accounting addressed properly. organization. In addition, with the OTS being eliminated and its powers• Business process re-engineering (BPR) — Streamlining being distributed among the Federal Reserve, the OCC and the operational and back-office business processes to create FDIC, we help banks that are currently regulated by the OTS efficiencies and reduce costs. as they prepare for examinations by a new regulator. We also• Capital adequacy and strategic planning — Preparing and assist banks in evaluating charters that will change. And because monitoring your bank’s strategic plan, capital adequacy plan the Bureau of Consumer Financial Protection will be able to and budget. examine community banks at its discretion, we assist those banks• Planning, budgeting and forecasting — Improving your that are preparing for this new regulatory oversight. bank’s ability to execute its strategy by aligning operational and financial plans.• Business intelligence — Making informed, proactive business decisions by obtaining relevant, timely information.• Working capital management — Analyzing cash flow and developing recommendations for enhancing liquidity.• Portfolio profit improvement — Analyzing and quantifying your portfolio in order to identify where profit growth and potential can be attained.• Business transformation assessment — Identifying opportunities for reducing costs of processes while increasing the value they provide to the bank.• Project management office — Improving your bank’s ability to identify, address and mitigate risks related to the management, execution and control of key business projects.• Systems planning — Assisting with systems planning, selection and integration, including key systems associated with regulatory reporting, credit, capital and risk management, and data management. How can we help your bank? 17
Problem bank servicesInstitutions on the FDIC’s list of problem banks will needto take a number of steps to return to a healthy state. Ourprofessionals can help you:• Establish and monitor strategic and capital plans• Create liquidity management policies with contingency funding plans• Develop a lending policy with plans to reduce classified assets, and conduct a concentration analysis• Evaluate management’s plans and assist in talent acquisition of new management if necessary18 How can we help your bank?
Mortgage banking and securitizationservicesWe offer state-of-the-art audit, tax and advisory services designed We also offer structured finance services to meet the variousto add value and improve the operations of mortgage banks. needs of your transactions. From securitization due diligenceOur professionals understand the need to differentiate your services to bond administration and payment verificationbank from competitors that also provide mortgage financing and services, our professionals work with clients through all phasessecuritization services. Through established procedures, we help of the capital markets/structured finance process.mortgage banks implement a systematic, disciplined approach toevaluating and improving the effectiveness of their governance,risk management and control processes. Our professionals understand the accounting, valuation andregulatory implications related to various securitization vehicles,such as asset-backed securities (ABS), mortgage-backed securities(MBS), collateralized debt obligations (CDOs), collateralizedloan obligations (CLOs), collateralized bond obligations (CBOs)and collateralized mortgage obligations (CMOs). Recommended reading Over the past few years, private investors have lost their collective appetite for most mortgage-backed securities, particularly those in the nonconforming or “jumbo” category (those too large to be guaranteed or secured by a government entity, such as Fannie Mae or Freddie Mac). In April 2010, Redwood Trust, a California-based REIT, sponsored a $238 million residential prime jumbo mortgage securitization — the first deal of its kind since August 2008 — and breathed new life into a dormant market. Learn more about this transaction and how it may shape future securitizations in this issue of Currency: Private market for mortgage-backed securities shows signs of life. Visit www.GrantThornton.com/financialservices. How can we help your bank? 19
Valuation servicesUnderstanding what contributes to the value of your bank or its Following are some key questions to consider during abusiness assets can put you on the right track toward preserving business valuation:or growing that value. Valuations relate to investment analysis, • Is there goodwill on the balance sheet?capital budgeting, purchase price allocation, financial reporting, • Are there intangible assets with indefinite lives on the balancefresh-start accounting, taxable events, litigation support, and sheet?many other business and legal applications. • Has a merger or an acquisition been completed within the There are inherent financial, regulatory and legal factors that past year?should be considered carefully during the valuation process. • Is a merger or an acquisition contemplated over the next 12A thorough, supportable valuation requires the application to 18 months?of objective, accurate and advanced valuation methods • Could there be an impairment charge under ASC 360balanced with the education, training and experience that only (formerly SFAS 144)?accomplished valuation professionals can provide. Our insights, • Have stock options been granted in the past 12 months?coupled with our industry experience, can help you identify • Are key executives undertaking estate or gift tax planning?value drivers, maintain compliance with the latest U.S. and • Is a Code Section 338(h)(10) or (g) acquisition contemplated?international accounting standards, and demonstrate unbiased If so, and if foreign entities are involved, have statutorycredibility and transparency to your stakeholders and depositors. capital issues been addressed? Our Valuation Services professionals provide a full range of • Are there complex options or derivatives that have marketgeneral and banking industry-specific valuation services to public exposure?and private banks, private equity firms, governments, insurance • Does a complex tax structure exist, or are there tax changescarriers, attorneys, fiduciaries, private investors, family-owned that may entail moving intangible assets or equity frominterests, and high-net-worth individuals. subsidiary companies? Recommended reading Business Valuation Monitor is a newsletter covering value creation perspectives for corporate executives and the investment community in the areas of financial reporting, transaction support, damage calculations in disputes, intellectual property, bankruptcy proceedings and corporate tax planning. Visit www.GrantThornton.com/thinking and select “Newsletters.”20 How can we help your bank?
SSAE 16/SAS 70 reviewsSince April 1992, Statement on Auditing Standards No. 70 As banks make the transition from SAS 70 to SSAE 16, we(SAS 70) has been the U.S. standard for reporting on controls can help them navigate the process:at a service organization. In April 2010, the American Institute • Determine whether multiple service auditor reports will beof Certified Public Accountants (AICPA) issued Statement on necessaryStandards for Attestation Engagements (SSAE) 16, Reporting on • Review their existing monitoring and testing processes toControls at a Service Organization. SSAE 16 supersedes SAS 70 determine whether they are sufficient to support the writtenfor reports with periods ending on or after June 15, 2011. management assertion • Identify risks that threaten the achievement of control objectives Today’s banking landscape is more complicated than ever before. We have the experience to help your bank navigate issues from compliance with financial reform to failed bank acquisitions. Molly Curl Bank Regulatory National Advisory Partner How can we help your bank? 21
Forensic accounting and fraudinvestigationsWhen conducting an investigation or responding to allegations Our experienced investigators are trained to respond quicklyof fraud or a regulatory inquiry, a swift, strategic approach to and confidentially to allegations of white-collar crime, fraud,discreetly control damage is paramount. waste and abuse. Our credentialed specialists use established Grant Thornton’s multidisciplined Forensic professionals forensic investigation methods, such as interviews, digitalperform forensic accounting and use data analytics techniques forensics, forensic data analytics, financial analysis, recordsto gather, analyze and interpret financial and economic evidence research and background searches to reveal the root cause andto assist others in making informed decisions about business impact of the fraud.concerns and coordinate litigation support to prosecute for the We produce reliable findings, conclusions andretrieval of missing assets. recommendations that have been used successfully in civil, We can support institutions and their attorneys if they criminal and bankruptcy proceedings; corporate actions;become involved in litigation, dispute resolution or other legal governmental inquiries; regulatory investigations; and insuranceproceedings. Our team combines the diverse skills of CPAs, claim cases, among other matters.auditors, credentialed forensic technology specialists, CertifiedFraud Examiners (CFEs), and Certified Anti-Money LaunderingSpecialists (CAMS).22 How can we help your bank?
Tax servicesOur Tax professionals can assist institutions with tax compliance Compensation and benefitsand are familiar with provisions for income taxes and remodeling Our Compensation and Benefits professionals have considerableand repair expenditures for banks. We are available for both experience assisting boards of private and public banks withoutsourcing and co-sourcing of an institution’s tax function. In executive and board compensation issues. We work with boardsaddition, we can help banks identify federal and state tax savings and their compensation committees as they develop effectiveopportunities, as well as international tax complexities. We can programs focused on executive pay, director pay, retainers andalso assist banks as they navigate compensation and benefit equity compensation. We offer an array of services:issues, especially in light of new regulations. • Executive compensation review • Review and design of short- and long-term incentive plans • Benchmarking • Review of compliance with incentive compensation guidance • Review of compliance with control and governance policies related to compensation design and implementation • Nonqualified deferred compensation and supplemental executive retirement plan analysis • Board compensation review • Employment and change in control agreement review and diagnostics • Proxy consulting • Change in control and golden parachute tax gross-up diagnostic review • Performance metric analysis In addition to providing compensation services, our professionals can provide plan design and regulatory compliance services for employee benefit plans. How can we help your bank? 23
State tax savings opportunities Federal tax savings opportunities• Analysis of apportionment factor to determine proper • Assistance in reviewing debt modifications and restructurings compliance and tax savings opportunities, including (deemed tax exchanges under IRC Section 1001), including consideration of market-state sourcing and distinctive rules analysis of accelerated tax deductions and deferred revenue applicable to financial institutions recognition versus FAS 118 treatment• Determination of apportionment factor and potential • Analysis of conformity election associated with bad debt tax savings opportunities associated with the use of loan deduction, including possible revocation securitizations • Analysis of distressed asset acquisitions, including• Review of the financial institution classification for a nonperforming loan interest, contractual interest and market taxpayer, or for each member of a combined or affiliated discount calculations group • Determination of tax planning and structural opportunities• Review of combined return membership, including for FDIC-assisted acquisitions that maximize tax deferrals consideration of techniques to force or break a particular and identify basis deductions combined group • Analysis of fixed assets for accelerated deductions via cost• Review of financial institution corporate structure, including classifications and rebranding opportunities location of foreign entities • Review of federal tax credits such as low-income housing and• Analysis of state income and franchise (net worth) tax new market credits treatment of owners of real estate mortgage investment • Analysis of strategies with respect to tax-exempt income that conduit (or REMIC) residual interests complement recent case law and legislation• Analysis of state income tax impact of federal reorganizations • Development of tax hedging and investment strategies that and other transactions are consistent with regulatory financial reform• Review of gross receipts-based taxes, including the Texas • Transfer pricing reviews margin tax, Ohio commercial activity tax and Michigan • IRS audit assistance business tax• Review of state tax credit opportunities• Review of the sales and use tax procurement function to identify potential savings opportunities via structural planning• Review of sales and use tax treatment of computer software, digital products, and soft-dollar purchases• State and local tax audit controversy assistance24 How can we help your bank?
Remodeling and repair expenditures for banks International tax servicesOn March 10, 2008, the IRS and Treasury withdrew prior Each new offshore location and international businessproposed regulations and issued new proposed regulations transaction requires appropriate tax strategies to address globalunder Section 263 governing the deductibility of costs incurred risk, new regulations and varying tax rates. If your bank wantsin connection with the acquisition, production, or improvement to design an efficient tax structure or financing for an overseasof tangible property. The new proposed regulations clarify and acquisition, an existing venture or worldwide restructuring,expand upon rules contained in the existing final regulations Grant Thornton’s International Tax Services team can provideunder Sections 263(a) and 162 as well as existing case law and the advice you need. We can also guide you through theadministrative guidance. increasingly complex U.S. reporting requirements for outbound Remodeling expenditures: deduct or capitalize? Among foreign operations and inbound activities.the issues addressed in the proposed regulations is whether While you concentrate on growing your business, ourcertain types of repair and maintenance costs are capitalizable International Tax professionals can assist you with:or deductible. The proposed regulations contain an example • Foreign business investments — Structure investments inthat raises the possibility of deducting certain costs incurred to offshore businesses to manage U.S. and host country taxation byremodel and reconfigure branch locations and other facilities analyzing host country deductions, exemptions and incentives.when those remodeling and reconfiguration costs are undertaken • Cash management — Plan for the tax-efficient repatriationto provide for better merchandising, cosmetic alterations, and offshore use of foreign profits.rebranding and general “refreshing.” Because many taxpayers • Global tax compliance — Leverage our web-basedhave capitalized such costs for both financial statement and tax management tool and global tax resources to assist withpurposes, a review of capitalized remodeling costs might uncover proper compliance in the U.S. and abroad while keeping keysignificant deduction opportunities. information at your fingertips. Our Tax professionals will work with you to identify • Transfer pricing — Optimize intercompany transfers forpotential deduction opportunities by conducting a goods, services, royalties, intellectual property and loanscomprehensive capital expenditure review. This review may between companies in a cross-border context.identify items that were capitalized for GAAP and tax purposes, • Employee taxation — Manage U.S. and host country taxbut which qualify as current tax expenses. At your direction, we benefits for expatriate employees and their employers.will prepare an accounting method change request to help you • Regional specialty consulting — Structure your businessclaim the benefit of a deduction for such costs. activities as you pursue business in Asia, Latin America, We are respectful of your time. Recognizing that you and your Europe and other regions.staff have your own responsibilities, Grant Thornton’s approach • Cross-border acquisitions and reorganizations — Structureminimizes the time and effort required in compiling and analyzing cross-border acquisitions and reorganizations in ainformation necessary to prepare the method change request. tax-efficient manner. We have successfully completed many large-scalecapitalization review projects for major retailers and franchisees,financial institutions, distributors and manufacturers. Grant Thornton’s experience and our tax-oriented approachenable us to help you take advantage of this potential opportunity. How can we help your bank? 25
Audit servicesWe understand how important audited financial statements IPO servicesare to businesses, shareholders, owners, lenders, investors Grant Thornton has extensive experience providing accountingand other stakeholders. Our professionals have extensive and tax services to companies launching IPOs. We work closelyexperience performing bank audits, and we work with some with your securities counsel, underwriters and other advisers toof the country’s most successful private and public banks. Our facilitate the process and help minimize the disruptive effects itapproach is first to understand the business of your bank and can have on your accounting staff.the risks it faces and then to focus our attention where it matters We also use our experiences in working closely with themost. Our method is both effective and cost-efficient. SEC to guide you through the process and assist in identifying Ultimately, we see an audit as more than just numbers areas of focus ahead of the filing in an effort to reduce the timeand compliance; our goal is to help our clients have a better spent on resolving matters during the review process. Our teamunderstanding of their business. We consider it our job to keep consists of both SEC regulatory specialists, including formerour clients informed all year long of accounting, financial and SEC staffers, and technical accounting specialists.regulatory developments that may affect their business.You can also visit our Audit Committee Resource Center atwww.GrantThornton.com/auditcommittees to learn aboutemerging issues and to sign up to receive technical updates. We offer products and services designed for banks like yours,and our experienced professionals are dedicated to providingyou with distinctive client service. Our command of bankingindustry practices and technical issues will result in promptresponses to your questions. Grant Thornton can help yourbank maximize its potential. Recommended reading The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act) will change the landscape for financial services firms and financial institutions. Although central elements of the Act focus on regulating the financial services sector, the legislation also includes provisions affecting every public company, including enhanced SEC enforcement authority and additional corporate governance requirements. This white paper, Financial reform: What public companies and their audit committees need to know, outlines key financial reform issues that public companies and their audit committees should understand and actions they can take. Visit www.GrantThornton.com/financialreform for more.26 How can we help your bank?
Managing the filing requirements can be difficult and time-consuming. Our approach is designed to help you meet yourtimetable for filing and to deliver high quality by:• Strictly adhering to the Public Company Accounting Oversight Board (PCAOB) independence standards• Performing an audit of your financial statements• Providing consent to the use of our audit reports in offering documents as needed• Reviewing your accounting policies and financial statement disclosures for compliance with U.S. GAAP and SEC-related requirements• Working closely with securities counsel and other advisers in the review of the offering document• Reviewing your responses to SEC comment letters, questions or concerns prior to their submission• Working with other accounting firms that provide non-audit services or may have been involved in prior periods• Providing benchmark accounting policies and disclosures from comparable public companies• Providing comfort to underwriters on certain financial amounts disclosed in the registration statement upon request Grant Thornton has earned Wall Street’s trust and has alsoworked with, and been accepted by, the major underwriters thatare involved with our clients. How can we help your bank? 27
Accounting servicesWe offer banks practical advice about a number of technical In addition, our Accounting Guidance Resource Centersissues related to accounting guidance: offer a wealth of information on a range of topics, from fair value• The completeness and determination of critical accounting and International Financial Reporting Standards to business policies, including the allowance for loan losses, fair value combinations and lease accounting. Visit www.GrantThornton. and lease accounting com/accountingguidance.• The applicability of new accounting pronouncements• The formulation and improvement of accounting policies and practices• Areas of significant accounting and disclosure risk• Drafting of financial statement disclosures and regulatory filings• Preparation of your tax provision under U.S. GAAP, International Financial Reporting Standards (IFRS) and other foreign reporting standards Recommended reading Financial Bulletin covers regulations and developments affecting the financial services industry. This February 2010 issue, FASB update clarifies fair value measurement, explores how the amendments made by Accounting Standards Update (ASU) 2010-06, Improving Disclosures about Fair Value Measurements, clarify a fund’s process for applying valuation techniques to its fair-valued securities. Visit www.GrantThornton.com/financialservices for more.28 How can we help your bank?
Grant Thornton resourcesBringing meaningful information to our clients Accounting Guidance Resource CentersGrant Thornton Thinking webcasts, white papers and From fair value and IFRS to business combinations and leasepublications will keep you plugged in to what you need to accounting, our Accounting Guidance Resource Centers offerknow about both your industry and the complex regulatory a wealth of information on a range of accounting topics. Visitenvironment you face. Here are just some of our online www.GrantThornton.com/accountingguidance.resources and publications. Bank Executive Survey Financial Regulatory Reform Now in its 18th year, this Grant Thornton Resource Center survey, conducted in conjunction with Bank On July 21, 2010, President Obama Director magazine, takes the pulse of bankers signed into law the Dodd-Frank Wall Street on the state of the economy, top concerns, Reform and Consumer Protection Act (the plans for growth and more. Visit Act). The Act is significantly reshaping www.GrantThornton.com/banksurvey. financial regulation in the United States. OurFinancial Regulatory Reform Resource Center provides key FDIC-assisted transactions seriesinformation about the legislation, its effects and updates on new These white papers explore the accountingdevelopments. Visit www.GrantThornton.com/financialreform. and tax issues associated with the complexities of FDIC-assisted transactions. Visit Audit Committee Resource Center www.GrantThornton.com/troubledbanks. At a high level, audit committee members need to navigate through ever-changing SEC and other regulatory standards in today’s financial environment. Our Audit Committee Resource Center houses guides, tools and thought leadership to help audit committeemembers understand the latest financial standards whilehighlighting the overall implications for public companies. Visitwww.GrantThornton.com/auditcommittees.Visit www.GrantThornton.com/subscribeto learn more about our publications.30 How can we help your bank?
Contact usJack Katz Nichole JordanNational Managing Partner National Banking and SecuritiesFinancial Services Industry LeaderGrant Thornton LLP Grant Thornton LLPT 212.542.9660 T 212.624.5310E email@example.com E firstname.lastname@example.orgMolly Curl Dorsey BaskinBank Regulatory National Advisory National Technical Banking Partner andPartner Central Region Partner-in-Charge of theGrant Thornton LLP Professional Standards GroupT 214.561.2450 Grant Thornton LLPE email@example.com T 214.561.2328 E firstname.lastname@example.org How can we help your bank? 31
About Grant ThorntonGrant Thornton LLP was founded in 1924 and has 49 offices the world’s leading organisations of independently owned andnationwide, with more than 5,200 professionals serving more managed accounting and consulting firms. These firms providethan 24,000 clients. Grant Thornton LLP is the U.S. member assurance, tax and advisory services to privately held businessesfirm of Grant Thornton International Ltd, one of the six global and public interest entities. More than 2,500 partners provideaudit, tax and advisory organizations. In the U.S. visit clients with distinctive, high quality and personalised servicewww.GrantThornton.com. in over 100 countries. Grant Thornton International Ltd and The people in the independent firms of Grant Thornton its member firms are not a worldwide partnership, as eachInternational Ltd provide personalized attention and the member firm is a separate and distinct legal entity. For morehighest quality service to public and private clients in more information visit www.gti.org.than 100 countries. Grant Thornton International is one ofOffices of Grant Thornton LLPNational Office Georgia New York Utah175 West Jackson Boulevard Atlanta 404.330.2000 Long Island 631.249.6001 Salt Lake City 801.415.1000Chicago, IL 60604 Downtown 212.422.1000312.856.0200 Illinois Midtown 212.599.0100 Virginia Chicago 312.856.0200 Alexandria 703.837.4400Washington National Tax Office Oakbrook Terrace 630.873.2500 North Carolina McLean 703.847.75001250 Connecticut Ave. NW, Suite 400 Charlotte 704.632.3500Washington, DC 20036-3531 Kansas Raleigh 919.881.2700 Washington202.296.7800 Wichita 316.265.3231 Seattle 206.623.1121 OhioArizona Maryland Cincinnati 513.762.5000 Washington, D.C.Phoenix 602.474.3400 Baltimore 410.685.4000 Cleveland 216.771.1400 Washington, D.C. 202.296.7800California Massachusetts Oklahoma WisconsinIrvine 949.553.1600 Boston 617.723.7900 Oklahoma City 405.218.2800 Appleton 920.968.6700Los Angeles 213.627.1717 Tulsa 918.877.0800 Milwaukee 414.289.8200Sacramento 916.449.3991 MichiganSan Diego 858.704.8000 Detroit 248.262.1950 OregonSan Francisco 415.986.3900 Portland 503.222.3562San Jose 408.275.9000 MinnesotaWoodland Hills 818.936.5100 Minneapolis 612.332.0001 Pennsylvania Philadelphia 215.561.4200Colorado MissouriDenver 303.813.4000 Kansas City 816.412.2400 South Carolina St. Louis 314.735.2200 Columbia 803.231.3100FloridaFort Lauderdale 954.768.9900 Nevada TexasMiami 305.341.8040 Reno 775.786.1520 Austin 512.391.6821Orlando 407.481.5100 Dallas 214.561.2300Tampa 813.229.7201 New Jersey Houston 832.476.3600 Edison 732.516.5500 San Antonio 210.881.180032 How can we help your bank?
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