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Page 1: How can we help your bank?

How can we help your bank?Grant Thornton LLP services to the industry

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Contents

2 Regulatory compliance programs

4 Regulatory reform

6 Loan portfolio reviews and stress testing

7 Foreclosure reviews

8 Internal audit services

10 Corporate governance and internal control

12 Enterprise risk management

13 Mergers and acquisitions

16 Corporate advisory & restructuring services

17 Performance improvement

18 Problem bank services

19 Mortgage banking and securitization services

20 Valuation services

21 SSAE 16/SAS 70 reviews

22 Forensic accounting and fraud investigations

23 Tax

26 Audit

28 Accounting

30 Grant Thornton resources

31 Contact us

32 About Grant Thornton

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In an era of increased public scrutiny and complex financial reform and regulatory demands, banks, thrifts, credit unions and other financial institutions need straightforward business guidance delivered ethically and professionally.

At Grant Thornton LLP, our Audit, Tax and Advisory Services professionals are among the most experienced in the industry; we have been serving bankers for more than 80 years. Our dedicated Banking professionals bring unparalleled industry knowledge and insight, while our accessibility and responsiveness mean that relevant business guidance is provided in a timely manner and that issues are addressed appropriately.

We are also strategically committed to the industry. Our professionals are involved in a variety of industry organizations, including ABA, ICBA, NACHA, RMA, MBA, Bank Tax Institute, the AICPA and its Depository Institutions Expert Panel, among others.

Because of this experience with financial institutions and industry organizations, we can help you assess issues that are important to your bank. Moreover, we can provide you with practical insights to help you improve your overall strategy.

We offer a full range of banking industry services, providing personalized attention and the highest-quality service to public and private banks around the world.

We are strategically committed to the banking industry worldwide. Our professionals excel and take pride in helping financial institutions with their critical business needs.Jack Katz National Managing Partner, Financial Services

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We can assist in the development of a complete compliance program, as well as keep you informed of emerging regulatory developments and share best practices for establishing related policies and procedures.

Bank Secrecy Act/Anti-money laundering servicesWe offer leading Bank Secrecy Act/Anti-Money Laundering (BSA/AML) advisory services. Our Certified Anti-Money Laundering Specialists (CAMS) provide assistance to regional, national and international financial institutions, whether public or private. Our BSA/AML practice also works with businesses and government institutions as they navigate the current regulatory environment and develop comprehensive and effective BSA/AML programs, including implementing Office of Foreign Asset Control (OFAC) sanctions programs. Our BSA/AML services include:• BSA/AML compliance program development• Program assessment and review for recommended

enhancements• Independent program testing • Look-back investigations as part of regulator-mandated

actions or internal requirements • AML software readiness assessments

Regulatory compliance programs

Fair lending complianceWe can help your bank comply with fair lending regulations, including the Fair Housing Act and Equal Credit Opportunity Act.

Red Flags Rule complianceBusinesses are required to comply with the Red Flags Rule regulation (FTC 16 CFR 681) of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), which aims to prevent identity theft. The Federal Trade Commission (FTC) now requires compliance from all businesses that meet its definition of a creditor. Any entity — including a bank — that allows a customer to defer payment for goods or services is a creditor under the rule. Our Red Flags compliance services are designed to gather the information banks need to know in order to maintain compliance. Using a combination of automated surveys, structured interviews, and reviews of available documentation, we can deliver the necessary information you need to evaluate your Red Flags compliance program.

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Recommended readingBeginning 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.

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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 entities on the requirements of Regulation AB, as well as performing the services required in order to issue an attestation report.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act mandates sweeping changes across the banking industry. We can help banks as they maintain compliance with heightened regulatory requirements and related issues including:• New disclosure and reporting requirements• 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

Regulatory reform

Banks will receive updates on new developments from our Financial Regulatory Reform Task Force and can also read about them on our online Financial Regulatory Reform Resource Center at www.GrantThornton.com/financialreform. Learn more about our numerous resources at the end of this document.

Recommended readingOn 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.

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Our team of dedicated professionals provide a unique perspective on the issues financial institutions face in the current environment. We have the global resources to help meet your needs on a broad range of industry-related matters, wherever you do business.Nichole Jordan National Banking and Securities Industry Leader

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Loan reviews are performed using our established methodology, which is consistent with current regulatory objectives. We can tailor the scope of this review to fit your bank’s needs, or we can perform a full-scope assessment of your 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

concentrations

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Loan portfolio reviews and stress testing

Regulators now require many banks to stress test their loan portfolios using multiple economic scenarios. Our professionals can assist with modeling a variety of scenarios. We can also help your bank conduct loan portfolio reviews, perform remediation activities and train personnel.

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We can assist with any remediation efforts, particularly for public banks subject to SOX 404 and Federal Deposit Insurance Corporation Improvement Act (FDICIA) requirements, and we can coordinate with other reviewers. In addition, our foreclosure issues task force is monitoring this ever-changing situation and can keep our clients up to date on emerging developments.

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Foreclosure reviews

We can assist banks by evaluating their foreclosure processes and controls and helping them address related accounting and tax planning issues. Our professionals can help banks apply the Federal Housing Finance Agency (FHFA)’s foreclosure process framework by conducting risk assessments to identify deficiencies in documentation. By choosing a third party to conduct a foreclosure review, banks can instill confidence and thus minimize the possibility of conflicts with the FHFA or other regulators.

Recommended readingMortgage 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.

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Internal audit services

Our internal audit services can help you backstop the internal controls that safeguard your bank’s valuable business assets and processes, including data and IT systems. Our professionals can work with you to assess your corporate-level risk, identify the areas of greatest risk, and develop appropriate workplans and audit programs that you can use to mitigate those risks.

Following are examples of the internal audit services we offer:• Full outsourcing of internal audits• Co-sourcing with the existing internal audit function• Internal audit transformation• IT auditing • Process mapping and process reviews• Operational audits• Quality assurance reviews• Internal control documentation and testing• Specialized audits• Startup and development advice• Internal audit training

Benefits of an internal audit include:• Increased efficiency, effectiveness and functionality of the

internal audit function• Reduced costs of hiring, training and retaining quality

personnel• Compliance with applicable laws and regulations• Assessment of the risks associated with SOX as it pertains to

internal controls• Improved risk management, controls and governance

processes• Implementation of internal controls that help banks achieve

their goals and minimize surprises along the way• Enhanced communication with the audit committee

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Information technology audit servicesBanks today depend upon information systems for nearly all aspects of their financial and operational functions. Accordingly, the security of this information is very important to a bank’s fiscal and organizational health, as well as to its shareholders, regulators and compliance examiners. With the aid of our IT services, your bank can protect its data and overall system architecture from internal and external threats, while improving its overall IT functionality. Our team of dedicated professionals can help your bank take stock of its current information security environment and develop and implement best practices and optimal techniques. We can offer you a variety of services, including business 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.

Staff augmentationFor complex projects, we offer staff augmentation so your bank will not have to hire additional full-time employees for temporary needs and special projects. Having external professionals conducting your internal audit will also provide a new perspective in assessing your operations and bring technical knowledge to efficiently reach your project goals. Staff augmentation will also allow you time to interview potential candidates to find the right person or people for your team. Staff augmentation is a cost-effective alternative to temporarily adding staff or adding the wrong staff. Our professionals can complement your internal staff by providing open communication, schedule flexibility and fresh recommendations and insights.

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Corporate governance and internal control

With experienced professionals that specialize in monitoring risks and controls, Grant Thornton facilitates constructive interaction among your audit committee, management team, existing external auditor and internal audit group. Our knowledgeable and accredited professionals help banks reap a number of benefits:• Effective evaluation, documentation and sign-off procedures

to support management’s design and operation of the internal control system

• A foundation from which to start looking at enterprise-wide risks, based on recognized COSO standards

• Improved oversight by the audit committee and board of directors

• Increased efficiency, effectiveness and overall functionality of the internal audit function

• An industry-recognized framework and risk-based methodologies

Public banks must comply with the financial disclosure and internal control requirements of the Sarbanes-Oxley Act of 2002 (SOX) and related SEC rules. Private banks preparing for an IPO or seeking to improve their internal controls would also benefit from SOX compliance. Grant Thornton can help banks address their compliance needs and assist audit committees and boards of directors with the establishment of appropriate corporate governance procedures. Related services include the following:• Internal control documentation and evaluation services — Documentation of the internal control environment, testing

and evaluation of control effectiveness, assessment of risks, remediation of inefficiencies, and recommendations for improvement and continuous monitoring.

• Board of directors/audit committee services — Effectiveness assessments, director education, whistleblower programs, evaluation of codes of conduct, and compensation structure reviews.

Recommended readingIn 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.

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ComplianceSet® software for governance, risk and complianceAchieving cost-effective compliance with the requirements of SOX is beneficial regardless of where your bank is within the compliance life cycle. Grant Thornton’s ComplianceSet® software can help. ComplianceSet® is a Web-based software as a service, or SaaS, solution that serves as the technical foundation for a process-based approach to governance, risk and compliance requirements related to SOX, internal audit and enterprise risk management. The ComplianceSet® application provides management with a real-time view of a bank’s system of internal controls over financial reporting (ICFR). The application incorporates proven SOX compliance best practices, work approaches, thought leadership, methodologies, accelerators, training materials and process-based tools to help banks manage and measure their ongoing compliance processes.

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Enterprise risk management

In today’s business environment, with its increased market complexity, rapid globalization and heightened investor expectations, managing risks while providing value is more important than ever before. All banks — big or small, public or private — have risks that they must manage proactively to succeed. Enterprise risk management (ERM) serves as the leading approach to managing and optimizing risks. This approach involves strategically identifying, analyzing, overseeing and monitoring the potential risks to a bank. ERM enables a bank to determine how much uncertainty and risk are acceptable when adding value.

Our ERM methodology is customizable to a bank’s particular situation or needs. To help develop a strategy that works, we ask several specific, probing questions about current risk management processes:• What are your bank’s strategic objectives, risk management

philosophy, risk appetite and risk tolerance?• How does management identify strategic, operational,

reporting, compliance and other risks?• How does management assess and respond to risks? Does

management avoid, reduce, share or accept them?• What controls are in place to meet management’s risk needs

and how does management monitor these controls?

Our Professional Standards Group is dedicated to the details. We can help your bank understand how technical accounting issues affect the big picture.Dorsey BaskinNational Technical Banking Partner andCentral Region Partner-in-Charge of the Professional Standards Group

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Mergers and acquisitions

You’ll get the benefit of our experience with various transaction structures:• Acquisition or divestiture of entire banks• Carve-outs or spinoffs of specific divisions or product lines• Leveraged ESOPs

Our professionals can also assist with all due diligence matters in the compressed timeframe required by the FDIC in a failed bank acquisition:• Conducting loan reviews and assisting in the identification of

areas of risk and portfolio valuation• Using loan sampling techniques to assist with identification

of risk in the loan portfolio during due diligence• Inquiries and assessment of management, credit practices and

banking operations• Preparing a report or presentation of due diligence results for

management and the board

Financial reform may prompt institutions to consider selling in order to avoid shouldering additional regulatory burdens. Our professionals can help with all aspects of M&A activity, including integration, due diligence, valuations, regulatory application process, combined strategic and capital plans, combined pro forma financials, and accounting and tax compliance. In addition, we can assist thrifts with mutual-to-stock conversions.

Due diligenceBalancing your strategic and financial goals with opportunities and exposures when executing mergers and acquisitions can put a strain on your people and your budget. Our Transaction Advisory Services team can provide the support you need so that you can maximize value for the price paid. Our team members draw from their extensive experience with operating businesses and executing transactions to provide practical insight into each transaction. You can expect to work with professionals who have a solid foundation in accounting, finance and tax, along with significant consulting and banking industry experience. You will have instant access to resources and 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

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Our failed bank acquisition and FDIC-assisted transactions experience includes the following:• Assisting in targeting and negotiations with the FDIC in a

failed bank transaction• Preparing regulatory filings, such as the application and

business plan• 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

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Failed bank acquisitions and FDIC-assisted transactionsFailed banks can present growth opportunities for healthy institutions, with the risk mitigated by FDIC-assisted transactions. Our professionals can help acquirers with due diligence, purchase accounting, and systems and tax issues. After an acquisition, we can assist with the integration process, as well as compliance with FDIC agreements.

Recommended readingThese white papers explore the accounting and tax issues associated with the complexities of FDIC-assisted transactions.Visit www.GrantThornton.com/troubledbanks to learn more.

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Our professionals can assist acquiring banks with reviewing loans assumed from a failed bank for potential fraudulent activity. Such a review will include interviewing various bank personnel and reviewing loan documents, bank policies and board minutes for compliance with loan requirements, as well as reporting any fraudulent activity to the appropriate authorities.

Our professionals also have experience working on a contractor basis as part of the Receivership Assistance Contract (RAC) program to provide a full range of bank closing support functions: • Valuation services — Upon acquisition, we can help the

acquirer determine the fair value of the assets acquired and liabilities assumed.

• 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.

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In stressful economic situations, banks must carefully measure, report and forecast results, manage cash flow, and monitor compliance with loan covenants. Our cash management and financial modeling specialists address these issues, and develop both short-term and long-term solutions, as well as assist lenders and 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 integration

Corporate advisory & restructuring services

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Performance improvement

Our performance improvement services can help your bank improve the value of its operational and back-office business processes. Our comprehensive approach addresses the performance of people, processes and technology, focusing on methods for improving efficiency, reducing costs and creating value. We help banks improve their business in a number of core areas:• Finance transformation — Creating substantial benefits for

the entire bank by reinventing the finance and accounting organization.

• Business process re-engineering (BPR) — Streamlining operational and back-office business processes to create efficiencies and reduce costs.

• Capital adequacy and strategic planning — Preparing and monitoring your bank’s strategic plan, capital adequacy plan and budget.

• Planning, budgeting and forecasting — Improving your 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.

Regulatory examination readiness and remediation Tightened regulatory requirements make it increasingly important for any issues arising from regulatory examinations to be addressed thoroughly and promptly. We assist banks with remediating issues noted in regulatory examinations. This assistance includes participating in the development of remedial action plans and testing to determine whether issues have been addressed properly. In addition, with the OTS being eliminated and its powers being distributed among the Federal Reserve, the OCC and the FDIC, we help banks that are currently regulated by the OTS as they prepare for examinations by a new regulator. We also assist banks in evaluating charters that will change. And because the Bureau of Consumer Financial Protection will be able to examine community banks at its discretion, we assist those banks that are preparing for this new regulatory oversight.

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Institutions on the FDIC’s list of problem banks will need to take a number of steps to return to a healthy state. Our professionals 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 necessary

Problem bank services

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We offer state-of-the-art audit, tax and advisory services designed to add value and improve the operations of mortgage banks. Our professionals understand the need to differentiate your bank from competitors that also provide mortgage financing and securitization services. Through established procedures, we help mortgage banks implement a systematic, disciplined approach to evaluating and improving the effectiveness of their governance, risk management and control processes. Our professionals understand the accounting, valuation and regulatory implications related to various securitization vehicles, such as asset-backed securities (ABS), mortgage-backed securities (MBS), collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), collateralized bond obligations (CBOs) and collateralized mortgage obligations (CMOs).

Mortgage banking and securitization services

We also offer structured finance services to meet the various needs of your transactions. From securitization due diligence services to bond administration and payment verification services, our professionals work with clients through all phases of the capital markets/structured finance process.

Recommended readingOver 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.

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Following are some key questions to consider during a business valuation:• Is there goodwill on the balance sheet?• Are there intangible assets with indefinite lives on the balance

sheet? • Has a merger or an acquisition been completed within the

past year?• Is a merger or an acquisition contemplated over the next 12

to 18 months?• Could there be an impairment charge under ASC 360

(formerly SFAS 144)?• Have stock options been granted in the past 12 months?• Are key executives undertaking estate or gift tax planning?• Is a Code Section 338(h)(10) or (g) acquisition contemplated?

If so, and if foreign entities are involved, have statutory capital issues been addressed?

• Are there complex options or derivatives that have market exposure?

• Does a complex tax structure exist, or are there tax changes that may entail moving intangible assets or equity from subsidiary companies?

Understanding what contributes to the value of your bank or its business assets can put you on the right track toward preserving or growing that value. Valuations relate to investment analysis, capital budgeting, purchase price allocation, financial reporting, fresh-start accounting, taxable events, litigation support, and many other business and legal applications. There are inherent financial, regulatory and legal factors that should be considered carefully during the valuation process. A thorough, supportable valuation requires the application of objective, accurate and advanced valuation methods balanced with the education, training and experience that only accomplished valuation professionals can provide. Our insights, coupled with our industry experience, can help you identify value drivers, maintain compliance with the latest U.S. and international accounting standards, and demonstrate unbiased credibility and transparency to your stakeholders and depositors. Our Valuation Services professionals provide a full range of general and banking industry-specific valuation services to public and private banks, private equity firms, governments, insurance carriers, attorneys, fiduciaries, private investors, family-owned interests, and high-net-worth individuals.

Valuation services

Recommended readingBusiness 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.”

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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

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Since April 1992, Statement on Auditing Standards No. 70 (SAS 70) has been the U.S. standard for reporting on controls at a service organization. In April 2010, the American Institute of Certified Public Accountants (AICPA) issued Statement on Standards for Attestation Engagements (SSAE) 16, Reporting on Controls at a Service Organization. SSAE 16 supersedes SAS 70 for reports with periods ending on or after June 15, 2011.

SSAE 16/SAS 70 reviews

As banks make the transition from SAS 70 to SSAE 16, we can help them navigate the process:• Determine whether multiple service auditor reports will be

necessary• Review their existing monitoring and testing processes to

determine whether they are sufficient to support the written management assertion

• Identify risks that threaten the achievement of control objectives

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When conducting an investigation or responding to allegations of fraud or a regulatory inquiry, a swift, strategic approach to discreetly control damage is paramount. Grant Thornton’s multidisciplined Forensic professionals perform forensic accounting and use data analytics techniques to gather, analyze and interpret financial and economic evidence to assist others in making informed decisions about business concerns and coordinate litigation support to prosecute for the retrieval of missing assets. We can support institutions and their attorneys if they become involved in litigation, dispute resolution or other legal proceedings. Our team combines the diverse skills of CPAs, auditors, credentialed forensic technology specialists, Certified Fraud Examiners (CFEs), and Certified Anti-Money Laundering Specialists (CAMS).

Forensic accounting and fraud investigations

Our experienced investigators are trained to respond quickly and confidentially to allegations of white-collar crime, fraud, waste and abuse. Our credentialed specialists use established forensic investigation methods, such as interviews, digital forensics, forensic data analytics, financial analysis, records research and background searches to reveal the root cause and impact of the fraud. We produce reliable findings, conclusions and recommendations that have been used successfully in civil, criminal and bankruptcy proceedings; corporate actions; governmental inquiries; regulatory investigations; and insurance claim cases, among other matters.

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Tax services

Our Tax professionals can assist institutions with tax compliance and are familiar with provisions for income taxes and remodeling and repair expenditures for banks. We are available for both outsourcing and co-sourcing of an institution’s tax function. In addition, we can help banks identify federal and state tax savings opportunities, as well as international tax complexities. We can also assist banks as they navigate compensation and benefit issues, especially in light of new regulations.

Compensation and benefits Our Compensation and Benefits professionals have considerable experience assisting boards of private and public banks with executive and board compensation issues. We work with boards and their compensation committees as they develop effective programs focused on executive pay, director pay, retainers and equity compensation. We offer an array of services:• 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.

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State tax savings opportunities• Analysis of apportionment factor to determine proper

compliance and tax savings opportunities, including consideration of market-state sourcing and distinctive rules applicable to financial institutions

• Determination of apportionment factor and potential tax savings opportunities associated with the use of loan securitizations

• Review of the financial institution classification for a taxpayer, or for each member of a combined or affiliated group

• Review of combined return membership, including consideration of techniques to force or break a particular combined group

• Review of financial institution corporate structure, including location of foreign entities

• Analysis of state income and franchise (net worth) tax treatment of owners of real estate mortgage investment conduit (or REMIC) residual interests

• Analysis of state income tax impact of federal reorganizations and other transactions

• Review of gross receipts-based taxes, including the Texas margin tax, Ohio commercial activity tax and Michigan 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 assistance

Federal tax savings opportunities• Assistance in reviewing debt modifications and restructurings

(deemed tax exchanges under IRC Section 1001), including analysis of accelerated tax deductions and deferred revenue recognition versus FAS 118 treatment

• Analysis of conformity election associated with bad debt deduction, including possible revocation

• Analysis of distressed asset acquisitions, including nonperforming loan interest, contractual interest and market discount calculations

• Determination of tax planning and structural opportunities for FDIC-assisted acquisitions that maximize tax deferrals and identify basis deductions

• Analysis of fixed assets for accelerated deductions via cost classifications and rebranding opportunities

• Review of federal tax credits such as low-income housing and new market credits

• Analysis of strategies with respect to tax-exempt income that complement recent case law and legislation

• Development of tax hedging and investment strategies that are consistent with regulatory financial reform

• Transfer pricing reviews• IRS audit assistance

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Remodeling and repair expenditures for banksOn March 10, 2008, the IRS and Treasury withdrew prior proposed regulations and issued new proposed regulations under Section 263 governing the deductibility of costs incurred in connection with the acquisition, production, or improvement of tangible property. The new proposed regulations clarify and expand upon rules contained in the existing final regulations under Sections 263(a) and 162 as well as existing case law and administrative guidance.

Remodeling expenditures: deduct or capitalize? Among the issues addressed in the proposed regulations is whether certain types of repair and maintenance costs are capitalizable or deductible. The proposed regulations contain an example that raises the possibility of deducting certain costs incurred to remodel and reconfigure branch locations and other facilities when those remodeling and reconfiguration costs are undertaken to provide for better merchandising, cosmetic alterations, rebranding and general “refreshing.” Because many taxpayers have capitalized such costs for both financial statement and tax purposes, a review of capitalized remodeling costs might uncover significant deduction opportunities.

Our Tax professionals will work with you to identify potential deduction opportunities by conducting a comprehensive capital expenditure review. This review may identify items that were capitalized for GAAP and tax purposes, but which qualify as current tax expenses. At your direction, we will prepare an accounting method change request to help you claim the benefit of a deduction for such costs.

We are respectful of your time. Recognizing that you and your staff have your own responsibilities, Grant Thornton’s approach minimizes the time and effort required in compiling and analyzing information necessary to prepare the method change request.

We have successfully completed many large-scale capitalization review projects for major retailers and franchisees, financial institutions, distributors and manufacturers.

Grant Thornton’s experience and our tax-oriented approach enable us to help you take advantage of this potential opportunity.

International tax servicesEach new offshore location and international business transaction requires appropriate tax strategies to address global risk, new regulations and varying tax rates. If your bank wants to design an efficient tax structure or financing for an overseas acquisition, an existing venture or worldwide restructuring, Grant Thornton’s International Tax Services team can provide the advice you need. We can also guide you through the increasingly complex U.S. reporting requirements for outbound foreign operations and inbound activities.

While you concentrate on growing your business, our International Tax professionals can assist you with:• Foreign business investments — Structure investments in

offshore businesses to manage U.S. and host country taxation by analyzing host country deductions, exemptions and incentives.

• Cash management — Plan for the tax-efficient repatriation and offshore use of foreign profits.

• Global tax compliance — Leverage our web-based management tool and global tax resources to assist with proper compliance in the U.S. and abroad while keeping key information at your fingertips.

• Transfer pricing — Optimize intercompany transfers for goods, services, royalties, intellectual property and loans between companies in a cross-border context.

• Employee taxation — Manage U.S. and host country tax benefits for expatriate employees and their employers.

• Regional specialty consulting — Structure your business activities as you pursue business in Asia, Latin America, Europe and other regions.

• Cross-border acquisitions and reorganizations — Structure cross-border acquisitions and reorganizations in a

tax-efficient manner.

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26 How can we help your bank?

IPO servicesGrant Thornton has extensive experience providing accounting and tax services to companies launching IPOs. We work closely with your securities counsel, underwriters and other advisers to facilitate the process and help minimize the disruptive effects it can have on your accounting staff. We also use our experiences in working closely with the SEC to guide you through the process and assist in identifying areas of focus ahead of the filing in an effort to reduce the time spent on resolving matters during the review process. Our team consists of both SEC regulatory specialists, including former SEC staffers, and technical accounting specialists.

We understand how important audited financial statements are to businesses, shareholders, owners, lenders, investors and other stakeholders. Our professionals have extensive experience performing bank audits, and we work with some of the country’s most successful private and public banks. Our approach is first to understand the business of your bank and the risks it faces and then to focus our attention where it matters most. Our method is both effective and cost-efficient. Ultimately, we see an audit as more than just numbers and compliance; our goal is to help our clients have a better understanding of their business. We consider it our job to keep our clients informed all year long of accounting, financial and regulatory developments that may affect their business. You can also visit our Audit Committee Resource Center at www.GrantThornton.com/auditcommittees to learn about emerging 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 providing you with distinctive client service. Our command of banking industry practices and technical issues will result in prompt responses to your questions. Grant Thornton can help your bank maximize its potential.

Audit services

Recommended readingThe 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.

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Managing the filing requirements can be difficult and time- consuming. Our approach is designed to help you meet your timetable 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 also worked with, and been accepted by, the major underwriters that are involved with our clients.

How can we help your bank? 27

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Accounting services

We offer banks practical advice about a number of technical issues related to accounting guidance:• The completeness and determination of critical accounting

policies, including the allowance for loan losses, fair value and lease accounting

• 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

In addition, our Accounting Guidance Resource Centers offer a wealth of information on a range of topics, from fair value and International Financial Reporting Standards to business combinations and lease accounting. Visit www.GrantThornton.com/accountingguidance.

Recommended readingFinancial 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.

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30 How can we help your bank?

Grant Thornton resources

Bringing meaningful information to our clientsGrant Thornton Thinking webcasts, white papers and publications will keep you plugged in to what you need to know about both your industry and the complex regulatory environment you face. Here are just some of our online resources and publications.

Financial Regulatory Reform Resource Center 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.

Audit Committee Resource Center 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 committee members understand the latest financial standards while highlighting the overall implications for public companies. Visit www.GrantThornton.com/auditcommittees.

Accounting Guidance Resource CentersFrom fair value and IFRS to business combinations and lease accounting, our Accounting Guidance Resource Centers offer a wealth of information on a range of accounting topics. Visit www.GrantThornton.com/accountingguidance.

Bank Executive Survey Now in its 18th year, this Grant Thornton survey, conducted in conjunction with Bank Director magazine, takes the pulse of bankers on the state of the economy, top concerns, plans for growth and more. Visit www.GrantThornton.com/banksurvey.

FDIC-assisted transactions series These white papers explore the accounting and tax issues associated with the complexities of FDIC-assisted transactions. Visit www.GrantThornton.com/troubledbanks.

Visit www.GrantThornton.com/subscribe to learn more about our publications.

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How can we help your bank? 31

Contact us

Jack KatzNational Managing PartnerFinancial ServicesGrant Thornton LLPT 212.542.9660E [email protected]

Nichole JordanNational Banking and Securities Industry LeaderGrant Thornton LLPT 212.624.5310E [email protected]

Dorsey BaskinNational Technical Banking Partner andCentral Region Partner-in-Charge of the Professional Standards GroupGrant Thornton LLPT 214.561.2328E [email protected]

Molly CurlBank Regulatory National Advisory PartnerGrant Thornton LLPT 214.561.2450E [email protected]

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the world’s leading organisations of independently owned and managed accounting and consulting firms. These firms provide assurance, tax and advisory services to privately held businesses and public interest entities. More than 2,500 partners provide clients with distinctive, high quality and personalised service in over 100 countries. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity. For more information visit www.gti.org.

About Grant Thornton

Grant Thornton LLP was founded in 1924 and has 49 offices nationwide, with more than 5,200 professionals serving more than 24,000 clients. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. In the U.S. visit www.GrantThornton.com. The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton International is one of

Offices of Grant Thornton LLP

National Office 175 West Jackson BoulevardChicago, IL 60604312.856.0200

Washington National Tax Office1250 Connecticut Ave. NW, Suite 400Washington, DC 20036-3531202.296.7800

ArizonaPhoenix 602.474.3400

CaliforniaIrvine 949.553.1600Los Angeles 213.627.1717Sacramento 916.449.3991San Diego 858.704.8000 San Francisco 415.986.3900San Jose 408.275.9000Woodland Hills 818.936.5100

Colorado Denver 303.813.4000

FloridaFort Lauderdale 954.768.9900Miami 305.341.8040Orlando 407.481.5100Tampa 813.229.7201

GeorgiaAtlanta 404.330.2000

IllinoisChicago 312.856.0200Oakbrook Terrace 630.873.2500

KansasWichita 316.265.3231

MarylandBaltimore 410.685.4000

MassachusettsBoston 617.723.7900

MichiganDetroit 248.262.1950

MinnesotaMinneapolis 612.332.0001

MissouriKansas City 816.412.2400St. Louis 314.735.2200

NevadaReno 775.786.1520

New JerseyEdison 732.516.5500

New YorkLong Island 631.249.6001Downtown 212.422.1000Midtown 212.599.0100

North CarolinaCharlotte 704.632.3500Raleigh 919.881.2700

OhioCincinnati 513.762.5000Cleveland 216.771.1400

OklahomaOklahoma City 405.218.2800Tulsa 918.877.0800

OregonPortland 503.222.3562

PennsylvaniaPhiladelphia 215.561.4200

South CarolinaColumbia 803.231.3100

TexasAustin 512.391.6821Dallas 214.561.2300Houston 832.476.3600San Antonio 210.881.1800

UtahSalt Lake City 801.415.1000

VirginiaAlexandria 703.837.4400McLean 703.847.7500

WashingtonSeattle 206.623.1121

Washington, D.C.Washington, D.C. 202.296.7800

WisconsinAppleton 920.968.6700Milwaukee 414.289.8200

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This Grant Thornton LLP document is based on general concepts and terms is not a comprehensive analysis of the subject matters covered, and may be subject to change in part because any existing or proposed accounting and other literature summarized herein may be amended or may change before it is issued in final form. The views and interpretations expressed in the document are those of the authors, and the document is not intended to provide accounting or other advice or guidance with respect to the matters covered. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this document. Accordingly, this document should not be used as a basis for any decision or action that may affect your business. Grant Thornton LLP, its affiliates, and related entities, shall not be responsible for any loss sustained by any person or entity relying on this document. For additional information on matters covered in this document, contact your Grant Thornton LLP adviser.

Tax Professional Standards StatementIn accordance with certain professional standards, we inform you that this document supports Grant Thornton LLP’s marketing of professional services, and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document, we encourage you to contact us or an independent tax advisor to discuss the potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this document is not intended by Grant Thornton to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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© Grant Thornton LLPAll rights reservedU.S. member firm of Grant Thornton International Ltd

The people in the independent firms of Grant ThorntonInternational Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.

In the U.S., visit Grant Thornton LLP at www.GrantThornton.com.