
7 minute read
Industry News
INDUSTRY NEWS Arkansas Universities Take Part in CSBS Community Bank Case Study
value of future cash flows which also includes the terminal value at some future date. If the present value of the future cash flows for your organization is less than an offer to sell your bank, then you should sell because you are getting more value than your current value. Conversely, you wouldn’t sell your bank if the offer was less than the present value of the future cash flows. Sellers also need to take into account the type of consideration received and the tax consequences of each. Cash has no risk but may be a taxable event depending upon your basis. Also, the value of that cash producing future income is dependent upon how it is reinvested. Stock carries the risk of the acquiring institution. You would also be able to avoid taxes until the stock is sold and could have upside if the acquirer is a well-managed and profitable institution. However, with a minor position in the acquiring institution, you also give up control of your investment. So back to the question “Is it a good deal?” – could be, it just depends!
Mark Owen, President of the Bank of Star City, works with one of two University of Arkansas at Pine Bluff teams taking part in the CSBS Community Bank Case Study Competition.
from The Banker’s Advocate, March 31, 2016 Students from four universities in Arkansas – more schools than any other state – are participating in the 2016 Community Bank Case Study competition, sponsored by the Conference of State Bank Supervisors (CSBS). A total of 33 teams representing 25 colleges and universities in 18 states are involved in the competition, including the following four institutions in Arkansas: Arkansas State University; the University of Arkansas, Fayetteville; the University of Arkansas at Pine Bluff; and the University of Central Arkansas. In the nationwide team competition, undergraduate college students – under the guidance of a school faculty member – have established partnerships with local community banks. The teams are conducting original research to: Assess the impact of the bank’s small-business lending efforts on the community. Analyze how the institution’s smallbusiness lending affects financial performance. Evalute the institution’s management of small-business lending. The banks with which the Arkansas schools are working are: Arkansas State University: Three separate teams are each working with Farmers Bank and Trust, Blytheville. The teams’ adviser is David Kern, Ph.D., Associate Professor of Finance. University of Arkansas, Fayetteville: A single team is working with Today’s Bank, Huntsville. The team’s adviser is Tim Yeager, Ph.D., Associate Professor of Finance. University of Arkansas at Pine Bluff: Two teams are working separately with their own banks – Peoples Bank, Sheridan, and Bank of Star City. The teams’ adviser is Joon “John” J. Park, Ph.D., Associate Professor of Finance. University of Central Arkansas: Five separate teams are each working with First Service Bank, Greenbrier. The teams’ adviser is Alex Fayman, Ph.D., Associate Professor of Finance. The teams will be responsible for submitting a paper consisting of up to 25 pages that discusses their case-study findings, and a video that highlights the findings. The deadline to submit the paper and video is May 2, 2016. The winning team will be announced in May during the 2016 CSBS State-Federal Supervisory Forum in Denver and students on the winning team will have an opportunity to attend the “Community Banking in the 21st Century” research and policy conference in 2016. The fourth annual conference is scheduled for September 28-29 at the Federal Reserve Bank of St. Louis. Organizers of the conference are CSBS and the Federal Reserve System. In addition, the members of the winning team each will win a $1,000 scholarship.

By Richard S. Plotkin from The Banker’s Advocate, March 31, 2016 The soon-to-be-issued credit-impairment model does not prescribe a specific modeling technique or loss methodology, according to the Financial Accounting Standards Board (FASB). FASB reiterated this guidance at a “round table” session with community bankers, regulators, auditors and banking lobbyists to discuss implementation of the Current Expected Credit Loss (CECL) model, according to an article posted February 11, 2016, on the website of BKD, LLP, a national CPA and advisory firm. The meeting was held February 4, 2016, at FASB headquarters in Norwalk, Connecticut. Among those attending were representatives of financial institutions, and senior officials from the federal banking regulatory agencies, Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB) and Conference of State Bank Supervisors (CSBS). The bankers emphasized the need for an agreement among banking regulators, SEC, auditors and PCAOB on an acceptable level of precision needed to support the increased judgment the new standard will require. Regulators expressed their commitment to make their supervision of CECL implementation reasonable for community banks. The American Bankers Association has expressed concern that the lack of capacity for complex financial modeling will put community banks at a competitive disadvantage. FASB said the standard does not require the use of a specific modeling technique or loss methodology, and that banks can continue using a FAS 114 approach to evaluate individual loans. Robert Storch, the Chief Accountant of the Federal Deposit Insurance Corporation, noted that with some No Specific Methodology Required for Credit Model adjustments, methodologies currently used would be appropriate for smaller banks. These methodologies include Excel spreadsheets, used by 84 percent of community banks in the U.S. On February 22, FASB responded to a bipartisan letter from 62 members of Congress who requested that the organization provide more information about its consideration of more practical alternatives to a complex modeling requirement. The members of Congress signing on to the January 29 letter also inquired about the impact of the accounting standard on general credit availability and economic growth. FASB responded, in part: “The proposed standard does not prescribe that organizations use specific estimation methods in any specific circumstance, but rather it allows the latitude for an organization to apply judgment to develop estimation methods that are appropriate and practical for the circumstance. In essence, historical experience remains the foundation of the estimate. “We have already incorporated these changes into the proposed standard which will allow all financial institutions (including community banks and credit unions) to leverage their existing processes. These changes make clear that a community bank or credit union will not be required to perform complex modeling or hire outside consultants.” The final standard is being drafted after a prolonged period of review. Issuance is expected in the second quarter of 2016. The most recent Exposure Draft of the proposed standards update, issued on December 20, 2012, is on the FASB website. The implementation date is not until 2019 for public business entities that meet the definition of an “SEC filer.” Public business entities not meeting the definition of an SEC filer, and all nonpublic business entities, have until 2020 to implement the standard. In 2011, the Office of the Comptroller of the Currency and Federal Reserve estimated loan-loss reserves would have to be increased by 30 percent to 50 percent when the model was implemented. This projection was based on conventional expectations and 2010 data. Now, however, the American Bankers Association, citing a survey conducted by financial services provider Keefe, Bruyette & Woods, predicts a median increase for reserves of 3 percent for small and midsized banks.
PUT THE TEAM TO WORK FOR YOU.






Crews & Associates is proud to be named the top bond underwriter in Arkansas.
Crews & Associates is committed to serving local communities. So we are honored to be ranked the
top underwriter of Arkansas bonds again for 2015, financing projects totaling more than twice the
amount of any other firm. Are you planning a project or wanting to lower your interest rates? Our
team is eager to help. Contact us today and see what Crews can do for you.
INVESTMENT BANKING | BONDS PUBLIC FINANCE | LEASES | LOANS
A First Security Company | Investment Bankers