v20_11 financial institutions fair value survey

7/30/2019 V20_11 Financial Institutions Fair Value Survey

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I. First Pass: Equity- Changes, But Not What Youd Expect.......................................... 1

II. Second Pass: Assets & Liabilities- More Of The Above ...................................................................... 6

III. Taking Fair Values At Face Value- Only Thing You Can Do ............................................................. 10

Table of Contents

President: Jack Ciesielski

Research Co-ordinator: Paula Tanabe, CPA

Research Associate: Melissa Herboldsheimer, CPA

Administration: Brenda Rappold

R.G. Associates is:

THE ANALYST'S

ACCOUNTING OBSERVERJack T. Ciesielski, CPA, CFA

Volume 20, No. 11 September 26, 201

Fair Value Reporting: A Financial Institutions SurveyA year ago, the FASBs proposal for revamping financial instrument accounting was the burning accounting iss

of the day. In the end, the FASB got singed by the fire. In the face of staunch opposition to the proposal from just about eve

quarter -preparers, regulators, and even investors - the FASB pulled in its horns and moved to a more IFRS-like stanc

one that perpetuates amortized cost as the fundamental measure for financial instruments.

Theres a good chance that the FASBs new-yet- old-fashioned approach may be re-exposed for comment: its muc

different than the May 2010 financial instruments proposal. One thing thats unlikely to change are the quarterly fair valu

disclosures for financial instruments. In fact, they might be staked out parenthetically in the balance sheet - a much mo

investor-friendly treatment than their current burial in the footnotes.

Whether theyre on the face of the balance sheet or tucked into the footnotes, theres still information in them f

investors to consider. What follows here is a survey of the differences between amortized cost and fair value for the 453 no

REIT financial institutions contained in the Russell 3000.

I. First Pass: Equity

Imagine an alternate reality where the FASB required all financial instruments to be reported at fair value - just lik

it wanted to do a year ago. The key to that alternate reality is contained in the footnotes each quarter; the fair values of a

financial instruments remains a required disclosure for companies of all stripes. Enterprising investors can revise balan

sheets to reflect all financial instruments at fair value, include an estimated tax effect, and observe the net impact on equit

Owing to the composition of their assets, financial institutions experience a greater impact from this exerci

than other industries. This survey focuses only on financial institutions because theyre the richest vein of disclosures

be mined. The table below summarizes the effects of the mark-to-market exercise on the common equity of the 453 no

REIT financial institutions in the Russell 3000.

At 2Q2011:

($inmillions) #

CommonEquity: FVMarks/

Reported

Equity

FinancialLeverageBasedOn:

ReportedNetFairValue

Marks

Adjustedfor

FVMarks

Adjusted

Equity

Reported

Equity Differenc

CommercialBanks 170 $398,954.8 ($24,828.1) $374,126.7 6.2% 10.01 9.41 0.6

RegionalBanks 165 233,868.9 (16,402.1) 217,466.8 7.0% 9.68 9.04 0.64

DiversifiedBanks 5 165,085.9 (8,426.0) 156,659.9 5.1% 10.47 9.95 0.52

DiversifiedFinancialServices 23 613,678.7 (25,462.2) 588,216.5 4.1% 11.23 10.79 0.44

Thrifts&MortgageFinance 51 45,490.3 (106.1) 45,384.2 0.2% 7.91 7.74 0.17

Insurance 106 766,114.4 (6,457.6) 759,656.8 0.8% 6.31 6.23 0.08

CapitalMarkets 86 325,628.0 (1,223.1) 324,404.9 0.4% 9.53 9.49 0.04

ConsumerFinance 17 62,906.8 2,141.1 65,047.9 3.4% 10.01 10.36 (0.35

GrandTotal 453 $2,212,773.0 ($55,936.0) $2,156,837.0

2.5% 8.92 8.70 0.22

Copyright2011,R.G.Associates,Inc.TheAnalystsAccountingObserverisatrademarkofR.G.Associates,Inc.

ForpurposesofclientsofR.G.Associates,Inc.only.Reproductionprohibitedwithoutpermission.Seenoteonbackpage.


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The table is sorted in descending order of the effect of fair values upon each financial industrys category of commo

equity (the fair value marks to common equity column) and also in terms of each industrys financial leverage (total asse

divided by common equity). As might be expected, banks experience the greatest impact on capital from the restateme

exercise. At the other end of the range, the capital markets firms experience the least capital impact, because they wide

employ fair value reporting of assets and liabilities by default.

The purpose of restating the shareholders equity is to make something analytically useful from th

information. Fair values may be suspect, especially when theyre notbased on quoted prices of securities trading in activ

liquid markets - when based on models developed by the reporting companies. Yet overstatement of values does not see

to be a problem, at least on the first pass. If anything, the financial instruments fair values seem to be saying that there

overstatement present in amortized cost amounts. Assets on financial institutions balance sheets are not likely to fetch the

stated amount in a sale, even though managers hope to realize such amounts someday.

Fair value reporting is not perfect, but neither is amortized cost reporting. At least fair value reporting gives investo

an idea of what a balance sheet is worth in the here and now, and not in terms of some hoped-for future values. Knowin

what the assets of a firm might fetch in a current market gives investors a more informed view of a firms liquidity - an

a better base from which to build investment decisions. Capital levels are a fine yardstick for measuring a firms ability

withstand losses, but liquidity is another important aspect of a firms ability to survive catastrophes. Capital adequacy

merely an illusion if assets arent worth their stated value when the need arises to liquidate them.

Fair value reporting improves the investors picture of liquidity when it shows the values that assets might actual

fetch in the marketplace and when it shows the values at which liabilities could actually be settled. Some critics deride

as theoretical values because the firms managers dont intendto liquidate the assets or settle the liabilities. While tru

a managements intention to hold securities until they return to amortized cost doesnt make them any more realistic tha

their fair values - even if theyre only estimates of fair value rather than values observed in active, liquid markets.

More observations from the table:

Fairvaluedisclosureshaveappearedinthefootnotesofquarterly

financial statements for the last several years. To compare fair

valuesof financial instruments to reportedvalues,a surveywas

madeofthefairvaluedisclosuresfor453financialinstitutionsinthe

Russell3000,excludingREITS,attheendofthesecondquarter.

Asagroup,therestatementofbalancesheetstothefairvalues

reportedbyfirmsfortheirfinancialinstrumentsresultedinacutto

commonequity about2.5%intheaggregate,andariseinfinancial

leverageof22basispoints.

Withintheaggregate,therewasplentyofvariation.Theregional

bankgroupsawa7.0%dropincommonequity,whiletheconsumer

finance group saw a 3.4% increase in equity due to four large

beneficiariesoffairvaluetreatment.

DespitewidespreadoppositiontoFASBsplanstointroducefai

valueaccountingtobalancesheets,therestatementtofairvalue

wasrelativelybenign.Only190firmssawdeclines inequityasa

result, while 166 firms saw common equity increases. The

remaindershowednochange.

Asurprisingnumberoffirmssawincreasesinassets:267ofthem

Only76sawmarkdownsonafairvaluebasis unexpectedlylowin

aperiodofeconomicdistress.Therestshowednochange.

The samepatternexisted for liabilities:moreof the liabilitie

increasedonafairvaluebasis,indicatingfavorablecreditstanding

DuetoalongexistingflawinGAAP,fairvaluesforassetsmigh

notbeagenuineexitvaluecalculation,whichmightexplainsome

ofthehigherfairvalues.

Executive Summary

AccountingStandardCodification8251050requiresfirmstodisclosethefairvaluesofallfinancialinstruments.UsingDirectEdga

software,the10QdisclosureswereisolatedforallnonREITfinancialfirmsintheRussell3000.(Whilemanyconsiderthemtobeavarietyoffinancialinstitutions,REITshavecomparativelylittlebywayoffinancialinstrumentsintheirassetbase,sotheywere

excludedfromthedatabasetokeepthestudyfocusedonthefinancialfirmsmostlikelytoprovidefairvaluedisclosureexamples.

Totalassetsandtotalliabilitiesatfairvalueweredeterminedbyadjustingreportedamounts(sourcedfromS&PsResearchInsigh

database)forthedifferencesbetweenreportedandfairvalues.A35%taxeffectwasdeterminedonthenetassetandliabilit

differencesbetweenfairvalueandreportedvalues;wherethenettaxeffectresultedinanasset,totalassetsatfairvaluewere

increasedfortheestimateddeferredtaxasset,andwhenthenettaxeffectresultedinaliability,totalliabilitieswereincreasedfo

theestimateddeferredliability.Thesumofalldifferenceswasnettedagainststockholdersequitytodeterminetheeffectoffai

valuereportingoncapital.

Themethodologyencompassesallthatinvestorscandowithmeredisclosuresoffairvalues.Thetaxratemightdifferwidelyfrom

firmtofirm;moreimportantly,thequalityofthedisclosuresprobablyvariesfromfirmtofirm.Thepointofthestudyistosee

whatdirectionfairvaluereportingmightleadinvestors:tobevaguelyright,ratherthanexactlywrong.Whilenotassatisfying

asfullfairvaluereportingbyfirms,ithastobesufficientfornow.

Methodology


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Capital effects of fair value reporting vary by the kind of bank. Regional banks, with a larger concentration

assets in loans than their diversified big brothers, show the greatest markdowns in equity and the greatest increase i

financial leverage. Below, the regional banks with financial leverage increases of 1.00 or more.

Regional Banks: Largest Negative Capital Impact At 2Q2011

Common

Equity: FV

Marks/

Reported

Equity

FinancialLeverage

Based

On:

($inmillions) Reported

NetFairValue

Marks

Adjustedfor

FVMarks

Adjusted

Equity

Reported

Equity Difference

RegionalBanks $233,868.9 ($16,402.1) $217,466.9 7.0% 9.68 9.04 0.6

SunBancorp 298.8 (170.0) 128.8 56.9% 23.67 10.75 12.9

Popular 3,913.9 (2,236.4) 1,677.5 57.1% 22.02 9.97 12.0

WesternAllianceBancorp 483.3 (163.9) 319.4 33.9% 19.89 13.47 6.4

RegionsFinancial 13,489.0 (5,533.5) 7,955.6 41.0% 15.8 9.7 6.1

PeoplesBancorp 200.7 (75.3) 125.3 37.5% 13.98 8.98 5.0

PrivateBancorp 1,021.0 (312.0) 709.0 30.6% 16.67 11.87 4.8

AssociatedBancCorp 2,741.1 (1,100.0) 1,641.1 40.1% 12.82 8.04 4.7

SCBTFinancial 371.1 (104.3) 266.8 28.1% 14.04 10.35 3.6

ValleyNationalBancorp 1,311.2 (326.2) 985.024.9% 14.72 11.04 3.6

CapitalCityBankGroup 260.5 (64.4) 196.1 24.7% 12.93 9.98 2.9

Stellarone 404.3 (126.9) 277.3 31.4% 10.16 7.26 2.9

TCFFinancial 1,769.6 (345.4) 1,424.2 19.5% 13.29 10.64 2.6

HuntingtonBancshares 4,890.1 (922.0) 3,968.1 18.9% 13.16 10.85 2.3

OrrstownFinancialServices 153.4 (29.4) 124.0 19.2% 12.16 9.98 2.1

SandySpringBancorp 423.7 (81.4) 342.3 19.2% 10.36 8.53 1.8

WestCoastBancorp 264.4 (47.3) 217.2 17.9% 11.04 9.31 1.7

FirstHorizonNational 2,681.4 (467.0) 2,214.4 17.4% 11.03 9.34 1.6

BridgeCapitalHoldings 123.6 (20.7) 102.9 16.7% 9.98 8.36 1.6

OrientalFinancialGroup 656.4 (80.6) 575.7 12.3% 12.4 10.79 1.6

SuntrustBanks 19,488.0 (3,091.4) 16,396.6 15.9% 10.32 8.83 1.4

ZionsBancorp 4,583.7 (531.0) 4,052.711.6% 12.65 11.21 1.4

UnitedCommunityBanks 666.8 (80.0) 586.7 12.0% 12.47 11.11 1.3

BancorpRhodeIsland 133.5 (12.1) 121.5 9.0% 13.46 12.12 1.3

Firstmerit 1,550.4 (205.3) 1,345.1 13.2% 10.53 9.25 1.2

HanmiFinancial 198.4 (17.0) 181.4 8.6% 14.91 13.67 1.2

EnterpriseBancorp 122.4 (11.3) 111.1 9.2% 13.15 12.01 1.1

FifthThirdBancorp 12,203.0 (1,423.5) 10,779.5 11.7% 10.21 9.08 1.1

Keycorp 9,446.0 (987.4) 8,458.7 10.5% 10.47 9.4 1.0

BankoftheOzarks 389.1 (34.7) 354.4 8.9% 11.37 10.35 1.0

Contrast those results with the entire diversified banks group shown below: only one of them - Wells Fargo - sa

its equity decline from restating financial instruments at fair value. Oddly, more of them saw equity increases - not the kin

of result to be expected from fair value reporting, judging by the uproar from the bankers over last years FASB proposa

Diversified Banks Group At 2Q2011:CommonEquity: FVMarks/

Reported

Equity



NetFairValue

Marks

Adjustedfor

FVMarks

Adjusted

Equity

Reported

Equity Difference

DiversifiedBanks $165,085.9 ($8,426.0) $156,659.9 5.1% 10.47 9.95 0.5

WellsFargo 127,435.0 (9,085.7) 118,349.3 7.1% 10.61 9.89 0.7

BancoLatinoAmericano 736.0 0.0 736.0 0.0% 7.89 7.89 0.0

USBancorp 30,735.0 554.5 31,289.5 1.8% 10.32 10.44 (0.12

Comerica 6,038.0 96.9 6,134.9 1.6% 8.84 8.97 (0.13

EncoreBancshares 141.9 8.4 150.3 5.9% 9.98 10.33 (0.35


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More surprisingly, some regional banks share that result. Below, the regional banks where application of fair valu

reporting on financial instruments resulted in decreases of 1.0 or more in their financial leverage.

Regional Banks: Largest Positive Capital Impact At 2Q2011CommonEquity: FVMarks/

Reported

Equity



NetFairValue

Marks

Adjustedfor

FVMarks

Adjusted

Equity

Reported

Equity Difference

RegionalBanks $233,868.9

($16,402.1) $217,466.9

7.0% 9.68

9.04 0.6

StateBancorp 125.0 67.4 192.3 53.9% 8.5 13.01 (4.51

HamptonRoadsBankshares 161.6 32.2 193.9 19.9% 13.61 16.07 (2.46

BridgeBancorp 78.0 16.1 94.2 20.6% 12.95 15.29 (2.34

SeacoastBanking 124.3 19.9 144.2 16.0% 14.48 16.76 (2.28

FirstBancorpInc 131.5 31.5 162.9 24.0% 8.76 10.78 (2.02

TaylorCapitalGroup 103.8 5.1 108.9 4.9% 40.3 42.32 (2.02

Banner 391.2 87.4 478.6 22.3% 8.78 10.75 (1.9

BankofHawaii 1,003.4 197.5 1,201.0 19.7% 11.22 13.12 (1.90

TricoBancshares 204.9 50.5 255.4 24.6% 8.78 10.62 (1.84

FinancialInstitutions 216.3 49.4 265.7 22.9% 8.86 10.56 (1.70

EastWestBancorp 2,146.3 364.1 2,510.4 17.0% 8.55 10.19 (1.64

VirginiaCommerceBancorp 200.8 26.0 226.7 12.9% 12.44 13.93 (1.49

CityHoldingCo 310.4 68.4 378.8 22.1% 7.26 8.74 (1.48

AllianceFinancial 140.1 27.3 167.4 19.4% 9.05 10.53 (1.48

UnivestCorpofPA 273.0 73.1 346.1 26.8% 6.13 7.54 (1.41

EnterpriseFinlServices 204.1 21.7 225.8 10.6% 13.03 14.38 (1.35

MerchantsBancshares 104.8 12.8 117.6 12.2% 12.31 13.65 (1.34

StateBankFinancial 374.6 108.9 483.5 29.1% 6.07 7.38 (1.31

WintrustFinancial 1,423.7 242.1 1,665.8 17.0% 9 10.27 (1.2

CNBFinancial 122.2 15.0 137.2 12.3% 11.02 12.2 (1.18

SierraBancorp 165.4 30.0 195.4 18.1% 7.04 8.14 (1.10

The entire consumer finance group shows beneficial effects from applying fair value reporting to a

financial instruments. Note from the first table that the entire consumer finance group saw an equity increase of 3.4% an

a 35 basis point drop in financial leverage - another counterintuitive result from applying fair value reporting. Below, th

17 companies comprising the group and the effects of the restatement. The groups results were dominated by four firm

large positive effects.

Consumer Finance Group At 2Q2011:CommonEquity: FVMarks/

Reported

Equity



NetFairValue

Marks

Adjustedfor

FVMarks

Adjusted

Equity

Reported

Equity Difference

ConsumerFinance $62,906.8 $2,141.1 $65,047.8 3.4% 10.01 10.36 (0.35

AmericanExpress 18,205.0 (1,950.0) 16,255.0 10.7% 9.16 8.12 1.0

DiscoverFinancialServices 7,523.3 (674.8) 6,848.5 9.0% 9.43 8.43 1.0

DollarFinancial 251.9 (26.0) 225.9 10.3% 5.99 5.32 0.6

CashAmericaInternational 858.4 (111.8) 746.6 13.0% 2.1 1.75 0.3

CreditAcceptance 441.9 (5.6) 436.3 1.3% 3.67 3.58 0.0

WorldAcceptance 392.1 (1.9) 390.2 0.5% 1.7 1.69 0.0

AdvanceAmerCashAdvance 254.7 (0.3) 254.4 0.1% 1.62 1.62 0.0

NetspendHoldings 169.0 0.0 169.0 0.0% 1.58 1.58 0.0

EZCorp 593.8 0.0 593.8 0.0% 1.13 1.13 0.0

NicholasFinancial 105.6 0.0 105.6 0.0% 2.19 2.19 0.0

GreenDot 210.6 0.0 210.6 0.0% 1.53 1.53 0.0

ImperialHoldings 221.4 0.0 221.4 0.0% 1.32 1.32 0.0

FirstCashFinancialServices 322.7 0.0 322.7 0.0% 1.15 1.15 0.0

CapitalOneFinancial 28,681.0 1,469.7 30,150.7 5.1% 6.73 6.96 (0.23

FirstMarblehead (759.6) 426.7 (332.9) 56.2% 18.58 10.64 (7.94

Nelnet 988.8 525.0 1,513.7 53.1% 16.96 25.15 (8.19

SLM 4,446.2

2,490.2

6,936.4

56.0% 28.15

45.06 (16.91


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Regardless of the industry, theres a

unexpected frequency of positive fair valu

impacts. The table at left spells it out: there a

almost as many firms having positive impacts

negative impacts. When you factor in the compani

where reported values didnt change at all (

possibly did not report any), there were more nonegative impacts on common equity from fair valu

reporting than negative impacts. Some of it mak

sense: for instance, the 53 capital markets firm

showing zero impact from transplanted fair valu

reporting. Thats because capital markets firm

usually employ fair value accounting as their norm

reporting regime. Thats about the only part th

makes sense, however.

Looking at the fair value effects on equity alone provides a bottom-line view of how fair values differ from historic

cost - but if you want to make more sense out ofwhy equity changed, you have to drill down into fair value differences f

assets and liabilities separately. Heres a case where its hard to make sense out of what the fair value differences are sayinsome firms show increases in assets on a fair value basis - an improvement in financial condition - while their liabilities a

marked down on a fair value basis, indicating that market participants believe theres a diminution of credit-standing. That

a contradiction embedded in the footnote disclosures of 34 companies in the study. Below, the differences in asset

liabilities and equity for the 20 firms where equity increased by 10% or more because of simultaneous asset increases an

liability decreases.

Where Fair Values Contradict: 2Q2011TotalAssets: TotalLiabilities: CommonEquity:

($inmillions)

Reported

Value FVDiff.

@Fair

Value

Reported

Value FVDiff.

@Fair

Value

Reported

Value FVDiff.

@Fair

Value

Equity%

Increas

StateBancorp $1,626.1 $8.1 $1,634.3 $1,464.8 ($59.2) $1,405.6 $125.0 $67.4 $192.3 53.9

FBLFinancialGroup 15,863.6 95.9 15,959.5 14,583.6 (419.7) 14,163.9 1,277.0 515.6 1,792.6 40.4NationalWesternLife 9,262.4 342.7 9,605.2 8,005.9 (105.5) 7,900.5 1,256.5 448.2 1,704.7 35.7

UnivestCorpofPA 2,058.4 61.8 2,120.2 1,785.4 (11.3) 1,774.1 273.0 73.1 346.1 26.8

FirstBancorpInc 1,417.7 9.5 1,427.2 1,261.5 (21.9) 1,239.5 131.5 31.5 162.9 24.0

CityHoldingCo 2,713.8 35.6 2,749.4 2,403.4 (32.8) 2,370.6 310.4 68.4 378.8 22.1

HoraceMannEducators 7,208.0 3.9 7,212.0 6,275.8 (172.2) 6,103.5 932.3 176.2 1,108.5 18.9

SierraBancorp 1,345.9 28.6 1,374.5 1,180.5 (1.3) 1,179.1 165.4 30.0 195.4 18.1

ViewpointFinancialGroup 2,963.9 33.2 2,997.1 2,556.9 (37.7) 2,519.2 407.0 70.9 477.9 17.4

SeacoastBanking 2,082.9 4.2 2,087.1 1,911.7 (15.6) 1,896.1 124.3 19.9 144.2 16.0

FirstCommonwealthFinancial 5,691.3 31.1 5,722.4 4,929.2 (76.7) 4,852.5 762.1 107.8 869.8 14.1

VirginiaCommerceBancorp 2,797.8 23.7 2,821.4 2,530.7 (2.3) 2,528.4 200.8 26.0 226.7 12.9

WSFSFinancial 4,151.5 15.6 4,167.1 3,775.6 (29.3) 3,746.3 375.9 44.9 420.8 11.9

AssuredGuaranty 19,238.9 10.8 19,249.7 15,288.9 (450.5) 14,838.4 3,950.0 461.3 4,411.3 11.7

ReinsuranceGroupofAmerica 30,659.3 404.4 31,063.6 25,334.8 (200.0) 25,134.8 5,324.5 604.3 5,928.9 11.4EnterpriseFinancialServices 2,935.4 7.5 2,942.9 2,698.4 (14.2) 2,684.3 204.1 21.7 225.8 10.6

Thats a curious set of companies, well represented by regional banks. Its almost as if the balance sheet is in

tug-of-war with itself. On the asset side, where estimates are used for valuations of loans and other non-liquid financi

instruments, its as if managements are asserting that the firms assets are viable and valuable. On the liability side, it

as if the markets are saying there could be credit problems. The next section explores more of the fair value differenc

in assets and liabilities.

ImpactonCommonEquity:

Total Negative

AllNon

Negative Positive Zero

CommercialBanks 170

83

87 84 3RegionalBanks 165 82 83 81 2

DiversifiedBanks 5 1 4 3 1

DiversifiedFinancialServices 23 13 10 2 8

Thrifts&MortgageFinance 51 20 31 29 2

Insurance 106 44 62 37 25

CapitalMarkets 86 23 63 10 53

ConsumerFinance 17 7 10 4 6

453 190 263 166 97

2Q2011Fair Value Equity Impact Summary


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II. Second Pass: Assets & LiabilitiesThe table below contains summarized information about the total assets, total liabilities and common equity for th

166 firms showing increases in common equity after application of fair value reporting. Fair value amounts for total asse

and total liabilities are straight from the financial statement footnotes; deferred tax effects are reflected in the fair valu

differences for total liabilities. Because of the combination of higher assets at fair value and/or lower liabilities at fair valu

estimated deferred tax liabilities result. The table is sorted in descending order of fair value effect on common equity.

Where Fair Values Increased Equity at 2Q2011:TotalAssets: TotalLiabilities: CommonEquity:

($inmillions) #

Reported

Value FVDiff. @FairValue

Reported

Value FVDiff.

@Fair

Value

Reported

Value FVDiff.

@Fa

Valu

Insurance 37 $1,473,828.5 $7,601.7 $1,481,430.2 $1,319,712.7 ($2,475.4) $1,317,237.3 $154,112.7 $10,077.1 $164,189.

CommercialBanks 84 1,269,132.0 8,471.8 1,277,603.8 1,124,067.1 3,188.8 1,127,255.9 140,266.5 5,283.1 145,549.

RegionalBanks 81 892,650.5 6,306.4 898,956.9 787,136.3 1,683.1 788,819.4 103,351.5 4,623.4 107,974

DiversifiedBanks 3 376,481.5 2,165.4 378,646.9 336,930.8 1,505.7 338,436.5 36,914.9 659.7 37,574

ConsumerFinance 4 433,066.6 (3,169.6) 429,897.0 399,145.2 (8,081.1) 391,064.1 33,356.4 4,911.5 38,267.

Thrifts&MortgageFinance 2 9 126,019.5 2,666.7 128,686.2 107,327.0 1,153.7 108,480.7 18,656.0 1,513.0 20,169.

CapitalMarkets 10 1,444,903.2 1,197.0 1,446,100.2 1,307,474.8 (27.9) 1,307,446.9 135,420.5 1,224.9 136,645.

DiversifiedFinancialServices 2 1,633.0 331.1 1,964.1 931.6 109.6 1,041.2 701.3 221.5 922.

Total 166 $4,748,582.8 $17,098.7 $4,765,681.5 $4,258,658.4 ($6,132.3) $4,252,526.1 $482,513.4 $23,231.1 $505,744.

Theres a lot that leaps out of the table. Check the column for the fair value difference of total assets: except for th

consumer finance industry, the aggregate marks to fair value for all other industries were positive - meaning that asse

increasedin a fair value reporting mode. Thats not what youd expect on a consistent basis.

Next, check the column for the fair value differences for the total liabilities: theyre negative for some of th

industries, including insurance, consumer finance, and capital markets. In total, the fair value of liabilities for firms in the

industries were less than their recorded value - and thats not a really good thing. In todays ultra-low interest ra

environment, if a firms debt instruments are worth less in the marketplace than their issuance price, its likely that a deb

discount exists because of market perceptions of the firms own creditworthiness. The fair values of the debt instrumen

implicitly state the marketplaces collective view on a firms ability to repay its debts.

Below, the 25 regional banks with the largest absolute dollar increase in equity resulting from fair value reportin

Note that only four - BB&T, East West Bancorp, Banner andPinnacle Financial - have lower assets at fair value.

Regional Banks Where Fair Values Increased Equity at 2Q2011:TotalAssets: TotalLiabilities: CommonEquity:

($inmillions) #

Reported

Value FVDiff.

@Fair

Value

Reported

Value FVDiff.

@Fair

Value

Reported

Value FVDiff.

@Fa

Valu

RegionalBanks 81 $892,650.5 $6,306.4 $898,957.0 $787,136.3 $1,683.1 $788,819.3 $103,351.5 $4,623.4 $107,974.

PNCFinancial 263,117.0 3,252.0 266,369.0 228,244.0 2,760.6 231,004.6 34,225.0 491.4 34,716.

BB&T 159,310.0 (1,017.0) 158,293.0 142,261.0 (1,400.5) 140,860.5 17,049.0 383.5 17,432.

EastWestBancorp 21,872.7 (418.8) 21,453.9 19,643.4 (782.9) 18,860.5 2,146.3 364.1 2,510.

WintrustFinancial 14,615.9 381.4 14,997.3 13,142.5 139.3 13,281.8 1,423.7 242.1 1,665.

HancockHoldingCo 19,757.5 337.8 20,095.3 17,371.2 137.4 17,508.6 2,386.3 200.3 2,586.

BankofHawaii 13,161.2 314.8 13,476.0 12,157.8 117.3 12,275.0 1,003.4 197.5 1,201.

ColumbiaBankingSystem 4,429.1 265.6 4,694.7 3,701.5 75.8 3,777.2 727.7 189.8 917.

CapitalSource 9,314.9 105.3 9,420.2 7,204.6 (76.7) 7,127.8 2,110.4 182.0 2,292.

CityNational 22,526.1 296.1 22,822.2 20,398.3 134.8 20,533.2 2,127.7 161.3 2,289.

BOKFinancial 24,238.2 213.2 24,451.3 21,546.0 96.9 21,642.9 2,692.2 116.3 2,808.

StateBankFinancial 2,766.3 170.5 2,936.8 2,391.7 61.6 2,453.3 374.6 108.9 483.

FirstCommonwlthFinancial 5,691.3 31.1 5,722.4 4,929.2 (76.7) 4,852.5 762.1 107.8 869.

OldNationalBancorp 8,018.8 204.3 8,223.1 7,010.6 108.1 7,118.6 1,008.3 96.2 1,104.

Banner 4,206.1 (3.3) 4,202.7 3,695.0 (90.7) 3,604.3 391.2 87.4 478.

ProsperityBancshares 9,657.1 126.4 9,783.6 8,145.5 48.8 8,194.3 1,511.6 77.6 1,589.

UnivestCorpofPA 2,058.4 61.8 2,120.2 1,785.4 (11.3) 1,774.1 273.0 73.1 346.

CityHoldingCo 2,713.8 35.6 2,749.4 2,403.4 (32.8) 2,370.6 310.4 68.4 378.

StateBancorp 1,626.1 8.1 1,634.3 1,464.8 (59.2) 1,405.6 125.0 67.4 192.

UmpquaHoldings 11,459.7 85.0 11,544.7 9,785.4 22.6 9,808.0 1,674.3 62.4 1,736.

1stSource 4,354.9 122.7 4,477.7 3,849.4 60.4 3,909.7 505.6 62.4 568.

CommerceBancshares 19,570.9 120.1 19,690.9 17,439.3 59.8 17,499.1 2,131.6 60.3 2,191.

GlacierBancorp 6,978.3 52.3 7,030.6 6,113.5 (2.6) 6,110.9 864.8 54.9 919.

FNBCorp 9,857.2 70.2 9,927.3 8,654.0 15.4 8,669.4 1,203.1 54.8 1,257.

PinnacleFinancialPartners 4,831.3 (4.8) 4,826.5 4,132.1 (55.3) 4,076.8 607.8 50.5 658.

TricoBancshares 2,176.2 64.9 2,241.1 1,971.3 14.4 1,985.7 204.9 50.5 255.


7/20

-7-

Below, the entire set of companies in the insurance industry with increased equity from fair value reporting. Agai

notice the scarcity of asset markdowns - while liability markdowns are common.

Insurers Where Fair Values Increased Equity at 2Q2011:TotalAssets: TotalLiabilities: CommonEquity:

($inmillions) #

Reported

Value FVDiff.

@FairValue Reported

Value FVDiff.

@FairValue Reported

Value FVDiff.

@Fa

Valu

Insurance 37 $1,473,828.5 $7,601.7 $1,481,430.2 $1,319,712.7 ($2,475.4) $1,317,237.3 $154,112.7 $10,077.1 $164,189.

Life&HealthInsurance 12 971,973.8 5,795.0 977,768.8 905,108.0 (396.9) 904,711.2 66,862.6 6,191.9 73,054.

AmericanEquityInvestmentLife 28,566.8 (257.7) 28,309.1 27,527.2 (2,776.3) 24,750.9 1,039.5 2,518.7 3,558.

PrudentialFinancial 613,377.0 3,997.0 617,374.0 577,741.0 2,896.6 580,637.6 35,636.0 1,100.5 36,736.

PrincipalFinancialGroup 149,278.4 439.4 149,717.8 138,610.8 (491.7) 138,119.1 10,667.5 931.1 11,598.

FBLFinancialGroup 15,863.6 95.9 15,959.5 14,583.6 (419.7) 14,163.9 1,277.0 515.6 1,792.

NationalWesternLife 9,262.4 342.7 9,605.2 8,005.9 (105.5) 7,900.5 1,256.5 448.2 1,704.

ProtectiveLife 50,987.8 523.8 51,511.7 47,383.4 157.6 47,541.0 3,604.5 366.2 3,970.

UnumGroup 58,015.8 172.6 58,188.4 48,933.0 49.3 48,982.3 9,082.8 123.3 9,206.

StancorpFinancialGroup 18,454.4 446.0 18,900.4 16,536.1 345.3 16,881.4 1,918.3 100.7 2,019.

PhoenixCompanies 21,377.3 0.0 21,377.3 20,214.2 (49.8) 20,164.4 1,163.1 49.8 1,212.

KansasCityLifeIns 4,392.2 31.3 4,423.5 3,686.1 (3.1) 3,683.0 706.1 34.3 740.

Citizens 1,040.7 (1.2) 1,039.5 800.1 (3.1) 797.0 240.5 1.9 242.

IndependenceHolding 1,357.4 5.1 1,362.5 1,086.7 3.5 1,090.1 270.7 1.6 272.

Property&

Casualty

Insurance 15 226,140.7

238.7

226,379.4

187,090.1

(1,666.8) 185,423.2

39,050.6

1,905.5

40,956.

MBIA 31,668.0 (231.0) 31,437.0 29,763.0 (928.5) 28,834.6 1,905.0 697.5 2,602.

Allstate 129,023.0 345.0 129,368.0 110,230.0 (231.6) 109,998.5 18,793.0 576.6 19,369.

AssuredGuaranty 19,238.9 10.8 19,249.7 15,288.9 (450.5) 14,838.4 3,950.0 461.3 4,411.

ArgoGroupIntlHoldings 6,513.7 0.0 6,513.7 4,965.1 (78.8) 4,886.3 1,548.6 78.8 1,627.

SelectiveINSGroup 5,369.6 50.4 5,420.0 4,268.6 21.3 4,289.9 1,101.0 29.1 1,130.

CincinnatiFinancial 15,702.0 7.0 15,709.0 10,645.0 (15.8) 10,629.3 5,057.0 22.8 5,079.

Amerisafe 1,152.5 27.7 1,180.3 815.3 9.7 825.0 337.2 18.0 355.

Proassurance 4,926.6 16.6 4,943.2 2,960.2 5.8 2,966.0 1,966.4 10.8 1,977.

UniversalInsuranceHldgs 896.7 0.0 896.7 738.5 (3.3) 735.3 158.2 3.3 161.

HarleysvilleGroup 3,239.5 8.0 3,247.5 2,457.8 5.4 2,463.2 781.7 2.6 784.

DonegalGroup 1,248.0 3.1 1,251.1 865.3 1.1 866.4 382.7 2.0 384.

HilltopHoldings 947.5 1.0 948.5 306.0 (0.3) 305.7 641.5 1.3 642.

HallmarkFinancialServices 747.1 0.0 747.1 527.5 (0.7) 526.9 219.6 0.7 220.

EMCInsuranceGroup 1,221.0 0.0 1,221.1 857.8 (0.5) 857.3 363.2 0.6 363.MercuryGeneral 4,246.5 0.0 4,246.5 2,400.9 (0.2) 2,400.7 1,845.6 0.2 1,845.

MultilineInsurance 6 212,309.9 1,107.5 213,417.4 179,345.0 (222.9) 179,122.1 32,964.9 1,330.4 34,295.

GenworthFinancial 112,347.0 370.0 112,717.0 96,789.0 (107.1) 96,681.9 15,558.0 477.1 16,035.

AmericanNationalInsurance 22,446.9 609.4 23,056.4 18,743.0 213.3 18,956.3 3,704.0 396.1 4,100.

AmericanFinancialGroup 34,053.0 9.0 34,062.0 29,428.0 (198.4) 29,229.7 4,625.0 207.4 4,832.

HoraceMannEducators 7,208.0 3.9 7,212.0 6,275.8 (172.2) 6,103.5 932.3 176.2 1,108.

Assurant 26,779.8 112.8 26,892.5 21,903.8 40.7 21,944.5 4,876.0 72.1 4,948.

HCCInsuranceHoldings 9,475.1 2.4 9,477.5 6,205.4 0.8 6,206.3 3,269.7 1.5 3,271.

Reinsurance 4 63,404.2 460.4 63,864.6 48,169.7 (188.9) 47,980.8 15,234.5 649.3 15,883.

ReinsuranceGroupofAmerica 30,659.3 404.4 31,063.6 25,334.8 (200.0) 25,134.8 5,324.5 604.3 5,928.

AlterraCapitalHoldings 10,497.4 56.1 10,553.5 7,704.3 28.4 7,732.6 2,793.1 27.7 2,820.

FlagstoneReinsuranceHld 3,243.6 0.0 3,243.6 2,279.3 (11.8) 2,267.5 964.3 11.8 976.

EverestReGroup 19,003.9 0.0 19,003.9 12,851.4 (5.4) 12,846.0 6,152.6 5.4 6,158.

Lastly, the four companies making up the consumer finance industry. Notice that Capital One Financial andNelnhave the unusual markup of assets, while SLM andFirst Marblehead account for nearly all of the differences betwee

reported value and fair value for liabilities.

Consumer Finance Firms Where Fair Values Increased Equity at 2Q2011:TotalAssets: TotalLiabilities: CommonEquity:

($inmillions) #

Reported


Reported


Reported

Value FVDiff.

@Fa

Valu

ConsumerFinance 4 $433,066.6 ($3,169.6) $429,897.0 $399,145.2 ($8,081.1) $391,064.1 $33,356.4 $4,911.5 $38,267.

SLM 200,356.6 (5,109.0) 195,247.6 195,345.3 (7,599.2) 187,746.2 4,446.2 2,490.2 6,936.

CapitalOneFinancial 199,753.0 3,043.0 202,796.0 171,072.0 1,573.4 172,645.4 28,681.0 1,469.7 30,150.

Nelnet 24,871.5 797.0 25,668.6 23,882.7 272.1 24,154.8 988.8 525.0 1,513.

FirstMarblehead 8,085.6 (1,900.7) 6,184.9 8,845.2 (2,327.4) 6,517.8 (759.6) 426.7 (332.


8/20

-8-

Surprisingly, only 76 of the firms, a mere 17% of th

total, saw assets decrease under fair value reportin

Marking assets to fair value (net of tax effects) increase

total assets for 267 of the 453 in the study - 59% of all,

rather sunny result for institutions mired in a glob

economic swoon. Another 110 of the firms had no effect.

Even more curious, the financial institutions such regional banks, thrifts and insurers were among the mo

vocal opponents of FASBs proposal to increase fair valu

reporting - yet more of each class enjoyed increased ass

values from fair value reporting than decreases. You have

wonder why they were so belligerent. You could also wond

about the veracity of their fair value disclosures.

Below, a look at the companies where the net-of-tax total asset fair values increased total assets by 3% or more

Largest Positive Differences Between Fair Value and Reported Value: Assets

($inmillions) Industry

ReportedTotal

Assets

Est.NetoftaxFair

ValueDifferences

TotalAssets

@FairValue

%Difference:Fa

Value/Reporte

PortfolioRecoveryAssociates DiversifiedFinancialServices $1,021.6 $331.1 $1,352.7 32.4StateBankFinancial CommercialBanks:Regional 2,766.3 170.5 2,936.8 6.2

ColumbiaBankingSystem CommercialBanks:Regional 4,429.1 265.6 4,694.7 6.0

HudsonCityBancorp Thrifts&MortgageFinance 51,778.6 2,510.2 54,288.8 4.8

OritaniFinancial Thrifts&MortgageFinance 2,569.1 110.2 2,679.3 4.3

NorthwestBancshares Thrifts&MortgageFinance 8,087.3 342.6 8,430.0 4.2

WashingtonFed Thrifts&MortgageFinance 13,388.8 547.5 13,936.3 4.1

CashAmericaInternaonal ConsumerFinance 1,504.2 60.2 1,564.5 4.0

NationalWesternLife Insurance 9,262.4 342.7 9,605.2 3.7

TerritorialBancorp Thrifts&MortgageFinance 1,488.2 52.2 1,540.4 3.5

DimeCommunityBancshares Thrifts&MortgageFinance 4,092.8 141.9 4,234.7 3.5

Nelnet ConsumerFinance 24,871.5 797.0 25,668.6 3.2

FinancialInstitutions CommercialBanks:Regional 2,282.9 71.0 2,353.9 3.1

AstoriaFinancial Thrifts&MortgageFinance 17,120.3 532.7 17,653.0 3.1

UnivestCorpofPA CommercialBanks:Regional 2,058.4 61.8 2,120.2 3.0

Fairvalueimpactonassetsisduesolelytodeferredtaxassetarisingfromfairvaluedifferenceonliabilies;nofairvalueassetdifferencesotherwis

At the other extreme, there were firms whose total assets fair value was less than the reported value. The media

discount on the total assets for the 76 discount firms was .70% of the reported value, in the same league as the media

premium size of .54% for the 267 premium firms. Below, the firms with a fair value discount on total assets of 2% or mor

Largest Negative Differences Between Fair Value and Reported Value: Assets


Reported

Total

Assets

Est.Netoftax

FairValue

Differences

TotalAssets@Fair

Value

%Difference:Fa

Value/Reporte

FirstMarblehead ConsumerFinance $8,085.6 ($1,900.7) $6,184.9 23.5

Popular CommercialBanks:Regional 39,013.3 (2,067.0) 36,946.4 5.3

SunBancorp CommercialBanks:Regional 3,213.8 (164.8) 3,049.0 5.1

AssociatedBancCorp CommercialBanks:Regional 22,048.5 (1,006.2) 21,042.3 4.6

Stellarone CommercialBanks:Regional 2,935.4 (116.9) 2,818.6 4.0

RegionsFinancial CommercialBanks:Regional 130,908.0 (5,174.5) 125,733.6 4.0

SouthwestBancorp CommercialBanks:Regional 2,660.5 (87.0) 2,573.5 3.3

PeoplesBancorp CommercialBanks:Regional 1,802.7 (51.0) 1,751.7 2.8

WestCoastBancorp CommercialBanks:Regional 2,462.6 (64.7) 2,397.9 2.6

SterlingFinancial CommercialBanks:Regional 9,241.6 (238.9) 9,002.7 2.6

SLM ConsumerFinance 200,356.6 (5,109.0) 195,247.6 2.5

FirstHorizonNational CommercialBanks:Regional 25,054.1 (619.0) 24,435.1 2.5

SCBTFinancial CommercialBanks:Regional 3,839.9 (94.0) 3,745.9 2.4

CapitalCityBankGroup CommercialBanks:Regional 2,599.3 (63.0) 2,536.2 2.4

PrivateBancorp CommercialBanks:Regional 12,115.4 (293.6) 11,821.8 2.4

WesternAlliance

Bancorp Commercial

Banks:

Regional 6,508.1

(155.6) 6,352.4

2.4

CountofFVDifferences:

Total Negative Positive Zero

CommercialBanks 170 62 105 3

RegionalBanks 165 61 102 2

DiversifiedBanks 5 1 3 1

DiversifiedFinancialServices 23 2 12 9Thrifts&MortgageFinance 51 5 43 3

Insurance 106 3 71 32

CapitalMarkets 86 2 27 57

ConsumerFinance 17 2 9 6

453 76 267 110

17% 59% 24%

Where Fair Value Affects Total Assets: 2Q11


9/20

-9-

The liabilities fair values imply that many more of

the financial institutions are in fine health: 269 of them

showed higher fair values than reported values, and 97 of

them showed no difference. Again, a cheerful outcome for

financial institutions in the midst of global crisis. Only 19%

of the firms showed lower fair values for their liability

financial instruments, likely indicating a market view thattheir credit status is not as favorable as when the financial

instruments originated.

Its a standards flaw that disclosures provide no

information enabling investors to discern how much of fair

value changes is due to interest rate shifts, leaving the rest

of the fair value change to be attributed to credit standing.

As low as interest rates have gone - and stayed - its fair to surmise that negative comparisons between fa

value and reported value are due to credit standing. When interest rates rise - and someday they will - it will be hard

to get a reading on the credit message embedded in the fair values of liability financial instruments, simply because high

interest rates will have a depressing effect on fair values. Below, a list of the firms where total liabilities show fair valu

markdowns over 2%.Largest Negative Differences Between Fair Value and Reported Value: Liabilities


ReportedTotal

Liabilities

Est.NetoftaxFair

ValueDifferences

TotalLiabilities@

FairValue

%Difference:Fa

Value/Reporte

FirstMarblehead ConsumerFinance $8,845.2 ($2,327.4) $6,517.8 26.3

AmericanEquityInvtLife Insurance 27,527.2 (2,776.3) 24,750.9 10.1

StateBancorp CommercialBanks:Regional 1,464.8 (59.2) 1,405.6 4.0

EastWestBancorp CommercialBanks:Regional 19,643.4 (782.9) 18,860.5 4.0

SLM ConsumerFinance 195,345.3 (7,599.2) 187,746.2 3.9

MBIA Insurance 29,763.0 (928.5) 28,834.6 3.1

AssuredGuaranty Insurance 15,288.9 (450.5) 14,838.4 2.9

SouthwestBancorp CommercialBanks:Regional 2,283.6 (65.8) 2,217.8 2.9

FBLFinancialGroup Insurance 14,583.6 (419.7) 14,163.9 2.9

SterlingFinancial CommercialBanks:Regional 8,434.0 (238.4) 8,195.6 2.8HoraceMannEducators Insurance 6,275.8 (172.2) 6,103.5 2.7

BankMutual CommercialBanks:Regional 2,254.0 (56.1) 2,197.9 2.5

Banner CommercialBanks:Regional 3,695.0 (90.7) 3,604.3 2.5

CentralPacificFinancial CommercialBanks:Regional 3,698.0 (76.2) 3,621.7 2.1

At the other end of the spectrum, the firms in the table below increased their total liabilities under fair value reportin

by at least 4%.

Largest Positive Differences Between Fair Value and Reported Value: Liabilities


Reported

Total

Liabilities

Est.NetoftaxFair

ValueDifferences

TotalLiabilities@

FairValue

%Difference

Fa

Value/Reporte

CashAmericaInternational ConsumerFinance $645.8 $172.1 $817.9 26.6PorolioRecoveryAssociates DiversifiedFinancialServices 463.2 115.9 579.0 25.0

CalamosAssetManagement CapitalMarkets 143.6 16.5 160.1 11.5

AffiliatedManagers CapitalMarkets 2,346.5 226.2 2,572.7 9.6

LeucadiaNational DiversifiedFinancialServices 2,386.7 154.3 2,541.0 6.5

EatonVance CapitalMarkets 1,211.1 74.7 1,285.8 6.2

HudsonCityBancorp Thrifts&MortgageFinance 46,890.7 2,687.2 49,577.9 5.7

NewstarFinancial DiversifiedFinancialServices 1,367.6 75.0 1,442.6 5.5

AresCapital CapitalMarkets 1,777.3 93.0 1,870.2 5.2

LeggMason CapitalMarkets 2,798.4 141.2 2,939.6 5.0

Lazard CapitalMarkets 2,223.2 111.0 2,334.2 5.0

CITGroup CommercialBanks:Regional 39,066.7 1,901.1 40,967.8 4.9

AstoriaFinancial Thrifts&MortgageFinance 15,841.8 735.5 16,577.3 4.6

PresidentialLife Insurance 3,210.5 131.0 3,341.5 4.1

Fairvalueliabilitiesimpactdueonlytodeferredtaxliabilityarisingfromfairvaluedifferenceonassets;nootherfairvalueliabilitiesdifferencesexiste

CountofFVDifferences:

Total Negative Positive Zer

CommercialBanks 170 48 119

RegionalBanks 165 47 116

DiversifiedBanks 5 1 3

DiversifiedFinancialServices 23 1 14

Thrifts&MortgageFinance 51 6 43

Insurance 106 23 58 2

CapitalMarkets 86 7 26 5

ConsumerFinance 17 2 9

453 87 269 9

19% 59% 21

Fair Value Effects On Total Liabilities: 2Q11


10/20

-10-

III. Taking Fair Values At Face ValueInvestors with long memories might recall the mid-1990s, when the FASB retreated from a plan to require expen

recognition for the value of stock options issued as compensation. The half-loaf the FASB then served to investors wa

annual disclosure of the expense in footnotes to the financial statements. The fair value situation today is fairly simila

retreat from an objective, followed by disclosures intended to compensate for a lack of financial statement recognition.

This time, the best thing the FASB did was to require disclosures to be part of interim financial statements. Investo

make judgments about the economic worth of net assets whenever they buy or sell shares of a companys stock; it mak

sense for those net assets to reflect the most recent values for the assets and liabilities that compose shareholders equit

The net effect of the value changes on equity can play a role in helping investors with valuation decisions, while th

directions of the fair value changes for the different financial instruments provides investors with market-based views o

a companys financial strength. Fair value markdowns of the assets indicate the markets think asset values are overstate

on a historical basis; fair value markdowns of liabilities indicate that markets harbor concerns about the credit standing

the issuer. The reverse holds true as well: fair value markups of assets indicate that markets believe that reported asset valu

are understated, and fair value markups of liabilities indicate that markets believe the credit standing of an issuer ha

improved since the origination of the relevant liabilities.

There are a couple ways the disclosures could be improved, however. They dont give investors sufficie

information to determine how much of a fair value change is due to change in interest rates. Without that information

investors cant really get a reading on what the fair values are telling them about the other specific factors - like the credstanding of the issuer for financial instruments held as assets, or perhaps more importantly, like credit standing of th

company itself, which would be expressed in the fair values of the liabilities of the issuer. Another major lack: deposito

institutions, like banks, are not required to disclose fair values of their demand deposits. Given the importance of tho

liabilities to the operations of such institutions, this could amount to a serious omission. (The counter-argument is th

demand deposits at face value really reflect fair value already: the face value is the amount the depositor could withdra

at any time.)

One glaring flaw in the existing standards has to do with, of all things, how fair value is determined for presentatio

in the footnote disclosures. The definition of fair value was supposed to have been settled when Statement 157 (now AS

Section 820) was issued in 2006: fair value was defined as the price that would be received to sell the asset or paid

transfer the liability (an exit price). Entities do not necessarily sell assets at the prices paid to acquire them. Similarly, entiti

do not necessarily transfer liabilities at the prices received to assume them. Note the (added) emphasis on exit price: itwhat youd receive if you sold an asset today. That has implications for some of the asset values noted in the study.

The problem is that Statement 157/ASC 820 did nothing to clear up an inconsistent example of the fair valu

disclosures that has been carried forward in the accounting standards since it first appeared in Statement 107

1991. That example (now in ASC 825-10-55-3) preceded the definition of fair value currently in effect, and it showed

sample footnote disclosure where a bank determined fair value of other types of loans ... by discounting the future cas

flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the sam

remaining maturities. That might have been a definition of fair value in 1991, but not now: its an entry value, not an ex

value. Yet the problematic example remains in the literature, and firms are free to analogize to it. It might explain why th

fair values of regional banks were so often higher than reported value.

The FASB is still revamping its financial instruments accounting proposal and will likely issue an exposure dra

because its so radically different from the original proposal, and due process is one of the organizations strong point

One anticipated change is that the fair values will be disclosed on the face of the balance sheet: much better real estate

in the financial statement package than the current location in the footnotes. Auditor scrutiny might ratchet upward

items appear on the balance sheet as opposed to footnotes. One would expect that they also avail themselves of th

opportunity to clean up the non-GAAP example thats masquerading as GAAP. The problem is that the financi

instruments standard could take perhaps another year until issuance, with a further lag time in between issuance an

effective date. That will leave investors with sub-par disclosures for many more quarters, and will only put them off fro

using them in the meantime.


11/20

-11-

Appendix - 2Q 2011 Balance Sheet at Fair Value($inmillions) Assets: Liabilities: Equity:

NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte

CapitalMarkets $1,094 $3,091,098 0.0% $2,317 $2,761,367 0.1% ($1,223) $324,405 0.4

AssetMgmt&CustodyBanks $1,696 $1,014,546 0.2% $2,247 $861,867 0.3% ($551) $152,143 0.4

AffiliatedManagers 79 * 5,404 1.5% 226 2,573 9.6% (147) 2,831 4.9

AmericanCapital 0 6,333 0.0% (33) 1,759 1.8% 33 4,574 0.7

AmeripriseFinancial 162 135,300 0.1% 656 124,566 0.5% (494) 10,734 4.4

ApolloInvestment 0 3,055 0.0% 0 1,192 0.0% 0 1,862 0.0

AresCapital 33 * 4,944 0.7% 93 1,870 5.2% (60) 3,074 1.9

ArlingtonAssetInvestment 0 918 0.0% 0 708 0.0% 0 210 0.0

ArtioGlobalInvestors 0 420 0.0% 0 256 0.0% 0 163 0.0

BankofNewYorkMellon 793 305,499 0.3% 702 270,685 0.3% 91 34,814 0.3

Blackrock 88 * 185,136 0.0% 252 160,630 0.2% (164) 24,506 0.7

BlackrockKelsoCapital 0 1,033 0.0% (5) 310 1.5% 5 722 0.7

CalamosAssetManagement 6 * 587 1.0% 17 160 11.5% (11) 427 2.5

CapitalSouthwest 0 524 0.0% 0 4 0.0% 0 520 0.0

CIFCDeerfield (8) 8,839 0.1% (53) 8,144 0.6% 45 695 6.9

Cohen&Steers 0 294 0.0% 0 34 0.0% 0 259 0.0

DiamondHillInvestmentGrp 0 37 0.0% 0 13 0.0% 0 25 0.0

EatonVance 26 * 1,833 1.4% 75 1,286 6.2% (49) 547 8.2

EdelmanFinancialGroup 0 347 0.0% 0 85 0.0% 0 262 0.0

EpochHolding 0 61 0.1% 0 * 8 0.2% 0 52 0.1

FederatedInvestors 0 1,120 0.0% 0 590 0.0% 0 530 0.0

FifthStreetFinance 0 996 0.0% 0 284 0.0% 0 712 0.0

FinancialEngines 0 234 0.0% 0 31 0.0% 0 203 0.0

FranklinResources 18 12,845 0.1% 26 4,404 0.6% (8) 8,441 0.1

GamcoInvestors 0 811 0.0% (1) 364 0.3% 1 447 0.3

GladstoneCapital 0 273 0.0% 0 37 0.0% 0 235 0.0

GladstoneInvestment 0 213 0.0% 0 27 0.0% 0 186 0.0

GolubCapital 1 * 461 0.3% 4 201 1.8% (2) 260 0.9

Harris&HarrisGroup 0 173 0.0% 0 5 0.0% 0 168 0.0

HerculesTechGrowthCap 3 * 695 0.5% 10 277 3.7% (6) 417 1.5

ICGGroup 0 289 0.0% 0 45 0.0% 0 244 0.0

Invesco 16

* 20,931

0.1% 44

11,762

0.4% (29) 9,169

0.3JanusCapitalGroup 17 * 2,686 0.6% 47 1,346 3.6% (31) 1,340 2.2

KohlbergCapital 1 * 262 0.3% 2 69 3.6% (2) 193 0.8

LeggMason 49 * 8,573 0.6% 141 2,940 5.0% (92) 5,633 1.6

MainStreetCapital 0 617 0.0% 0 283 0.0% 0 335 0.0

MCGCapital 0 1,066 0.0% 0 532 0.0% 0 534 0.0

MedallionFinancial 0 539 0.0% 0 373 0.0% 0 166 0.0

MedleyCapital 0 218 0.0% 0 2 0.0% 0 216 0.0

MVCCapital 0 489 0.0% 0 74 0.0% 0 414 0.0

NewMountainFinance 0 631 0.0% 0 190 0.0% 0 441 0.0

NGPCapitalResources 0 290 0.0% 0 82 0.0% 0 208 0.0

NorthernTrust 157 97,555 0.2% (117) 90,256 0.1% 274 7,300 3.9

PennantParkInvestment 0 775 0.0% 0 261 0.0% 0 514 0.0

Price(T.Rowe)** 1 * 3,884 0.0% 3 473 0.7% (2) 3,411 0.1

ProspectCapital 0

1,076

0.0% 0

173

0.0% 0

903

0.0PzenaInvestmentMgmt 0 66 0.0% 0 22 0.0% 0 43 0.0

SafeguardScientifics 0 415 0.0% 0 57 0.0% 0 358 0.0

SEIInvestments 0 1,331 0.0% 0 244 0.0% 0 1,087 0.0

SolarCapital 0 1,401 0.0% 0 554 0.0% 0 846 0.0

StateStreet 253 190,708 0.1% 156 170,777 0.1% 97 19,431 0.5

THLCredit 0 269 0.0% 0 3 0.0% 0 266 0.0

TICCCapital 0 330 0.0% 0 8 0.0% 0 322 0.0

TriangleCapital 0 487 0.0% 0 230 0.0% 0 257 0.0

VirtusInvestment 0 151 0.0% 0 63 0.0% 0 53 0.0

Waddell&Reed 0 * 1,045 0.0% 1 531 0.3% (1) 515 0.2

WestwoodHoldingsGroup 0 81 0.0% 0 14 0.0% 0 67 0.0


12/20

-12-

($inmillions) Assets: Liabilities: Equity:

NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte

DiversifiedCapitalMarkets $0 $1,031 0.0% $0 $771 0.0% $0 $260 0.0

HFF 0 384 0.0% 0 278 0.0% 0 106 0.0

JMPGroup 0 648 0.0% 0 493 0.0% 0 154 0.0

Invst.Banking&Brokerage ($602) $2,075,521 0.0% $70 $1,898,729 0.0% ($672) $172,002 0.4

BGCPartners 0 1,829 0.0% 0 1,378 0.0% 0 452 0.0

CowenGroup 0 1,793 0.0% 0 1,041 0.0% 0 752 0.0Duff&Phelps 0 536 0.0% 0 183 0.0% 0 353 0.0

ETradeFinancial (708) 46,276 1.5% 376 42,548 0.9% (1,085) 3,728 22.5

EvercorePartners 7 * 1,049 0.7% 20 562 3.7% (13) 487 2.6

FBR&Co 0 412 0.0% 0 128 0.0% 0 284 0.0

FXCM 0 1,250 0.0% 0 976 0.0% 0 274 0.0

GFIGroup 2 * 1,665 0.1% 7 1,178 0.6% (4) 487 0.9

Gleacher&Company 0 1,821 0.0% 0 1,477 0.0% 0 344 0.0

GoldmanSachsGroup 0 936,910 0.0% 0 863,362 0.0% 0 70,448 0.0

Greenhill&Co 0 473 0.0% 0 109 0.0% 0 317 0.0

INTLFCStone 0 2,272 0.0% 0 2,000 0.0% 0 272 0.0

InvestmentTechnologyGp 0 3,803 0.0% 0 3,124 0.0% 0 679 0.0

JefferiesGroup 0 40,967 0.0% 0 37,142 0.0% 0 3,824 0.0

KBW 0 626 0.0% 0 192 0.0% 0 434 0.0

KnightCapitalGroup 0 6,427 0.0% 0 5,001 0.0% 0 1,426 0.0LadenburgThalmannFinlServ 0 110 0.0% 0 61 0.0% 0 49 0.0

Lazard 39 * 3,120 1.3% 111 2,334 5.0% (72) 786 8.4

LPLInvestmentHoldings 1 3,664 0.0% 2 2,401 0.1% (1) 1,262 0.1

MFGlobalHoldings 0 44,832 0.0% 0 43,324 0.0% 0 1,377 0.0

MorganStanley 0 830,747 0.0% (650) 761,954 0.1% 650 67,285 1.0

OppenheimerHoldings 0 3,624 0.0% 0 3,124 0.0% 0 496 0.0

OptionsxpressHoldings 0 1,617 0.0% 0 1,487 0.0% 0 129 0.0

PiperJaffray 0 2,222 0.0% 0 1,359 0.0% 0 863 0.0

RaymondJamesFinancial 34 15,318 0.2% 64 12,529 0.5% (30) 2,789 1.1

Schwab(Charles) 12 97,584 0.0% 137 90,975 0.2% (125) 6,609 1.9

StifelFinancial 1 4,515 0.0% (27) 3,190 0.8% 28 1,325 2.2

SWSGroup 0 4,293 0.0% 0 3,933 0.0% 0 360 0.0

TDAmeritradeHolding 11 * 15,768 0.1% 30 11,656 0.3% (20) 4,112 0.5

CommercialBanks ($10,621) $3,745,377

0.3% $14,207

$3,344,865

0.4% ($24,828) $374,127

6.2

DiversifiedBanks ($2,079) $1,639,943 0.1% $6,347 $1,470,167 0.4% ($8,426) $156,660 5.1

BancoLatinoamericanoDeCom 0 5,807 0.0% 0 5,071 0.0% 0 736 0.0

Comerica 81 54,222 0.1% (16) 48,087 0.0% 97 6,135 1.6

EncoreBancshares 33 1,500 2.3% 25 1,320 1.9% 8 150 5.9

USBancorp 2,051 322,925 0.6% 1,497 289,030 0.5% 554 31,289 1.8

WellsFargo (4,245) 1,255,489 0.3% 4,841 1,126,659 0.4% (9,086) 118,349 7.1

RegionalBanks ($8,542) $2,105,434 0.4% $7,860 $1,874,698 0.4% ($16,402) $217,467 7.0

1stSource 123 4,478 2.8% 60 3,910 1.6% 62 568 12.3

1stUnitedBancorp (3) 1,258 0.2% (1) 1,047 0.1% (2) 211 0.8

AllianceFinancial 39 1,515 2.7% 12 1,347 0.9% 27 167 19.4

AmerisBancorp 6 2,863 0.2% 4 2,584 0.1% 3 229 1.2

AmesNational 2 1,003 0.2% 4 875 0.5% (2) 128 1.7

ArrowFinancial 32 1,934 1.7% 19 1,757 1.1% 13 177 7.9

AssociatedBancCorp (1,006) 21,042 4.6% 94 19,143 0.5% (1,100) 1,641 40.1Bancfirst 24 5,292 0.5% 35 4,832 0.7% (10) 460 2.2

Bancorp (20) 2,446 0.8% (4) 2,199 0.2% (16) 246 6.0

BancorpRhodeIsland 17 1,635 1.0% 29 1,514 1.9% (12) 121 9.0

Bancorpsouth 53 13,420 0.4% 56 12,176 0.5% (3) 1,244 0.2

BankKYFinancial (3) 1,598 0.2% (2) 1,434 0.1% (2) 148 1.1

BankofHawaii 315 13,476 2.4% 117 12,275 1.0% 198 1,201 19.7

BankofMarinBancorp 18 1,355 1.3% 8 1,217 0.7% 10 139 7.5

BankoftheOzarks 4 4,030 0.1% 38 3,676 1.1% (35) 354 8.9

Banner (3) 4,203 0.1% (91) 3,604 2.5% 87 479 22.3

BB&T (1,017) 158,293 0.6% (1,401) 140,861 1.0% 384 17,433 2.2

BOKFinancial 213 24,451 0.9% 97 21,643 0.4% 116 2,808 4.3


13/20

-13-


NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte

RegionalBanks(contd)

BostonPrivateFinlHoldings 61 6,098 1.0% 28 5,505 0.5% 33 535 6.5

BridgeBancorp 26 1,219 2.2% 10 1,125 0.9% 16 94 20.6

BridgeCapitalHoldings (6) 1,028 0.6% 14 925 1.6% (21) 103 16.7

BrynMawrBank 25 1,766 1.4% 11 1,568 0.7% 14 197 7.5

CamdenNational 26 2,357 1.1% 22 2,135 1.0% 4 222 1.9CapeBancorp 10 1,078 0.9% 9 932 1.0% 1 146 0.7

CapitalCityBankGroup (63) 2,536 2.4% 1 2,340 0.1% (64) 196 24.7

Capitalsource 105 9,420 1.1% (77) 7,128 1.1% 182 2,292 8.6

CardinalFinancial 30 2,195 1.4% 33 1,960 1.7% (3) 235 1.2

CascadeBancorp 13 1,575 0.8% 10 1,360 0.7% 3 216 1.5

CathayGeneralBancorp 36 10,571 0.3% 110 9,164 1.2% (75) 1,158 6.1

CenterBancorp 5 1,313 0.4% 11 1,188 0.9% (6) 115 4.7

CenterFinancial (7) 2,262 0.3% (27) 1,956 1.4% 21 252 8.9

CenterstateBanks 8 2,165 0.4% 4 1,910 0.2% 4 255 1.7

CentralPacificFinancialCp (77) 4,055 1.9% (76) 3,622 2.1% (0) 433 0.1

CenturyBancorp 0 2,598 0.0% 0 2,443 0.0% 0 155 0.0

ChemicalFinancial 3 5,207 0.0% 25 4,658 0.5% (22) 548 3.9

CITGroup 722 48,732 1.5% 1,901 40,968 4.9% (1,179) 7,764 13.2

Citizens&Northern 12 1,322 0.9% 25 1,181 2.2% (13) 140 8.6CityHoldingCo 36 2,749 1.3% (33) 2,371 1.4% 68 379 22.1

CityNational 296 22,822 1.3% 135 20,533 0.7% 161 2,289 7.6

CNBFinancial 21 1,513 1.4% 6 1,375 0.5% 15 137 12.3

CobizFinancial (3) 2,415 0.1% (2) 2,208 0.1% (2) 207 0.9

ColumbiaBankingSystem 266 4,695 6.0% 76 3,777 2.0% 190 918 26.1

CommerceBancshares 120 19,691 0.6% 60 17,499 0.3% 60 2,192 2.8

CommunityBankSystem 38 6,428 0.6% 81 5,741 1.4% (43) 687 5.9

CommunityTrustBancorp 7 3,491 0.2% (16) 3,116 0.5% 23 375 6.6

Cullen/FrostBankers 49 18,528 0.3% 20 16,321 0.1% 30 2,206 1.4

CVBFinancial 91 6,551 1.4% 60 5,836 1.0% 32 715 4.6

EagleBancorp 1 2,355 0.0% 6 2,143 0.3% (5) 188 2.8

EastWestBancorp (419) 21,454 1.9% (783) 18,860 4.0% 364 2,510 17.0

EnterpriseBancorp (10) 1,461 0.7% 1 1,350 0.1% (11) 111 9.2

EnterpriseFinlServicesCp 8 2,943 0.3% (14) 2,684 0.5% 22 226 10.6FNBCorp 70 9,927 0.7% 15 8,669 0.2% 55 1,258 4.6

FifthThirdBancorp (729) 110,077 0.7% 695 98,899 0.7% (1,424) 10,780 11.7

FinancialInstitutions 71 2,354 3.1% 22 2,071 1.1% 49 266 22.9

FirstBancorp (37) 3,297 1.1% (25) 2,957 0.8% (13) 277 4.3

FirstBancorpInc 10 1,427 0.7% (22) 1,240 1.7% 31 163 24.0

FirstBusey 37 3,508 1.1% 21 3,062 0.7% 16 346 4.9

FirstCitizensBancshares (69) 20,953 0.3% 63 19,274 0.3% (132) 1,678 7.3

FirstCmntyBancshares 26 2,232 1.2% 28 1,932 1.5% (2) 281 0.8

FirstCommonwlthFinl 31 5,722 0.5% (77) 4,853 1.6% 108 870 14.1

FirstFinancial 0 2,502 0.0% 10 2,169 0.5% (10) 333 2.9

FirstFinlBancorp (3) 6,038 0.1% 14 5,334 0.3% (18) 704 2.5

FirstFinlBankshares 0 3,841 0.0% 2 3,365 0.0% (1) 477 0.2

FirstHorizonNational (619) 24,435 2.5% (152) 22,221 0.7% (467) 2,214 17.4

FirstInterstateBancsystem 1 7,204 0.0% 19 6,462 0.3% (18) 691 2.6FirstLongIsland 16 1,871 0.9% 23 1,704 1.4% (7) 167 4.2

FirstMerchants 7 4,101 0.2% (23) 3,603 0.6% 29 430 7.4

FirstMidwestBancorp 18 8,148 0.2% 4 6,992 0.1% 14 964 1.5

Firstmerit (179) 14,169 1.2% 26 12,823 0.2% (205) 1,345 13.2

FultonFinancial (4) 15,963 0.0% (45) 13,969 0.3% 41 1,994 2.1

GermanAmericanBancorp 1 1,818 0.0% 5 1,663 0.3% (4) 156 2.7

GlacierBancorp 52 7,031 0.7% (3) 6,111 0.0% 55 920 6.3

GreatSouthernBancorp 5 3,423 0.1% 12 3,116 0.4% (8) 250 2.9

HamptonRoadsBankshares 42 2,639 1.6% 9 2,445 0.4% 32 194 19.9

HancockHoldingCo 338 20,095 1.7% 137 17,509 0.8% 200 2,587 8.4

HanmiFinancial (7) 2,704 0.3% 10 2,522 0.4% (17) 181 8.6


14/20

-14-


NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte


HeartlandFinancialUSA (12) 3,999 0.3% (12) 3,653 0.3% 0 267 0.2

HeritageCommerce 6 1,268 0.5% (1) 1,073 0.1% 7 136 5.4

HeritageFinancial 22 1,361 1.6% 9 1,142 0.8% 13 219 6.4

HomeBancshares (8) 3,686 0.2% 11 3,201 0.3% (20) 435 4.3

HudsonValleyHolding 35 2,853 1.2% 11 2,533 0.4% 24 319 8.0HuntingtonBancshares (821) 52,229 1.5% 101 47,899 0.2% (922) 3,968 18.9

Iberiabank (131) 11,322 1.1% (122) 9,824 1.2% (9) 1,498 0.6

IndependentBank 18 4,861 0.4% 4 4,391 0.1% 14 470 3.1

IntlBancshares (22) 11,799 0.2% 81 10,339 0.8% (102) 1,250 7.6

InvestorsBancorp 47 10,253 0.5% 105 9,372 1.1% (58) 881 6.2

Keycorp (252) 88,530 0.3% 735 79,780 0.9% (987) 8,459 10.5

LakelandBancorp 12 2,753 0.4% 17 2,508 0.7% (5) 227 2.3

LakelandFinancial 3 2,738 0.1% 12 2,487 0.5% (9) 250 3.4

M&TBank** (21) 77,706 0.0% 186 68,669 0.3% (207) 8,176 2.5

MainsourceFinlGroup (20) 2,800 0.7% (10) 2,491 0.4% (11) 252 4.1

MBFinancial (50) 9,928 0.5% (28) 8,605 0.3% (22) 1,129 1.9

MerchantsBancshares 17 1,448 1.2% 4 1,330 0.3% 13 118 12.2

MetroBancorp (16) 2,371 0.7% (7) 2,163 0.3% (9) 208 4.1

MidsouthBancorp 7 1,056 0.7% 4 914 0.4% 4 123 3.0NBTBancorp 82 5,419 1.5% 73 4,875 1.5% 9 545 1.7

NaraBancorp 41 3,008 1.4% 26 2,621 1.0% 15 322 4.7

NationalBankshares (7) 1,028 0.7% (4) 894 0.5% (3) 134 1.9

NationalPennBancshares 11 8,644 0.1% 89 7,589 1.2% (78) 1,055 6.9

NorthfieldBancorp 28 2,336 1.2% 24 1,934 1.3% 4 402 1.1

OldNationalBancorp 204 8,223 2.5% 108 7,119 1.5% 96 1,104 9.5

OmniAmericanBancorp 11 1,339 0.9% 10 1,137 0.9% 2 203 0.8

OrientalFinancialGroup 55 7,137 0.8% 135 6,494 2.1% (81) 576 12.3

OrrstownFinancialServices (24) 1,508 1.6% 6 1,384 0.4% (29) 124 19.2

PacificCapitalBancorp 18 5,854 0.3% 22 5,154 0.4% (4) 700 0.6

PacificContinental (7) 1,222 0.6% (3) 1,048 0.3% (3) 174 1.9

PacwestBancorp 6 5,401 0.1% 39 4,921 0.8% (32) 480 6.3

ParkNational 39 7,368 0.5% 70 6,651 1.1% (30) 620 4.7

ParkSterling (3) 608 0.5% 0 437 0.0% (3) 171 1.6PennsWoodsBancorp (6) 739 0.8% (8) 663 1.2% 2 76 2.4

PeoplesBancorp (51) 1,752 2.8% 24 1,609 1.5% (75) 125 37.5

PinnacleFinlPartners (5) 4,827 0.1% (55) 4,077 1.3% 51 658 8.3

PNCFinancial 3,252 266,369 1.2% 2,761 231,005 1.2% 491 34,716 1.4

Popular (2,067) 36,946 5.3% 169 35,219 0.5% (2,236) 1,677 57.1

PrivateBancorp (294) 11,822 2.4% 18 10,873 0.2% (312) 709 30.6

ProsperityBancshares 126 9,784 1.3% 49 8,194 0.6% 78 1,589 5.1

RegionsFinancial (5,174) 125,734 4.0% 359 114,379 0.3% (5,533) 7,956 41.0

Renasant (22) 4,237 0.5% (38) 3,742 1.0% 16 496 3.3

RepublicBancorp 67 3,172 2.2% 49 2,707 1.8% 19 465 4.2

S&TBancorp (13) 4,045 0.3% 11 3,477 0.3% (24) 462 5.0

SYBancorp 20 1,964 1.0% 18 1,782 1.0% 2 181 1.4

SandySpringBancorp (66) 3,546 1.8% 15 3,204 0.5% (81) 342 19.2

SCBTFinancial (94) 3,746 2.4% 10 3,479 0.3% (104) 267 28.1SeacoastBanking 4 2,087 0.2% (16) 1,896 0.8% 20 144 16.0

SierraBancorp 29 1,375 2.1% (1) 1,179 0.1% 30 195 18.1

SignatureBank 0 13,085 0.0% 0 12,028 0.0% 0 1,057 0.0

SimmonsFirstNational 2 3,266 0.1% 13 2,872 0.5% (11) 393 2.6

SouthsideBancshares 21 3,136 0.7% 11 2,882 0.4% 10 254 4.0

SouthwestBancorp (87) 2,574 3.3% (66) 2,218 2.9% (21) 288 6.9

StateBancorp 8 1,634 0.5% (59) 1,406 4.0% 67 192 53.9

StateBankFinancial 171 2,937 6.2% 62 2,453 2.6% 109 484 29.1

Stellarone (117) 2,819 4.0% 10 2,520 0.4% (127) 277 31.4

SterlingBancorp 18 2,600 0.7% 8 2,371 0.4% 9 228 4.2

SterlingFinancial (239) 9,003 2.6% (238) 8,196 2.8% (1) 807 0.1


15/20

-15-


NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte


SunBancorp (165) 3,049 5.1% 5 2,920 0.2% (170) 129 56.9

SuntrustBanks (3,002) 169,171 1.7% 89 152,602 0.1% (3,091) 16,397 15.9

SusquehannaBancshares (104) 14,054 0.7% (138) 11,997 1.1% 34 2,057 1.7

SVBFinancialGroup 40 19,406 0.2% 23 17,373 0.1% 17 2,033 0.8

SynovusFinancial (23) 28,291 0.1% (11) 25,451 0.0% (11) 1,897 0.6TaylorCapitalGroup (6) 4,389 0.1% (11) 4,141 0.3% 5 109 4.9

TCFFinancial 96 18,931 0.5% 442 17,506 2.6% (345) 1,424 19.5

TexasCapitalBancshares 8 6,717 0.1% 13 6,159 0.2% (5) 559 0.9

TompkinsFinancial 47 3,334 1.4% 35 3,022 1.2% 12 312 4.0

TowerBancorp 12 2,538 0.5% (13) 2,257 0.6% 25 281 9.6

TricoBancshares 65 2,241 3.0% 14 1,986 0.7% 50 255 24.6

Trustmark 58 9,757 0.6% 9 8,515 0.1% 49 1,242 4.1

UMBFinancial 78 12,849 0.6% 34 11,672 0.3% 44 1,177 3.8

UmpquaHoldings 85 11,545 0.7% 23 9,808 0.2% 62 1,737 3.7

UnionFirstMarketBankshares 14 3,866 0.4% 2 3,411 0.1% 12 420 3.0

UnitedBankshares (44) 7,090 0.6% 32 6,362 0.5% (76) 728 9.4

UnitedCommunityBanks (95) 7,314 1.3% (15) 6,534 0.2% (80) 587 12.0

UnivestCorpofPA 62 2,120 3.0% (11) 1,774 0.6% 73 346 26.8

ValleyNationalBancorp 27 14,497 0.2% 353 13,512 2.7% (326) 985 24.9VirginiaCommerceBancorp 24 2,821 0.8% (2) 2,528 0.1% 26 227 12.9

WashingtonBankingCo (17) 1,660 1.0% (12) 1,504 0.8% (5) 156 3.1

WashingtonTrBancorp 70 3,006 2.4% 51 2,705 1.9% 19 301 6.9

WebsterFinancial 138 17,945 0.8% 101 16,065 0.6% 38 1,851 2.1

Wesbanco (81) 5,344 1.5% (13) 4,790 0.3% (69) 554 11.0

WestBancorporation 6 1,267 0.5% 1 1,143 0.1% 5 124 4.1

WestCoastBancorp (65) 2,398 2.6% (17) 2,160 0.8% (47) 217 17.9

WestamericaBancorp 52 4,929 1.1% 20 4,348 0.5% 32 581 5.8

WesternAllianceBancorp (156) 6,352 2.4% 8 5,901 0.1% (164) 319 33.9

WilshireBancorp (3) 2,678 0.1% (1) 2,390 0.1% (1) 228 0.6

WintrustFinancial 381 14,997 2.6% 139 13,282 1.1% 242 1,666 17.0

ZionsBancorp (99) 51,262 0.2% 432 44,880 1.0% (531) 4,053 11.6

ConsumerFinance ($912) $651,041 0.1% ($3,054) $585,428 0.5% $2,141 $65,048 3.4

AdvanceAmerCashAdvance 0 * 413 0.0% 0 159 0.3% (0) 254 0.1AmericanExpress 1,050 * 148,846 0.7% 3,000 132,591 2.3% (1,950) 16,255 10.7

CapitalOneFinancial 3,043 202,796 1.5% 1,573 172,645 0.9% 1,470 30,151 5.1

CashAmericaIntl 60 * 1,564 4.0% 172 818 26.6% (112) 747 13.0

CreditAcceptance 20 1,602 1.3% 26 1,166 2.3% (6) 436 1.3

DiscoverFinancialServices 1,111 64,549 1.8% 1,786 57,700 3.2% (675) 6,849 9.0

DollarFinancial 14 * 1,354 1.0% 40 1,128 3.7% (26) 226 10.3

EZCorp 0 669 0.0% 0 75 0.0% 0 594 0.0

FirstCashFinancialServices 0 371 0.0% 0 49 0.0% 0 323 0.0

FirstMarblehead (1,901) 6,185 23.5% (2,327) 6,518 26.3% 427 (333) 56.2

GreenDot 0 322 0.0% 0 111 0.0% 0 211 0.0

ImperialHoldings 0 292 0.0% 0 71 0.0% 0 221 0.0

Nelnet 797 25,669 3.2% 272 24,155 1.1% 525 1,514 53.1

NetspendHoldings 0 267 0.0% 0 98 0.0% 0 169 0.0

NicholasFinancial 0 231 0.0% 0 126 0.0% 0 106 0.0SLM (5,109) 195,248 2.5% (7,599) 187,746 3.9% 2,490 6,936 56.0

WorldAcceptance 1 * 663 0.2% 3 272 1.1% (2) 390 0.5

DiversifiedFinancialServices ($15,886) $6,605,875 0.2% $9,577 $5,992,984 0.2% ($25,462) $588,216 4.1

MultiSectorHoldings $54 $10,906 0.5% $154 $3,090 5.3% ($100) $7,816 1.3

CompassDiversifiedHoldings 0 976 0.0% 0 429 0.0% 0 547 0.0

LeucadiaNational 54 * 9,246 0.6% 154 2,541 6.5% (100) 6,705 1.5

PicoHoldings 0 684 0.0% 0 120 0.0% 0 564 0.0

OtherDiversifiedFinlServices ($16,490) $6,448,219 0.3% $8,614 $5,889,623 0.1% ($25,104) $533,922 4.5

BankofAmerica (13,000) 2,248,319 0.6% 14 2,039,157 0.0% (13,014) 192,600 6.3

Citigroup (4,660) 1,951,966 0.2% 6,000 1,783,981 0.3% (10,660) 167,673 6.0

JPMorganChase&Co 1,170 2,247,934 0.1% 2,600 2,066,485 0.1% (1,430) 173,649 0.8


16/20


17/20

-17-


NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte

MultilineInsurance(contd)

HoraceMannEducators 4 7,212 0.1% (172) 6,104 2.7% 176 1,108 18.9

Loews 194 76,263 0.3% 544 53,130 1.0% (350) 23,133 1.5

Unitrin 15 8,197 0.2% 43 6,089 0.7% (28) 2,108 1.3

Property&CasualtyInsurance $2,504 $1,171,179 0.2% $4,153 $817,223 0.5% ($1,650) $353,460 0.5

Ace 182 89,436 0.2% 435 65,576 0.7% (254) 23,860 1.1Alleghany 3 * 6,619 0.1% 10 3,596 0.3% (6) 3,023 0.2

AlliedWorldAssurance 28 * 10,885 0.3% 80 7,893 1.0% (52) 2,992 1.7

Allstate 345 129,368 0.3% (232) 109,998 0.2% 577 19,370 3.1

AmericanSafetyInsHldg 0 1,265 0.0% 0 941 0.0% 0 328 0.0

Amerisafe 28 1,180 2.4% 10 * 825 1.2% 18 355 5.3

AmtrustFinancialServices 0 5,136 0.0% 0 4,262 0.0% 0 874 0.0

ArgoGroupIntlHoldings 0 6,514 0.0% (79) 4,886 1.6% 79 1,627 5.1

AspenInsuranceHoldings 0 9,517 0.0% 0 6,412 0.0% 0 3,105 0.0

AssuredGuaranty 11 19,250 0.1% (451) 14,838 2.9% 461 4,411 11.7

AxisCapitalHoldings 19 * 18,216 0.1% 55 12,919 0.4% (36) 4,797 0.7

Baldwin&Lyons 0 884 0.0% 0 538 0.0% 0 345 0.0

Berkley(WR) 39 18,234 0.2% 137 14,412 1.0% (99) 3,821 2.5

BerkshireHathaway** 1,402 384,098 0.4% 3,387 219,299 1.6% (1,985) 164,799 1.2

Chubb 100 * 51,542 0.2% 287 35,938 0.8% (187) 15,604 1.2CincinnatiFinancial 7 15,709 0.0% (16) 10,629 0.1% 23 5,080 0.4

CNAFinancial 85 55,859 0.2% 228 44,189 0.5% (143) 11,670 1.2

DonegalGroup 3 1,251 0.2% 1 * 866 0.1% 2 385 0.5

EMCInsuranceGroup 0 1,221 0.0% (1) 857 0.1% 1 364 0.2

EmployersHoldings 0 3,498 0.0% 0 2,999 0.0% 0 499 0.0

ErieIndemnity 0 14,723 0.0% 0 8,341 0.0% 0 6,382 0.0

FidelityNationalFinancial 0 7,835 0.0% 0 4,303 0.0% 0 3,532 0.0

FirstAmericanFinancial 2 5,786 0.0% 3 3,759 0.1% (1) 2,027 0.1

FPICInsuranceGroup 2 * 974 0.2% 6 710 0.8% (4) 263 1.4

GlobalIndemnity 0 2,239 0.0% 0 1,295 0.0% 0 943 0.0

HallmarkFinancialServices 0 747 0.0% (1) 527 0.1% 1 220 0.3

HanoverInsuranceGroup 5 8,987 0.1% 15 6,511 0.2% (9) 2,476 0.4

HarleysvilleGroup 8 3,248 0.2% 5 2,463 0.2% 3 784 0.3

HilltopHoldings 1 948 0.1% (0) 306 0.1% 1 643 0.2InfinityProperty&Cas 5 * 1,905 0.3% 16 1,248 1.3% (10) 657 1.5

Markel 30 * 11,495 0.3% 87 8,203 1.1% (56) 3,292 1.7

MBIA (231) 31,437 0.7% (928) 28,835 3.1% 697 2,602 36.6

MeadowbrookInsGroup 0 2,281 0.0% 0 1,708 0.0% 0 573 0.0

MercuryGeneral 0 4,247 0.0% (0) 2,401 0.0% 0 1,846 0.0

NationalInterstate 0 1,553 0.0% 0 1,222 0.0% 0 330 0.0

NavigatorsGroup 0 3,656 0.0% 0 2,838 0.0% 0 818 0.0

OldRepublicIntl 9 * 16,096 0.1% 26 12,141 0.2% (17) 3,955 0.4

OnebeaconInsuranceGroup 4 * 5,578 0.1% 13 4,415 0.3% (8) 1,163 0.7

Proassurance 17 4,943 0.3% 6 2,966 0.2% 11 1,977 0.5

Progressive 60 * 21,867 0.3% 171 15,629 1.1% (111) 6,238 1.7

RLI 0 2,730 0.0% 0 1,866 0.0% 0 864 0.0

SafetyInsuranceGroup 0 1,467 0.0% 0 820 0.0% 0 646 0.0

SeabrightHoldings 0 1,071 0.0% 0 730 0.0% 0 341 0.0SelectiveINSGroup 50 5,420 0.9% 21 4,290 0.5% 29 1,130 2.6

StateAutoFinancial 4 2,828 0.1% 8 2,157 0.4% (4) 671 0.5

StewartInformationServices 0 1,129 0.0% 0 673 0.0% 0 456 0.0

TowerGroup 0 4,214 0.0% 0 3,110 0.0% 0 1,104 0.0

Travelers 193 * 106,661 0.2% 550 82,010 0.7% (358) 24,651 1.4

UnitedFire&Casualty 22 3,644 0.6% 61 2,978 2.1% (39) 666 5.5

UniversalInsuranceHldgs 0 897 0.0% (3) 735 0.4% 3 161 2.1

WhiteMtnsInsGroup 5 * 14,208 0.0% 15 10,002 0.2% (10) 4,206 0.2

XLGroup 64 46,686 0.1% 232 36,154 0.6% (167) 10,531 1.6

Reinsurance $669 $166,744 0.4% $293 $119,275 0.2% $376 $46,392 0.8

AlterraCapitalHoldings 56 10,553 0.5% 28 7,733 0.4% 28 2,821 1.0

ArchCapitalGroup 8 * 17,221 0.0% 22 12,794 0.2% (14) 4,102 0.3

EnduranceSpecialtyHoldings 7 * 8,767 0.1% 20 6,110 0.3% (13) 2,640 0.5


18/20

-18-


NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte

Reinsurance(contd)

EnstarGroup 0 5,201 0.0% 0 3,855 0.0% 0 1,346 0.0

EverestReGroup 0 19,004 0.0% (5) 12,846 0.0% 5 6,158 0.1

FlagstoneReinsuranceHld 0 3,244 0.0% (12) 2,267 0.5% 12 976 1.2

GreenlightCapitalRe 0 2,285 0.0% 0 1,515 0.0% 0 770 0.0

MaidenHoldings 0 3,293 0.0% 0 2,534 0.0% 0 760 0.0MontpelierReHoldings 3 * 3,507 0.1% 8 1,891 0.4% (5) 1,465 0.3

Partnerre 15 * 24,614 0.1% 42 18,009 0.2% (27) 6,569 0.4

PlatinumUnderwritersHldg 0 4,682 0.0% 0 2,987 0.0% 0 1,696 0.0

ReinsuranceGroupofAmerica 404 31,064 1.3% (200) 25,135 0.8% 604 5,929 11.4

RenaissancereHoldings 5 * 8,171 0.1% 13 4,033 0.3% (8) 3,588 0.2

TransatlanticHoldings 172 16,878 1.0% 378 12,850 3.0% (206) 4,028 4.9

ValidusHoldings 0 8,260 0.0% 0 4,717 0.0% 0 3,543 0.0

Thrifts&MortgageFinance $6,898 $359,018 2.0% $7,004 $313,183 2.3% ($106) $45,384 0.2

AbingtonBancorp 4 1,181 0.4% (1) 960 0.1% 5 221 2.3

AstoriaFinancial 533 17,653 3.1% 736 16,577 4.6% (203) 1,076 15.9

BankMutual (27) 2,496 1.1% (56) 2,198 2.5% 29 298 10.9

Bankfinancial 8 1,671 0.5% 4 1,416 0.3% 4 254 1.6

Bankunited 242 11,088 2.2% 167 9,537 1.8% 75 1,551 5.1

BeneficialMutualBancorp (39) 4,674 0.8% 9 4,098 0.2% (48) 576 7.7BerkshireHillsBancorp 6 3,231 0.2% 9 2,789 0.3% (3) 442 0.7

BOFIHolding 32 1,693 1.9% 36 1,560 2.4% (5) 128 3.5

BrooklineBancorp 50 3,165 1.6% 25 2,635 0.9% 26 530 5.1

CapitolFederalFinl 205 9,938 2.1% 206 8,013 2.6% (1) 1,926 0.0

CharterFinancial (15) 976 1.5% 17 871 2.0% (32) 105 23.2

CliftonSavingsBancorp 33 1,169 2.9% 23 982 2.4% 10 186 5.4

DimeCommunityBancshares 142 4,235 3.5% 99 3,844 2.6% 43 391 12.5

DoralFinancial (106) 7,910 1.3% 125 7,277 1.8% (231) 281 45.1

ESBFinancial 27 1,995 1.4% 23 1,812 1.3% 5 182 2.6

ESSABancorp 21 1,115 1.9% 19 951 2.1% 2 164 1.1

FederalAgricultureMtgCp 146 10,591 1.4% 203 10,128 2.1% (57) 406 12.4

FirstDefianceFinancialCp 16 2,061 0.8% 15 1,792 0.8% 1 233 0.2

FirstFinancialHoldings 42 3,344 1.3% 33 3,023 1.1% 10 321 3.1

FirstNiagaraFinancial 48 30,937 0.2% 177 27,074 0.7% (129) 3,864 3.2FirstPactrustBancorp 12 894 1.3% 6 727 0.8% 6 167 3.8

FlagstarBancorp (41) 12,622 0.3% (35) 11,453 0.3% (6) 1,169 0.5

FlushingFinancial 121 4,444 2.8% 28 3,946 0.7% 93 498 22.9

FoxChaseBancorp 5 1,093 0.5% 14 893 1.6% (9) 200 4.5

FranklinFinancial 4 1,254 0.3% 1 1,121 0.1% 3 133 2.4

HomeFederalBancorp 5 1,340 0.4% 7 1,144 0.6% (2) 196 1.1

HudsonCityBancorp 2,510 54,289 4.8% 2,687 49,578 5.7% (177) 4,711 3.6

KearnyFinancial 21 2,902 0.7% 43 2,447 1.8% (22) 455 4.6

MeridianInterstateBancorp 26 1,950 1.3% 17 1,722 1.0% 9 228 4.0

MGICInvestment 0 8,270 0.0% (54) 6,703 0.8% 54 1,566 3.5

NewYorkCmntyBancorp 821 41,423 2.0% 1,339 36,381 3.8% (518) 5,042 9.3

NorthwestBancshares 343 8,430 4.2% 161 7,021 2.3% 182 1,409 14.8

OceanfirstFinancial 23 2,262 1.0% 16 2,042 0.8% 7 221 3.4

OcwenFinancial 1 2,290 0.0% 8 1,341 0.6% (7) 949 0.7

OritaniFinancial 110 2,679 4.3% 66 1,993 3.4% 44 686 6.9

People'sUnitedFinl 451 25,773 1.8% 192 20,321 1.0% 258 5,452 5.0

PMIGroup 0 4,014 0.0% 0 3,824 0.0% 0 191 0.0

ProvidentFinancialServices 204 7,083 3.0% 95 6,036 1.6% 109 1,048 11.6

ProvidentNewYorkBancorp 23 2,943 0.8% 51 2,550 2.0% (27) 393 6.5

RadianGroup 23 6,951 0.3% 57 5,856 1.0% (34) 1,095 3.0

RockvilleFinancial 16 1,763 0.9% 14 1,429 1.0% 2 335 0.7

RomaFinancial 26 1,917 1.4% 23 1,699 1.4% 3 219 1.3

TerritorialBancorp 52 1,540 3.5% 24 1,290 1.9% 28 251 12.7


19/20

-19-


NetFV

Marks

Adjustedfor

FVMarks

FV

Marks/

Reported

NetFV

Marks

Adjusted

forFV

Marks

FV

Marks/

Reported

NetFV

Marks

Adjustedfor

FVMarks

F

Marks

Reporte

Thrifts&MortgageFinance(contd)

TFSFinancial 50 10,935 0.5% 154 9,286 1.7% (104) 1,649 5.9

TrustcoBank 89 4,159 2.2% 34 3,835 0.9% 55 324 20.4

UnitedFinancialBancorp 36 1,646 2.2% 19 1,401 1.4% 17 245 7.6

ViewpointFinancialGroup 33 2,997 1.1% (38) 2,519 1.5% 71 478 17.4

Walker&Dunlop 0 681 0.0% 0 535 0.0% 0 146 0.0WashingtonFed 547 13,936 4.1% 229 11,780 2.0% 319 2,156 17.3

WestfieldFinancial 5 1,245 0.4% 8 1,028 0.8% (4) 217 1.6

WSFSFinancial 16 4,167 0.4% (29) 3,746 0.8% 45 421 11.9

* Net FV Mark due to estimated deferred tax calculation.

** R.G. Associates, Inc. holding. See note on back page.


20/20

R.G.Associates,Inc.

201N.CharlesStreet,Suite806

Baltimore,MD212014132

Phone:(443)9774370

Fax:(410)7832955

Internet:[email protected]

Website:www.accountingobserver.com

NOTE:

R.G.Associates,Inc.isregisteredasaninvestmentadviserwiththeStateofMaryland.NoprincipalsoremployeesR.G.Associates,Inc.haveperformedauditingorreviewengagementprocedurestothefinancialstatementsofanyofth

companiesmentionedinthereport.NeitherR.G.Associates,Inc.,noritsprincipalsandemployees,areengagedinthepracti

ofpublicaccountancynorhavetheyactedasindependentcertifiedpublicaccountantforanycompanywhichismentione

herein.

Thesereportsarebasedonsourceswhicharebelievedtobereliable,includingpubliclyavailabledocumentsfiledwi

theSEC.However,noassuranceisprovidedthattheinformationiscompleteandaccuratenorisassuranceprovidedthata

errorsdiscoveredlaterwillbecorrected.

Nothinginthisreportistobeinterpretedasabuyorsellrecommendation.Theinformationhereinisprovided

usersforassistanceinmakingtheirowninvestmentdecisions.

R.G.Associates,Inc.,itsclients,and/oritsprincipalsandemployeesthereofmayhavepositionsinsecuritiesreferretohereinandmaymakepurchasesorsalesthereofwhilethisreportisincirculation.Atthetimeofthisreport,thesecompani

representholdingsofR.G.Associates,Inc.clientsormanagement:

3M CampbellSoup M&TBank Pepsico

AbbottLabs ColgatePalmolive Manpower PriceAssociates,(T.Rowe)

BadgerMeter DaimlerAG McGrawHill VFCorp.

BectonDickinson DonaldsonCo.,Inc. Microsoft

Bemis Corporation ExxonMobil Mirant

v20_11 financial institutions fair value survey

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