Requirements for banks after reaching $500M asset threshold
Increased bank consolidation and considerable stimulus funds provided by governments in response to the COVID-19 pandemic have resulted in significant asset growth for community banks. Many banks have recently crossed or are nearing the $500MM asset threshold that subjects financial institutions to several new requirements. If your bank asset size is $500MM as of the first day of the fiscal year, you will be required to have the following (if not already required by applicable state laws):
- Audited comparative financial statements with Independent Auditor’s Report thereon
- Management report that contains:
- A statement of management’s responsibilities for:
- Preparing the annual financial statements
- Establishing and maintaining an adequate internal control structure over financial reporting
- An assessment by management of the Bank’s compliance with laws and regulations pertaining to insider loans and dividend restrictions during the year
- A statement of management’s responsibilities for:
- Audit firm must be independent under SEC/ PCAOB independence standards
- Majority of audit committee members must be outside directors that are independent of management
- Part 363 Annual Report with the FDIC and primary regulator within 120 days after the bank’s fiscal year end
- Management is required to prepare the financial statements, including disclosures, and tax accrual
Audited financial statements
Banks must have their audits completed within 120 days after the bank’s fiscal year end, unless the bank is publicly traded resulting in a 90-day or sooner requirement.
Auditor independence
Banks and their audit firm are required to follow SEC/ PCAOB independence standards including partner rotation every five years (unless firm is not subject to requirement), pre-approval of non-audit services and certain restrictions on banks hiring auditors from the engagement team. In connection with auditor independence, audit firms are not able to provide prohibited nonaudit services to the bank such as:
- Bookkeeping,
- Financial statement preparation (including tax accruals),
- Valuations,
- Outsourced internal audits,
- Tax return preparation for individuals in a financial reporting oversight role (or their family members), and
- Financial information systems design and implementation
Audit committee composition
Banks are required to have an audit committee to oversee financial reporting. Most of the audit committee members must be outside directors rather than members of management to avoid potential conflicts of interest. There should be direct communication between the audit committee and auditor.
How we can help
Maggart’s approach is tailored to your bank’s size and complexity. We will build relationships with your management team to develop a practical solution that can be scaled as you grow and your bank’s requirements change. We can help you with the following:
- Financial statement preparation
- Financial statement audits
- Loan review services
- Internal audits
- Investment center review
- Asset liability management assessments
- Liquidity and funds management assessments
- HUD audits
- Risk assessment services
- Outsourced accounting
- Merger & Acquisition consulting
- Process redesign and optimization plans
- Policies and procedures development
- Strategic planning
- Information security assessments
- Asset liability management assessments
- Liquidity and funds management assessments
- State collateral pool certifications
Why Maggart?
- We take a hands-on approach in helping you planning (typically 18-24 months in advance) to ensure you meet the FDICIA requirements in a cost effective and efficient manner.
- You will receive useful insights from a relationship-based firm with national firm expertise. Maggart has been providing services to banks ranging from small privately held community banks to publicly traded multi-billion-dollar institutions for over 40 years.
- When applicable, we will provide documentation or equivalent in accordance with AICPA standards to your audit firm and other outside service providers to maximize efficiency and minimize staff disruption in meeting requirements.
- You will be assigned a partner that is intimately involved in the relationship from day one. We won’t assign unsupervised inexperienced staff to you.