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The Financial Accounting Standards Board ("FASB") is considering a new loan-loss reserve model, which would require banks to set up an allowance for estimated losses at loan origination instead of when default is considered probable. Although this new Current Expected Credit Loss ("CECL") model has instilled some fear in community bankers as a result of the potential complex and costly reserve analysis it may bring, it is evident that concerns from bankers are being heard and considered by the FASB before any final decisions or mandates are made. Although many bankers left a February 2016 meeting with the FASB impressed by the teamwork of the FASB and bank regulators, and were also in agreement with the theory behind the change, some bankers left the meeting disgruntled when discussion of community banks' responsibility for the financial crisis was discussed. 

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On April 1st CMS launched the mandatory Comprehensive Care for Joint Replacement (CJR) program with a bundled payment model for health care costs for the procedure and 90 days after discharge. Earlier CMS alternative payment model programs were voluntary but this program places about 800 hospitals in 67 markets at financial risk if they do not reach Medicare's cost and quality targets for hip and knee replacements.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) allows CMS to create alternative payment mechanisms such as the CJ are and require hospitals and doctors to accept financial risk. 

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It's amazing that our nation is still talking about this issue post Dodd-Frank, but it's front-and-center in the fight for the democratic presidential nomination with Bernie vowing to come down hard on Wall Street, and Hillary defending her acceptance of campaign contributions.  Far more interesting, however, is Neel Kashkari's recent discussion on the topic.  While the idea of turning banks into "utilities" is a little off-the-wall to some, he is right on track as he turns his attention to over-regulation of small banks…this is worth a listen. Visit www.cnbc.com for more information >>  

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As we continue to see increased focus and closings of commercial real estate ("CRE") loans in an attempt to increase yields within the financial institution industry, what will be the fallout from the regulators? The regulators issued a warning through a joint statement in December 2015 regarding the "substantial rise in CRE exposure" similar to the warning sent in December 2006. The regulators are scared and want to be sure that all Banks housing are in order in this rising rate environment. But the Banks are not biting and continue to drive CRE growth due to the improving credit quality and declining delinquencies. For more information or assistance please contact James Dowling, Manager, and member of Marcum's Financial Institutions Industry Group. 

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Community Banks can benefit from a strategy typically associated with large international entities. Best Shared Service Centers are being used by effective management teams who can problem solve their way to higher profits. These teams are using Service Centers beyond their usual capacity of high-volume transaction processing. Not only do these Service Centers reduce cost, but they can take heavily regulated processes out of a bank thereby reducing the burden of compliance and any associated time, IT and audit costs. 

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In an age of increasing focus and scrutiny on cyber security, personal information security and overall information technology security within the financial institutions industry, any measure that can provide assurance to an institution's customer is priceless. The new wave is a move from the dot.com domains to dot.bank domains to provide for better security measures, increased customer service, improved marketability and a move from the crowded dot.com domains of the internet. Many U.S. institutions have applied for new domain names that end in dot.bank and fiscal year 2016 is expected to be the year of implementation. For more information or assistance please contact James Dowling, Management and member of Marcum's Financial Institutions Services Group. 

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The Affordable Care Act (ACA) published back in 2010, required providers and suppliers to repay overpayments from the Medicare program within 60 days. Many facets of the requirement were unclear, until now. On February 12, 2016, the Centers for Medicare and Medicaid Services (CMS) published in the Federal Register the "Reporting and Returning of Overpayments, final rule" providing guidance to Medicare providers. The effective date of this rule was March 14, 2016.

Of particular interest is the clarification of when an overpayment is identified, which sets the 60-day clock ticking. The original legislation did not provide clear guidance. The final rule states that an overpayment is identified when the provider has, or should have through the exercise of reasonable diligence, determined that they have received an overpayment and quantified the amount of the overpayment. This includes both results from a self-audit or a contractor initiated review or audit. "Quantification" can include the use of statistical sampling or extrapolation methodologies to determine the overpayment. 

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Banks merging is not a new concept. However, the economy, regulations and technology surrounding the banks of today have many new concepts. As a result, banks that once fought the idea of giving up their independence, have found they must adapt and change in order to continue. That change is to pool resources with other banks who find themselves in the same situation, in order to provide the technology and service that customers are coming to expect from their bank.   

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It has become tougher than ever for community banks to raise capital. Collateralized Debt Obligations ("CDO's") are a new option that would allow community and regional banks to work together to raise capital at a low cost. There appears to be significant demand in terms of investors, and investment firms just need to identify a group of interested, smaller privately held institutions who are looking to raise capital. Although similar, these CDO's are different from trust-preferred securities that can no longer be converted into marketable securities due to the Dodd-Frank Act.  

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Regulatory oversight certainly has its place, but examinations can be burdensome to many institutions, particularly small, well capitalized and well managed ones. And, for those that are floating around the $500 million in assets mark, the difference between a 12 and 18 month exam cycle could provide some welcome relief. In a March 4, 2016 Financial Institution Letter, the FDIC, along with other federal financial regulatory agencies, adopted a number of interim amendments that have effectively increased the total asset size for the extended examination cycle to $1 billion for qualifying banks. So, for those well managed and capitalized institutions out there who skirt the $500 million mark, do not be afraid of crossing that threshold, as the regulators are on your side on this one. 

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