Challenges facing banks Challenges facingcommunity banks What to do next What to do next Prepared by: Jim Koltveit, Chief Executive Officer – Bank CEO Network John Owens, Director of Financial Services – RSM McGladrey David Harrop, Director of Financial Services – RSM McGladrey Prepared by: Jim Koltveit, Chief Executive Officer – Bank CEO Network John Owens, Director of Financial Services – RSM McGladrey David Harrop, Director of Financial Services – RSM McGladrey Challenges facing banks | What to do next In the winter of 2000, the Commercial Lending Review published our article “Ten Challenges Facing Community Banks.” Those ten areas were: Capital adequacy and leveraging capital appropriately Other fee-based services Loan competition Economic downturns Risk management Effective use of technology Technology and customer retention New products and services New earnings sources Preparing for the future Although the issues addressed in our 2000 article are still valid, the banking industry has changed. Risk management, liquidity and capital adequacy recently became top priorities. Exacerbated by current economic conditions, they have put additional pressure on earnings. In this article, David Harrop joins us to address the “new realities” and challenges confronting bankers. —Jim Koltveit and John Owens Risk management In the original article, we expressed concern that — based on our experience — “few bankers spend a significant amount of time thinking about, planning for and managing risks.” Since then, we have observed that banks must give serious attention to the entire risk management process. Our current observations reveal the following issues: Strategic risks must be understood and planned for. Risk management needs an objective advocate and “scorekeeper.” Improper organizational structure may result in significant risk and subsequent losses. Processes must provide adequate control points. Loan documentation follow-up, receipt and analysis must be treated as more than a cursory review. Diversification of risks on both the asset and liability side of the balance sheet is imperative; banks must generally avoid an over-reliance on real estate and collateral rather than cash flow. Understanding the weaknesses and strengths of the staff at every position and providing appropriate training is a necessity. Using technology appropriately in the bank’s processes can lead to risk mitigation and enhanced customer service—a double win. The first two points deserve additional attention. Strategic risks must be understood and planned for Bankers, like many others, failed to think about future risks in a comprehensive manner. Envisioning the future in terms of various scenarios, which is the recommended approach, requires significant thought and imagination. Even Alan Greenspan apparently failed to completely comprehend the full extent of risks in certain financial instruments. At this early stage in the worldwide economic decline, it is unreasonable to assess the final outcome. But there are several fundamentals that are essential for the future of understanding strategic risks and risk mitigation: Challenges facing banks | What to do next 1. The bank’s strategic plan must allow for scenario planning. It must be dynamic. It should be formally analyzed for the milestones expected from the bank and the economic, financial and other factors that form the bases for the plan’s implementation. In fact, it should go beyond the expected to consider the probable impact of severe, but unexpected, events. Frequent, formal evaluation of the planning assumptions and updating the bank’s plan are essential. 2. Strong, vigilant risk governance practices are mission critical. Bankers must understand the reasoning behind their decisions and balance decisions appropriately. Communicate using a 360 degree approach— upward, downward and laterally. A true understanding of risk impacts is not just required for a single relationship, portfolio or segment, but for the entire enterprise. 3. Insights are the key. Scenario testing, validation models, research, market indicators, etc. are important. Challenging the assumptions is paramount to knowing the impact of the decisions under various scenarios. The bank should have strategies that build in an expectation of future downturns. 4. Always understand the “what i f ” of the best case and worst case scenarios. Evaluate the low probability/high impact risks. 5. Learn from the past. Downturns occur regularly in the industry, including those that prompted the recent collapses, bailouts and loan issues. The Harvard Business School and Oliver Wyman conducted a study of 600 financial services companies about the seven economic downturns that have occurred in the past 28 years. They concluded: Reacting and improvising after the onset of a crisis is not enough Firms whose products had above average margins recovered 113 percent of their pre-downturn price-to-earnings levels versus 101 percent for those that did not Above average capital softened the effects of a downturn The study further concluded that during a downturn a bank should try to maintain the firm’s 1 governance structure and dividends. 6. Ensure you have the following: The right people and the right level of communication The right people in all levels of risk management Leadership that does not shy from asking probing, less-than-popular questions Staff that does not shy from providing honest and potentially controversial answers to those questions and leadership that welcomes those responses Reverent candor is encouraged – and expected – at every level Risk management objectivity We are beginning to see the role of chief risk officer (CRO) appear in community and midsized banks. That doesn’t change the fact that everyone has a role to play in risk management, from the board of directors to the CEO to every member of the staff. The board should establish the risk appetite for the company and ensure management is remaining within the boundaries. This mandate for enterprise risk management (ERM) is trickling down from as high up as the Federal Reserve. On May 15, 2008, Fed Chairman Ben Bernanke called for financial institutions to step up their risk management practices, citing weaknesses in this area as a strong contributor to the current financial turmoil. In the March 2008 edition of the ABA Banking Journal, 72 percent of the bankers surveyed indicated regulatory emphasis was put on ERM during their last exam. The two main areas of expectations were a written program and a risk rating system. 1 Harvard Business Review, December 2 0 0 8 Challenges facing banks | What to do next In our experience, risk management is most effective when the CEO conducts regular risk meetings with the management team. All business line managers must take responsibility for knowing the risks associated with their areas. The CRO provides color commentary and insights while keeping the management team honest in their assessments of risks. The CRO acts as risk analyst and strategist. Their job is to ensure line-of-business leadership has the best available information so they can be armed to effectively mitigate risk. Review the Customer-Focused Financial Institution model shown on the following diagram. This organizational structure divides the bank’s activities into four main functional groups – direct sales and service, service and sales support, administration and risk management. The goal is to structure the organization in a way that minimizes conflicts between and among these different functions while establishing accountability. The organization rests on, and is focused at, serving the needs of the bank’s customer and prospect base. The concepts portrayed in this model can be adapted to both large and small organizations. Customer-focused financial institution Conceptual model Functions to identify and manage risk throughout the bank Support of service/sales delivery functions Internal functions not directly related Minimal external customer contact to customer service/sales contact Relationship management Direct customer contact Service existing customers Acquire new customers Capital adequacy Your bank’s capital may be adequate, but you will never have enough. That statement isn’t necessarily true, but it often feels that way. Sometimes, just when everything seems to be going well, an unexpected event occurs that results in a loss of capital. Regulatory agencies view capital as a source of strength for the organization and the cushion to absorb losses after all other sources have been exhausted. That’s a wonderful theory. In reality, an organization only needs capital to provide enough comfort to persuade creditors to continue to lend money (we don’t even know if the Challenges facing banks | What to do next federal government has any equity and it borrows immense sums of money). Capital is simply a way for regulators to determine whether a bank’s shareholders need to increase the size of their investment. To illustrate that point, consider the following situation: ABC Bank has risk-weighted assets of $100 million and a risk -weighted capital ratio of 10 percent. ABC Bank also has $30 million of assets that are in the 50 percent risk-weight category, therefore requiring $1,500,000 of capital. Market conditions change and this $30 million of assets moves to a 100 percent risk-weight category. These assets are current and ABC Bank believes they will be collected in full according to the original terms. However, ABC Bank will need an additional $1,500,000 in capital to maintain it at 10 percent on a risk-weighted basis. Rating changes increases in loan loss provisions, asset write-downs and numerous other events have adverse effects on capital. Some events can be anticipated and planned for, but many times we are surprised. Old-time bankers were often accused of building up reserves during good times so they would be better prepared for the inevitable economic cycles and the accompanying loan losses. Accounting principles were tweaked and interpreted so losses would be recognized only when they had actually occurred (or were believed to have occurred) and to prevent the “management of income.” This has resulted in significant reductions in the allowance for loan losses, less stability in earnings and fluctuating capital levels. Consequently, managing capital must be a key operating consideration. Unless shareholders are able and willing to provide capital on an “as needed” basis, you may need to allow capital to build to higher than necessary levels in good times. This will, of course, result in lower returns on equity, potentially lower stock prices and ongoing questions from shareholders. Unfortunately, capital is most costly and least available when it is most needed. Therefore, if a cushion for unplanned losses can’t be built into a bank’s capital, contingency planning becomes extremely difficult. Current shareholders, because they have much at stake, may be the first source of additional capital. New investors, if they can be found, will demand a high price (consider Warren Buffett’s high rate of return plus warrants on a recent investment in GE). Managing capital may be one of your most difficult tasks. There is no magic formula and the stakes are high. Too little capital will result in a forced sale or even failure. Too much capital will result in lower rates of return on equity, perhaps reduced dividends and unhappy shareholders. Look objectively at these realities, consider your bank’s risk profile and put together a capital plan your board of directors understands, approves and supports vigorously. Liquidity Not long ago liquidity was available from the Federal Home Loan Bank, lines of credit at other banks, fed funds, brokered deposits and other sources. When all else failed, investments could be sold. A “run on the bank” where depositors flocked to close accounts was something we read about in history books—until recently. Once again some banks have been forced to sell or merge because they exhausted their sources of liquidity, even though they had adequate capital. Managing liquidity risk cannot be ignored. For years bankers have been dealing with liquidity risk resulting from the mismatch of maturities in a bank’s balance sheet. Easy to identify, these disparities are typically managed in a relatively routine fashion. Managing liquidity gets significantly more interesting when needs arise because of unexpected cash concerns. The degree and complexity of the risk varies with the source of the liquidity need. Obtaining additional liquidity because of unexpected draws on loan commitments may be relatively easy to satisfy. However, obtaining additional liquidity because of unexpected deposit withdrawals may be extremely difficult. Challenges facing banks | What to do next Market conditions may also affect liquidity. For example, plans to sell securities to provide liquidity are negatively affected if the market value of the securities drops significantly. Recently, we’ve seen securities sell at prices that are significantly less than their discounted cash flows. You get a double-whammy when liquidity needs force the sale of assets at severely discounted prices. The amount of cash generated is significantly less than anticipated and earnings and capital are reduced as a result of the loss on sale. Planning for unexpected liquidity needs and challenges due to changes in market conditions is a lot like disaster recovery planning. The plan needs to anticipate the best possible response to every potential liquidity need. However, the actual response will likely be tempered by circumstances. Because of the complexity of liquidity risk, many banks turn to outside experts for help in assessing liquidity risks and planning for responses. Flexibility is clearly an asset when you are dealing with liquidity issues. The cost of liquidity is likely to increase significantly as the number of sources declines. Keeping a broad cross-section of unpledged securities is an example of one way to add flexibility. Your liquidity plan should be comprehensive, but simple enough for your bank’s board of directors to understand the risks and responses. Because liquidity needs change rapidly, the board of directors should be informed of the bank’s liquidity position and plans on a regular basis, generally at each board meeting. Board of directors The original article did not single out the board of directors and its challenges. But in light of the current state of the banking industry, we feel compelled to address these challenges. The preface to “The Director’s Book,” published by the Office of the Comptroller of the Currency (OCC) begins with the following: A bank’s board of directors plays a critical role in the successful operation of the bank. The health of a bank depends on a strong, independent and attentive board. Bank directors are ultimately responsible for the conduct of a bank’s affairs. They also are accountable to the bank’s shareholders as well as its depositors, regulators and the communities served by the bank. The demands on the board of directors are not destined to become less. As a result of the current environment, directors are sitting in on more meetings of committees they don’t serve on, seeking to better educate themselves “about the economics of banking.” And they’re keeping close tabs on how fallout from the current crisis—declining 401(k) account values, the bank’s reputation, etc.—is affecting employee morale. The implications of the current crisis will be daunting for most boards. Profitability could be squeezed for years to come, capital and liquidity will become more precious, and changes in the competitive landscape could lead to differences in what constitutes a winning strategy. Shareholders, bruised and battered by the industry’s collapse, are likely to demand alterations in areas such as CEO incentive pay and board composition. Just as in past turbulent times, it will take a lot of time and significant commitment on the part of board members to really understand what is going on. In the short term, boards can expect aggressive enforcement of tougher new rules by regulators and prosecution of the worst scofflaws when deemed necessary. “You’ve seen a lot of directors who have signed whatever [management] put in front of them,” says Robert Clarke, a former Comptroller of the Currency and a senior partner at Bracewell & Giuliani, a Houston law firm. “That’s a terrible thing to do, because as a director you’re 2 really painting a target on your back in terms of regulatory sanctions.” While most directors won’t have to confront a failure, that doesn’t mean they won’t feel fallout from the crisis. Many boards have been meeting more frequently, poring over outstanding loans for signs of trouble, and exercising greater caution and professionalism than just a few years ago. A Federal Reserve survey of senior loan officers released in August 2008 found that two-thirds of U.S. banks had tightened consumer loan terms, 2 ABA Banking Journal Challenges facing banks | What to do next raising credit scores and setting lower limits on revolving debt. Commercial lending also shows signs of slowing. Commercial real estate, development and construction loans are weighing down banks’ income and increasing their expenses. Economists worry these issues will hinder the recovery and cause more trouble for lenders. As they catch their collective breath, boards will also need to strike a better balance between short- and long- term growth and profits in the bank’s compensation practices. Many banks continue to reward top executives for quarterly growth, not long-term stability. In one sense that’s understandable, because banks that don’t deliver growth can be vulnerable to lower multiples and, perhaps, a takeover. But the crisis has shown that greater weight must be given to safety and soundness. As the current environment improves, one of the most damaging scenarios is that many directors will conclude the risks and time are too much, and step down. That will mean finding new board members—something that could be a challenge, given what appears to be in store for the present ones.² Technology: needs and uses Based on our consulting experience with several hundred financial institutions, the greatest technology challenge facing banks today is not what core system to employ or what new technologies and technology- related products to adopt, but how to get better returns from their technology investments. T h e 2 0 0 8 Bank P rofi t Imp rov e me nt Rep ort , a survey of 149 bank members of The Bank CEO Network, shows that the median cost of information technology, reported as a percentage of average IPC deposits, is 0.51 percent. For every $100 million of IPC deposits, a bank incurs an annual expense of $510,000 — in itself a significant sum. But the actual cost swells when we consider that most banks do well if they use more than 40 percent of their system capabilities. The primary reason for poor system utilization is the lack of alignment between a bank’s information technology (IT) staff and its business units. IT staff rarely understand the needs and goals of the business units and that lack of understanding is reciprocated. The lack of understanding is sometimes exacerbated by a lack of trust between the two groups. How can a bank improve the return on its technology investment? While there’s no single magic bean or silver bullet, several things can help: Business units must “own” their systems. Too often systems are assumed to be owned by IT. In fact, systems and system features, both core and ancillary, should be owned by the business units whose operations depend on their successful execution. When problems occur, the business unit must be accountable for taking a proactive role in working with IT representatives to resolve those problems. Part of the “ownership” role involves business unit staff members at appropriate levels and in appropriate positions attending periodic vendor user group meetings. In many instances these meetings are attended only by members of the IT department who often do not have the necessary business knowledge to take full advantage of meeting content and interaction with other users. Make sure that business unit staff receives proper training and, as necessary, retraining in the features and functions of the systems they use. If you are negotiating the purchase of a new system, be sure that the contract specifies not only pre-conversion training, but also post-conversion training follow-up and at least annual refresher training. Put in place a system to ensure that information regarding periodic software updates and new releases is communicated to and discussed with the business units. With many of our clients we have found that new release documentation is received in IT and is filed without being shared with those who actually use the system. Challenges facing banks | What to do next Adopting these suggestions and placing accountability on the business unit to learn as much as possible about the tools they use in doing their jobs will help financial institutions improve the return on technology investments. Beyond improving the usage of current systems, what technology trends will impact financial institutions over the coming decade? Several directions indicate: Technologies that enable the bank to aggregate information about and for their customers. Banks continue to struggle to gather customer information that enables them to evaluate the customer/bank relationship. This information helps determine not only customer profitability but also how best to serve each customer. There appears to be a significant opportunity for banks to leverage their technology. How can your bank improve the experience of your customers—both retail and business— through the use of technology? “Anytime, anywhere” banking technologies. Commercial remote deposit capture will expand to include consumer applications for scanning and depositing checks from home. ATMs, telephone banking and Internet banking channels will expand to include mobile phones and other personal devices. One of the real opportunities is to implement Internet technologies that match the consumer’s adoption of the Internet for selecting and purchasing products. Research indicates the banking industry has done very little in this channel to acquire or expand relationships. Will the number of branches finally shrink? How will the expansion of banking channels affect the traditional branch? Will branches be closed, merged into entities that can be accessed by customers of several banks or reconfigured with additional banking and non-banking services to attract customer usage? These are only a few of the technology-related changes that will affect financial institutions in the next few years. But unless banks can successfully address the issues of better utilization discussed above, the promises of these new technologies will largely go unfulfilled. Earnings “It’s really hard to throw a party when you’re dying.” So said Rebecca Lindland, an automotive analyst with HIS Global Insight, regarding an uncharacteristically subdued atmosphere surrounding the opening of the Los Angeles Auto Show. While no one would suggest that banking in the United States is dying, a review of recent American Banker headlines does create a rather somber mood: “Pacific Capital cites provision hike” “Goodwill writeoffs hit Guaranty” “Problem loans sting Carrollton” “$25 million loss for BankFinancial of Illinois” And, of course, the expanded FDIC coverage of bank deposits will generate increased insurance premium costs. Not all the news is bad. Many banks continue to show good financial performance. But the industry has been affected by the current economic problems. Banks, even if they did not directly invest in the so-called “toxic assets” that have caused so much of the problem, are feeling the effects. A review of Uniform Bank Performance Report data for all insured commercial banks in the United States (a total of 7,103 institutions) shows that net income has dropped from 1.02 percent of average assets at Sept. 30, 2007, to 0.66 percent as of Sept. 30, 2008. Other key data are presented below: Challenges facing banks | What to do next Percentage of Average Assets (UBPR) Item 9/30/2008 9/30/2007 Average Earning Assets 93.62% 93.84% Interest-Bearing Funds 76.30% 75.82% Interest Income (tax equivalent) 6.00% 6.75% Interest Expense 2.33% 2.86% Net Interest Income (tax equivalent) 3.66% 3.90% Noninterest Income 0.66% 0.68% Noninterest Expense 3.08% 3.11% Loan / Lease Loss Provision 0.32% 0.16% Source: UBPR National Data for A l Insured Commercial Banks – Summary Ratios as of 9/30/2008 The fact that non-current loans increased from 0.81 percent of total loans to 1.38 percent has also detracted from overall earnings. While much of the earnings reduction is the result of economic conditions beyond the control of individual banks, there remain opportunities for earnings improvement. Noninterest income Bankers have long heard that noninterest income will supplant interest income as the primary source of banking revenues. Many banks have added services such as mutual fund, annuity and insurance sales in efforts to generate additional fee income. How successful have these efforts been? A survey of Bank CEO Network members’ 2007 operating results shows that insurance and annuity sales have contributed, on average, only 0.26 percent of total noninterest income, with brokerage services contributing an additional 1.89 percent. Trust income accounted for 2.13 percent of total noninterest income, and loan servicing and sales income provided 7.38 percent. Our consulting work has shown us that the greatest noninterest income opportunities for most of our bank clients is simply charging a nd c ol l ec ti n g the fees and service charges that the banks have already disclosed. Waiver and refund rates need to be monitored, and bank staff members must be held accountable for their actions in waiving or refunding fees and charges. On the lending side, our experience shows that when lenders are held accountable for loan fee generation, and particularly if a modest incentive is provided, fees that were seemingly impossible to collect suddenly begin to appear on the income statement. Thus, there are opportunities to improve noninterest income performance without having to offer new products that are outside a bank’s comfort zone and expertise. Noninterest expense In the area of noninterest expense, the largest contributor continues to be personnel costs, which accounted for 1.68 percent of the 3.08 percent noninterest expense total from Sept. 30. How can banks deal with and control these costs? First, review processes. If processes make effective use of technology to streamline and simplify work steps, fewer staff members are needed to support the process. Expenses are reduced and customer service is often improved. Less efficient processes that underutilize technology and contain unnecessary or redundant work steps require additional people and often reduce customer service levels. A key and often overlooked step in the process improvement equation is training. Poorly trained employees will not be able to execute and maintain the process improvements and the effort will fall far short of its potential. A well-trained staff will not only manage the changes, but often find additional ways of improving the processes. Challenges facing banks | What to do next As process efficiency is gained, a second control over escalating personnel costs is development and use of good staffing productivity metrics. While industry standards can be used, the most effective metrics are those developed specifically for the bank that take into consideration the bank’s specific realities, including use of technology, desired levels of customer service, hours of operation, etc. Other costs should also be continuously reviewed to ensure that dollars are spent effectively and in support of the bank’s strategy. Cutting the fat is good, but poorly or hastily planned expense reduction efforts often cut into the muscle, hobbling performance. Interest income Amidst the uncertainty of the current economic situation is a potential silver lining. With the tightening of credit throughout the banking community there may be opportunities for banks to include a more effective risk component in their pricing methods and to educate borrowers on the need to provide good financial information as part of the application process. Also, if you’re not using a pricing model, it may be a time to consider one. Used poorly, pricing models can be detrimental to yield performance. Used well they can instill an oft-needed pricing discipline. Interest expense Banks that proactively manage their deposit portfolios tend to have lower interest costs than those that have traditionally “gone with the flow.” As non-deposit funds sources – correspondent lines, FHLB lines, etc. – become harder to find, the ability to grow deposits without negatively impacting earnings becomes increasingly important. While it’s certainly not a new strategy, banks increasingly focus on their borrowers as sources of deposits – wanting the entire relationship rather than just a part of it. More successful banks have, in many cases, adjusted lender incentive plans to give greater weight to deposit growth than to loan growth. Additionally, competition pushes rates on interest bearing deposits upward. Banks such as ING and HSBC have very efficient electronic business models that enable them to pay higher rates while keeping their overall acquisition costs low. Products such as Rewards Checking also have been effective in pulling deposits from other financial institutions. It has always been important to manage a bank’s deposit portfolio. Current conditions make it even more so. Facing the future We once had a client blurt out during the middle of a planning session, “Planning is difficult—especially when it concerns the future.” In our original article, we concluded that the extended enterprise concept of electronically networking customers, suppliers and partners is now reality: New channels are changing market access (in short, the entire customer experience) and causing disintermediation in traditional channels The balance of power is shifting to the customer. Customers today are much more demanding than their non-wired predecessors. True customer loyalty is much harder to build. The face of competition is changing. In addition to new competitors, traditional competitors are exploiting the Internet to become more innovative and efficient. The pace of business is moving at warp speed The Internet is pushing enterprises past their traditional boundaries Knowledge is becoming a key asset and source of competitive advantage These are still realities of the bank’s future. It is still an imperative to ensure that the bank’s products and services are delivered as effectively as possible with the possibilities of risk understood and Challenges facing banks | What to do next accounted for. If it takes 55 minutes for your bank to open a personal checking account, you need to fix this. If your attention is dedicated to collecting bad loans, you can’t move to the next plateau. But the biggest opportunity for banks to escape the “commodity jail” is to direct the bank’s resources toward looking outward rather than inward—strategic positioning and creating new forms of values for customers. How do you make this happen? At your next planning sessions ask the following questions: What’s going on with our customers? What do they need most? And is this what w e think the customers need, or do we really know what they need and want? Where must we innovate? Does our staff have all the information they need about our customers? What knowledge and skills do we need to develop? How does our bank measure its success? Do the things we measure focus on where we need to head? The future of the successful bank will be entrepreneurial in nature. How do you do it? 1. Develop a focused strategy based on differentiation 2. Seek out customer input, and listen to it closely 3. Invest in and experiment with innovative products, technologies, etc. 4. Develop a knowledgeable, trained workforce with specific knowledge 5. Instill ownership for achieving goals, accountability for performance and reward performance accordingly 6. Be disciplined and execute only those initiatives that support the bank’s strategy The first of these, a strategic differentiation, continues to elude most bankers. Why? Michael Porter, a leading authority on competitive strategy, defines the requirements of differentiation as: Strong research skills coordinated with the development of products Effective marketing Performance measurement and incentives 3 Organized to attract creative people Therefore, to accomplish a differentiated strategy requires a strong commitment to change some basic strategies of most banks, an economic investment that may not be practical in the immediate environment, a different structure and staffing that may not be prevalent in the market. “Personal customer service” continues to be the number one response for a description of the differentiated strategy in most community banks. In the latest ABA Bank Director Bank Executive Survey, 91 percent of the respondents singled out the “customer experience” as the key to compete effectively.² To do so, the bank must have some basic tenets in place. The first is to define personal customer service. The second requirement is to objectively measure each individual’s staff member’s performance. Third, measure the bank’s performance. These, in concert with the approaches previously mentioned, should position the bank on the path to a more strategic position and create more value for customers. 3 Competi ti ve Strategy RSM McGladrey is a leading professional services firm providing accounting, tax and business consulting. RSM McGladrey operates in an alternative practice structure with McGladrey & Pullen LLP, a partner- owned CPA firm that delivers audit and attest services. Though separate and independent legal entities, they work together to serve clients’ business needs. Together, the companies rank as the fifth largest U.S. provider of accounting, tax and business consulting services (source: Accounting Today), with 8,000 professionals and associates in nearly 100 offices. RSM McGladrey and McGladrey & Pullen serve clients’ global business needs through their membership in RSM International, the seventh largest worldwide organization of independent accounting and consulting firms (source: International Accounting Buletin), with 600 offices and 25,000 professionals in 64 countries. As the largest member of RSM International, we help companies establish and enhance global operations and distribution channels. Among our internationally active clients, 80 percent are manufacturers and wholesale distributors. To learn more, call 800.274.3978 ext. 301 or visit www.rsmmcgladrey.com.
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