In addition to our advisory services, we offer an array of specialty services that provide clients with best-in-class solutions for capital planning and stress testing, merger valuations, other types of valuations and Current Expected Credit Loss (CECL) modeling.
ALM First develops a unique and customized stress test that incorporates your institutions desired level of complexity, which adequately captures the unique risk facing your institution. ALM First will employ and customize the supervisory scenarios suggested by the Federal Reserve in a baseline, adverse, and severely adverse scenario. A capital stress test assists your institution in understanding key risks and scenarios that may put business strategies and continuance as a going concern at risk. It will provide useful insights in running the institution and allow managers to understand where opportunities and vulnerabilities exist.
Combining companies can be critical to the future success of the institution. Merging entities can be a daunting process on multiple fronts. An institution must assess the viability of a merger and whether such a strategy is congruent with company goals and culture. Accounting rules can cause additional questions and confusion. ALM First helps ease the way, bringing together a premier team of accounting and valuation experts to deliver a complete, turn-key merger valuation solution that meets ASC 805 requirements. Our services also make it easier for clients to finalize fair value entries, assess merger viability, and ensure timely merger accounting reports.
MacroView Merger Valuation
ALM First’s MacroView Valuation service has been designed for those instances where the Comprehensive Merger Valuation product is not required due to immateriality or for circumstances where the parties must have an understanding of the fair value estimates consistent with ASC 805 prior to executing a merger. Our MacroView Valuation provides critical insight into the acquirer’s management and board of directors without the detailed loan level analysis that is required for accounting purposes.
Highlights of the service include:
- Detailed information ideal for discovery and planning purposes
- Broad, high-level view of an institution’s worth
- Loans pooled by type to determine value
- The impact to capital
- Fair valuation of the intangible assets
Comprehensive Merger Valuation
The Comprehensive merger valuation solution is highly detailed and analyzes each loan at the loan level. The components of the Comprehensive Merger valuation service, required under ASC 805, performed by ALM First include:
- The entity value, which determines the acquisition value of the Target institution, and becomes the new equity of the Target concurrent with the closing of the merger
- Fair valuation of the financial assets (investments and loans) and financial liabilities (deposits and borrowings) of the Target’s balance sheet
- The fair valuation of the intangible assets, typically the core deposit intangible (CDI) and mortgage servicing rights (MSRs)
- A determination of the resulting goodwill (or negative goodwill) based on the foregoing valuations as well as any adjustments determined by third parties for fixed assets and repossessed assets, and other non-financial assets and liabilities
Goodwill Impairment Testing
The Goodwill Impairment Testing Service is designed to test for impairment after the merger is completed. This level of service entails a two-step test that is used to identify potential goodwill impairment.
The first step compares the entity value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, thus the second step of the impairment test in unnecessary.
The second step compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.
The Fairness Opinion Service is designed to provide a fair value range of an institution in order to determine if a change-of-control transaction is fair from a financial perspective. In comprehensively examining the deal economics, ALM First will perform the following analyses with intellectual rigor: comparable company, precedent transaction, discount cash flows, control premium, and accretion/dilution analysis where applicable.
ALM First issues fairness opinions for affiliate and insider transactions, related-party transactions, synergistic mergers, business combinations involving competing offers, and down-round financings.
ALM First offers a market-driven approach that encompasses the necessary variables to provide a reliable ALLL valuation that is defensible and can easily be explained to auditors, examiners, and ALCO. ALM First will provide guidance for data governance, as well as the critical data fields required for CECL and for capital planning, concentration risk analysis, product pricing, merger and acquisition valuation, and loan trading.
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