FFoot, lol...maybe you will want to convert the USD's to gold before you stuff them in
your bedding if Paul Tutor Jones is right...except it would be hard to sleep on it..

Horance Kent....Thank you,this journey of knowledge of mine has been so incredible so
far...heck, when I was sitting at the JPMorgan Health Care Conf in Jan and asking my first
questions in Q and A's...I had to pinch myself to realize how far we all have come in such
a short period of time...Plus, all the great minds we have met along the way....Our
Stockpickr Class TOTALLY Rules!

TN...you have expanded your knowledge since the early days...
Class of 2007....
congrats!!!....

thanks TN..

after reading the study by Mulford and Comiskey, I'm flowing my cash from the bank to the
mattress...

Yeah it is Fall...bummer...I love Summer. For me, I have been playing with my Stockpickr
Diary which is such a good learning tool for me cuz I am having to read my analysis in
black and white...plus, great place for me to keep important data which I was just trying
to put in folders before.....I have been learning to read the market better from Terry
Laundry...for me, I went short way too soon, ouch....but I see so much of this as a
learning process for me....which in the end I think everyone has to go thru including the
greats...believe it or not Jesse Livermore was short in 1929 and lost everything when he
changed to long just before the crash....us class of 2007 Stockpickrs have learned so much
in this game imho....anytime your bored, stop by and say hi in my diary....lol, now get
back to your leaves.

Just trying to make some money in the market like everyone else. Most of my stocks have
erased their losses from last year but it was a wild ride in the meantime.

Still bullish on banks, at least through the 4th quarter. Next year the comparisons will
get a lot tougher and it might be time to look elsewhere.

Oh, I'm also busy raking leaves. lol!

Last edited on: 11-04-2009 12:04 pm

Dogbones....lol...you mean FASB 102 is not doing it's job it was intended too...actually
flow sheets of banks still fun to look at...hey, what have you been up to?

I see there are some people out there who think (as I do) that the cash flow statements of
commercial banks aren't really very useful or meaningful.

Thanks for your very thorough and prompt response.

db

Last edited on: 11-04-2009 11:26 am

Yet...I give you this analysis...Cash Flow: a Better Way to Know Your Bank?
A study of commercial banks comes up with ways accounting for operating cash flow could be
improved.
Sarah Johnson - CFO.com | US
July 9, 2009

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If banks more consistently accounted for their operating cash flow, companies could gain
a better grasp of their commercial banks' financial health, two professors suggest in a
report to be released later this week.

The results would be astoundingly different than what financial institutions' statements
of cash flows tell us today. In the course of an attempt to make the firms' cash-flow
reports more comparable - which entailed several adjustments to how banks classified their
investments, accounted for non-cash transfers of their loans, and recorded cash flow from
acquisitions last year - the researchers saw huge swings, both downward (Bank of America)
and upward (KeyCorp).

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As it stands now, banks can't be reliably compared to each other by their recorded cash
flow from operations, the researchers contend. Their observations stem from their study of
the cash-flow reports of 15 of the largest independent and publicly traded U.S. commercial
banks in terms of total assets as of December 31, 2008. "Right now, operating cash flow
for a bank is basically meaningless," says Charles Mulford, director of the Georgia Tech
Financial Analysis Lab, who co-wrote the study with fellow accounting professor Eugene
Comiskey.

In BofA's case, the bank reported operating cash flow for 2008 of $4 billion. But under
the researchers' method, the firm would have had an operating cash flow of negative $6.9
billion. Other financial institutions that saw a decline under the researchers'
calculations: J.P. Morgan Chase and Wells Fargo.

Some firms went the other way. These included Citigroup, Fifth Third Bancorp, PNC
Financial, and SunTrust Banks. KeyCorp, which had reported $220 million in negative
operating cash flow last year, could have had a positive $3 billion result if it hadn't
moved some loans out of the held-for-sale classification to the held-for-investment
category.

To be sure, the banks that would have had better results may have been more concerned with
the end product of other financial metrics and made changes to its investment portfolio
for the benefit of its earnings results, rather than worrying about its operating cash
flow, according to Mulford. After all, he noted, operating cash flow a figure largely
ignored by analysts when it comes to banks.

Moreover, the researchers aren't accusing the banks of doing anything wrong, since current
accounting rules allow them to freely make non-cash transfers between investment
classifications, a move which can have varying effects on how loans and securities are
accounted for in cash-flow statements. Most likely, Mulford says, the firms that make
these reclassifications are doing so for the good of their overall investment portfolio,
which in turn could help their earnings in the near term.

Banks' cash-flow reports differ among each other in other ways as well. They vary in how
they designate their various cash flows as being from operating, investing, or financing
activities. Perhaps, the researchers imply, those concerned with banks' financial
stability should demand that more attention is paid to the cash-flow statement to get the
banks to be more consistent - and to give their investors incentive to give their cash
reports as much credence as they would those of non-financial firms.

"For companies in general, cash flow is their lifeblood," Mulford says. "Are they creating
cash or consuming it? If they're consuming it, then they have to find it somewhere, and
may have to rely on the capital markets, which aren't at a very friendly time right now."

However, with banks, the cash-flow metric is overlooked, Mulford contends. The researchers
don't offer a solution or take a stance, but rather ask that their research be used by
standard-setters and analysts to push for change. "Obviously something is wrong with [the
structure of] cash-flow statements when nobody uses it for a particular group," Mulford
says, calling his report an "open invitation" to the Financial Accounting Standards
Board.

"We wrote the study in the interest of building dialogue and possibly improving upon the
usefulness of cash flow for commercial banks," Mulford says.

The researchers question the usefulness of the current characterization of increases and
decreases in deposits as financing cash flow. Instead, they believe customer-driven
deposits should be accounted for under operating cash flow since "the very health of a
bank's operations depend on its deposit base and its ability to attract a growing stream
of deposits." The researchers admit their report's final calculations are not fully
accurate, partly because they didn't have enough information to distinguish between
brokered and consumer-driven deposits.

Stressing that they're mainly trying to stir up public discussion about the problems in
the financial reporting of banks' operating cash flow, the researchers acknowledge that
reports' conclusions are far from perfect. After all, the researchers' adjusted numbers
give troubled Citigroup a relatively rosy picture of $159.4 billion in adjusted operating
cash flow - compared, for example, to a negative $94.3 billion for J.P. Morgan

Dog Bones....Great Question...ok, I am going just basic on you to start out...I need to
make sure we are on the same page...so if this is like "duh" just let me know...as you
know banks have additional rules under FASB for the requirements for preparing a Cash Flow
Statement, most are under FASB 102...here is a link if you haven't read thru
it..http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blob
where=1175818820431&blobheader=application%2Fpdf.....also, we know that Cash Flow
Statements doesn't tell you the profits earned by the biz and the financial condition of
the biz at the end of the period....I know, duh...because of the rules for banks under 102
there is just as much value in going thru a cash flow statement for a bank vs non
bank...but we are really dealing with two different type of cash flow statements imho...as
you can see 102 does try to fix the problems of the activity that is unique to banks so
flooding the statement with fed window money not so easy in theory.

Last edited on: 11-04-2009 02:03 am