Fed Survey

A survey released by four regional Federal Reserve Banks (New York, Atlanta, Cleveland and Philadelphia) found that community banks play a critical role in funding small businesses.

According to findings, of the 22 percent of small businesses that applied for credit in the first half of 2014, 34 percent applied to a community bank with 59 percent of those applications being approved. Community banks provided credit to 90 percent of newer small businesses with profits or growing revenue. The survey also showed that larger banks focused credit approvals on mature small businesses.

The full survey can be found here.

Heart of Texas Compliance Officers

The Heart of Texas Compliance Officers (HOTCO) is a newly created association for compliance officers at banks and credit unions in Travis County and surrounding areas. For HOTCO’s first of four meetings in 2015, the topic will be ‘The Secret to a Happy Marriage with Third-Party Vendors’ presented by Karen Neeley. Neeley is well known and highly regarded in the Texas financial institution community in the areas of regulatory and compliance law.

We highly encourage all compliance officers and anyone else involved with third-party vendors in the area attend this informative meeting on March 26, 2015 at 6 p.m. at Morelia Mexican Restaurant in Pflugerville. Additional information can be found here. The cost is $40, which includes dinner, and the RSVP deadline is March 20, 2015. We hope to see you there!

IBAT Career Center

Need a new member for your team? Consider posting your bank’s open positions in the IBAT Career Center. Jobs posted in the IBAT Career Center are open for viewing to all Texas financial institutions as well as employees of IBAT’s 200+ associate members.

Looking to make a move? The IBAT Career Center is free to browse. IBAT members can also post their resumes (confidentially) to the career center for consideration by potential employers. Click here to create a profile and put your resume online.

Currently, there are two featured positions in IBAT’s Career Center. Click here to view postings for:

  • BSA Officer – First State Bank & Trust Company – Carthage, TX
  • Credit Analyst – First State Bank & Trust Company – Carthage, TX

Two IBAT Suggestions Adopted

Last year, IBAT contacted the Department of Banking and the Department of Savings and Mortgage Lending to point out that, although there are rules requiring issuers of access devices to furnish customer notices of basic safety precautions annually, the Finance Code does not require an issuer to send the notice more than once. IBAT suggested the agencies eliminate the annual requirement in the User Notice on ATM Safety Rules for state banks (page 39), state savings and loan associations (page 73), and state savings associations (page 77). The agencies agreed and proposed rule amendments to the Finance Commission at its December meeting, and the Finance Commission adopted the amendments at its February 20, 2015 meeting. IBAT is sincerely grateful that Texas has two agencies regulating the state’s financial institutions that are responsive to the cries for regulatory relief.

The amendments eliminate repetitive annual notice requirements and authorize delivery of notice by electronic means in certain circumstances. In addition, the recommended basic safety precautions are updated to mention online fraud and other relatively new cyber threats and other ATM risks. The proposal would have required resending the notice every time a debit card is reissued (IBAT commented in opposition to that change), but the adopted rule removed that requirement. The idea for this initiative came while researching a banker’s compliance question - keep the calls and emails coming to IBAT’s Compliance Helpline!

Additionally, IBAT recently sent an email to the Office of Consumer Credit Commissioner objecting to a provision in a rule up for adoption at the Finance Commission meeting that would have allowed tax lien lenders to charge points. The Finance Commission adopted the rule without the objectionable provision, which means that tax lien lenders must not charge points.

TechMecca Best of Show Winners

Congratulations to the two Best of Show winners - Verafin and Dell SecureWorks - selected at IBAT’s TechMecca technology show held earlier this month. Verafin and Dell SecureWorks received the greatest number of votes among 11 presenting companies from the nearly 300 community bankers in attendance. Both companies presented during TechMecca’s interactive general sessions, which highlighted products and services that allow community banks to stay technologically relevant, ensure offerings meet customers’ needs and get ahead of emerging trends.

Verafin presented its FRAML (Fraud and AML) detection software, highlighting how this approach creates efficiencies while reducing duplication of work. Dell SecureWorks presented about how its products can help support business growth without sacrificing information security. A special thanks to all of the presenting companies.

Interchange Rule on the Horizon

Last week, a federal judge ruled that American Express violated anti-trust laws by prohibiting merchants from encouraging their customers to use competing cards with lower fees, a process commonly known as “steering.” Visa and MasterCard previously abandoned similar rules following a settlement with the United States Justice Department.

The decision set off a flurry of conjecture that an interchange price war might be looming. “A price war could especially strain community banks and credit unions, if larger banks are able to reach agreements with retailers to steer customers toward their cards,” wrote Guggenheim Securities analyst Jaret Seiberg, as reported in American Banker.

While this decision is just a new wrinkle in the ongoing drama surrounding “swipe” fees, Texas remains the only state to have passed a prohibition on surcharges on debit card purchases. This initiative, championed by IBAT in the 2013 Legislative Session, got renewed attention last week as Texas Senator Charles Schwertner introduced SB 641. As filed, SB 641 would give the Texas Attorney General or the prosecuting attorney in a county authority to assess civil penalties of $1,000 for each violation of the debit card surcharge prohibition. The addition of rulemaking and enforcement authority to the surcharge prohibition is one of the major items on IBAT’s proactive state legislative agenda.

Please be on the lookout in future issues of IBAT's Bottom Line and Legislative Insider newsletters for information about how you can voice your support for SB 641 and other bills of interest.

Call to Grassroots Action

IBAT is calling all Texas community bankers to lend support to the industry through grassroots advocacy at two upcoming events:

If you’ve been with IBAT at any of our Regional Meetings throughout the state, you’ve heard that the timeline to pass significant regulatory reform legislation is short. For this reason, we’re calling upon every Texas community banker to join the cause to make your voice heard in Austin and Washington, D.C.

If you haven't already registered, please do so soon by clicking the links above.

OCC Handbook Removal

Last week, IBAT sounded the alarm after the Office of the Comptroller of the Currency (OCC) published an updated “Deposit Related Consumer Credit” handbook. The source of confusion in the handbook was updated guidance requiring that financial institutions under OCC supervision obtain customer opt-in for overdraft services (across all check and debit), perform ability-to-repay analysis for those services and establish overdraft fees that are "reasonably correlated to the actual cost" of the service.

Following outcry from bankers, the OCC removed the resource from its website, replacing it with the following statement:

“The Office of the Comptroller has removed from this website the “Deposit-Related Consumer Credit” booklet originally posted on February 11, 2015. Since the booklet is not intended to establish new policy, the agency is revising the booklet to clarify and restate the existing law, rules and policy. The agency expects to post the revised booklet within the next two weeks.”

IBAT staff will watch for the updated handbook to be posted to ensure that the issues of concern are resolved. Read more about this in the February issue of Capitol Comments.

Baker Market Update: Feb. 23, 2015

With the observance of President’s Day on Monday, this has been a short week. Even so, it still lasted longer than the cease-fire between Russia and Ukraine. This week also marked yet another year in which a Labrador Retriever was not named Best in Show by the Westminster Kennel Club. A spokesman for the WKC reaffirmed that it is not at war with Labs.
The U.S. economy, however, sure looks like it’s at war with inflation. We learned on Tuesday that the Producer Price Index (PPI) fell by .8% last month and stands at zero (0.0) on a year-over-year basis. Read more in the Baker Market Update.

Harvard Study

A new study by Harvard University, “The State and Fate of Community Banking,” takes an in-depth look at the banking industry, particularly community banks compared to larger regional and national banks. Not surprising to anyone reading this, the study shows that community banks provide a disproportionate amount of service to key segments of the lending market - agricultural, residential mortgage and small business loans.

Looking at the impact of Dodd-Frank on community banks, the authors conclude that since its enactment, community banks have lost market share at twice the rate they did prior to it. They note that many of the regulations enacted as part of Dodd-Frank are not linked to the size of the financial institution so regulatory costs fall heavier on smaller banks. This is a major contributor to the industry consolidation of recent years. Listed below are suggested policies that could help promote a more competitive banking sector:

  • Reform the regulatory process to mitigate unintended consequences,
  • Expand community banks’ regulatory exemptions and
  • Improve existing regulation.

The full study can be found here.

ICBA Board Nominations

ICBA recently announced the nominees for its 2015-2016 Board of Directors. On the slate is Scott Heitkamp - ValueBank Texas (Corpus Christi) President, Chief Executive Officer and Director – nominated as Vice Chairman. Additionally, Cynthia Blankenship – Bank of the West (Grapevine) Vice Chairman and Chief Operating Officer – is nominated for ICBA Consolidated Holdings Chair. 

ICBA’s Board of Directors will vote on the nominations in early March. Congratulations to Scott and Cynthia on this well-deserved recognition!