Baker Market Update: Aug. 24, 2015

These days, trying to make sense out of all the economic data that pours over us is like trying to read Chinese. Maybe that’s because the most significant data of late is written in Chinese. Just yesterday, markets were surprised by the weakest manufacturing report out of the PRC in 77 months. The dark clouds that seem to be forming over the world most populous nation may not be confined to the mainland. The fraying fortunes of Asia’s juggernaut have sparked concerns for the negative consequences that its economic downturn may bring to others. Like us.

Read more in the Baker Market Update.

Diebold TAG Conference

Diebold’s ATM Users Group, The Advisory Group (TAG), will host its national conference at the Hilton San Diego Resort and Spa, September 13-16. IBAT members will receive a discounted registration fee. Attendees will benefit from industry and education sessions as well as interact with peers, Diebold executives and subject matter experts.

TAG was created in 1978 with the original purpose to serve as a beta test group for Diebold's first ATMs. Since then, it has developed into a thriving and energetic independent user group encompassing financial institutions and ATM deployers of all sizes.

Click here for addition information and to register for the TAG Conference.


What are the biggest challenges facing community banks? According to the Office of the Comptroller of the Currency’s Semiannual Risk Perspective, community banks are most challenged by operational and lending issues, including:

  1. Strategic risk caused by shifting bank strategy to adapt to low interest rates, competition and slow economic growth;
  2. Management succession and retention of key staff;
  3. Expansion into new products requiring specialized risk management expertise;
  4. Reliance on third-party vendors for operational and business functions;
  5. Increasing volume and sophistication of cyber threats; and
  6. Increasing BSA/AML risks.

Is your bank prepared to respond to these challenges? IBAT offers two great schools focused on developing the next generation of lenders and operations officers to help you respond to every challenge facing community banks:

  • Bank Operations Institute (October 11-16, 2015)
    BOI builds its innovative banking program around moving operations officers from the back room to the boardroom. The emphasis is on practical, real-world banking issues and sure-fire solutions
  • Bank Lending Institute (November 8-13, 2015)
    BLI offers strategic insight into both the present and future of banking technology, best practices, administrative processes and project management. The bank training emphasis is on practical skills and approaches required for effective and profitable bank lending management.

The Return of Patent Trolls

Throughout the past two weeks, dozens of IBAT members have responded to a request for information on a new round of letters sent to banks and litigation filed against banks by patent trolls. Many banks have received letters from the patent trolls identified in our emails, and several banks identified an additional patent troll who is sending letters to Texas community banks - Dr. Adaikkappan Periyakaruppan.

Shannon Phillips, IBAT Deputy General Counsel, says he defers to each bank’s legal counsel but suggests all banks that received one of these letters or were served with process take the following steps:

  1. Do not contact the sender of the letter directly, unless legal counsel recommends it.
  2. Check your appropriate vendor contract for an indemnity and duty to defend. In any event, promptly notify the vendor(s) in writing about these claims and ask them to provide a defense to the bank.
  3. Implement a “litigation hold” to make sure you don’t inadvertently destroy records that might relate to the threatened litigation. Don’t overlook emails that might relate to the programs that are under attack.
  4. Send a copy of the letter or pleadings to sphillips@ibat.org.

Thank you to all who have responded with your letters thus far.

PAC Auction

There are only three weeks left to submit your PAC Auction items or pledge forms if you want them included in the PAC Auction Guide at convention. We're always happy and grateful to accept your auction items, but September 1 is the deadline for items to be included in the Auction Guide.

Thanks to all who have already submitted your items. And remember that if you don't want to get out in the heat to shop, you can always send us the amount you would like for us to charge your credit card, and we'll do the shopping for you. To view the latest list of items, click here.

Baker Market Update: Aug. 17, 2015

Has the world grown wan with the yuan? The largest, single devaluation of Chinese currency in more than 20 years dominated the week’s headlines as financial markets around the globe reacted to the tacit admission by Sino policymakers that all is not well in the People’s Republic. Fears that the world’s second largest economy is headed towards a “hard landing” sparked a universal sell-off of equities and commodities as vague perceptions of a slow-growth future became a more demonstrable cognizance. Does this complicate things for the FOMC? Things are already pretty complicated, and this doesn’t help.

Read more in the Baker Market Update.

August Consumer Tips

IBAT’s August Consumer Tips publication, now available online, covers common consumer scams. Be it merchandise fraud, fake checks, phishing and identity theft, or several other common schemes, the more aware consumers are, the better the chance they never fall prey to scam artists.

We encourage you to share this helpful information with your customers to help them and their loved ones avoid becoming fraud victims.

FDIC Banker Outreach

The Independent Bankers Association of Texas and the Texas Bankers Association have partnered with the FDIC to provide this important update on current and emerging banking issues. Breakout sessions are tailored for directors, risk management staff and consumer compliance staff. Attendees will be provided with resource materials for future reference.

All bank directors, CEOs and bank officers are encouraged to attend this timely update, participate in the sessions and share their perspectives with the group. Topics that will be covered include consumer protection, information technology, concentration risk management and internal routines & controls/fraud.

FDIC Banker Outreach Programs will occur in Austin on August 18 and in Dallas on August 20. Please make your reservations early - this meeting has been known to sell out.

CalTech IT Tips Webinar

While IT will always be a cost center, it can also be a profit generator if used effectively. Join presenter Rob Houser of CalTech to explore specific examples of how Texas community banks have transformed their IT departments into profit-generating machines.

Topics that will be addressed include:

  • How to save thousands per year on telecommunications - One bank saved $325,000/year!
  • Improve communication between the IT department and the C-Level - A “Giga-what”?
  • Effectively use server virtualization to save thousands - One server can use as much electricity as 15 refrigerators!
  • Use technology in a business process to free up high-priced human resources - That’s right, you don’t have to hire more people!
  • Allow your IT support team to function at optimal performance

Bank COOs, CFOs, CEOs, CIOs, Presidents, IT Officers and Risk Management Officers are encouraged to attend 10 IT Secrets the Best CEOs Use to Generate Profit on August 25, 2015 at 2 p.m. Click here for registration and additional information.


The July/August 2015 digital edition of IBAT’s magazine, The Texas Independent Banker, is now available online. Click here to view the full table of contents or link directly to specific content below:

As always, if you have suggestions for future content to be featured in The Texas Independent Banker magazine, please contact Bonnie Kankel.

Patent Troll Lawsuits

In our August 4 Bottom Line eNewsletter, we included a request regarding any recent litigation filed against your bank or communications sent to your bank by patent trolls. In response to that request, we received copies of several letters recently sent by patent trolls to our member banks - most of them from Plano Encryption Technology. However, we suspect that many more Texas banks have received letters or been sued, but simply didn't see our request. For that reason, the request, in its entirety, is republished in this email, and we ask that you send us copies of any recent letters or litigation.

We are working collaboratively to develop a joint strategy on this new round of claims so that no one bank or entity needs to stand alone. The Dykema Cox Smith team of IP counsel has begun researching the validity of these patents and is working toward a proactive approach through IBAT. 

Notwithstanding the victory in the DataTreasury case, three new Patent Trolls - Finnavations, LLC, Plano Encryption Technology and Turn IP - have filed suits in the Eastern District of Texas. They are alleging infringement of various patents that generally relate to the secure transmission and storage of data from customers, claiming that the banks' Mobile Banking Platform infringe these patents.

If you have received one of these letters or been served, below are steps to take immediately:

1.     Check your appropriate vendor contract for an indemnity and duty to defend. In any event, promptly notify the vendor(s) in writing about these claims and ask them to provide a defense to the bank.

2.     Implement a “litigation hold” to make sure that you don’t inadvertently destroy records that might relate to the threatened litigation. Don’t overlook emails that might relate to the programs that are under attack.

3.     Send a copy of the letter or pleadings to sphillips@ibat.org



With the TILA-RESPA Integrated Disclosure (TRID) rule now effective October 3, 2015, the CFPB has updated the implementation materials to align with this date. Updated versions of the compliance guide, guide to Loan Estimate and Closing Disclosure forms, closing fact sheet, disclosure timeline and other resources are available on the CFPB’s website.

As a reminder, IBAT supports both House (H.R. 2213) and Senate (S. 1711) legislation calling for a hold-harmless or safe harbor period through January 1, 2016 for lenders that make good faith efforts to comply with the rule.

August 14 Deadline

If you have not yet registered for IBAT’s 41st Annual Convention, September 19-22, we encourage you to do so soon. The cutoff for the special room rate at Hilton Galveston Island Resort is August 14. Space is limited and will be available on a first-come, first-served basis. We encourage you to register today and secure your accommodations.

This year’s event, themed “It’s Island Time in Galveston,” offers a variety of educational sessions, networking events, entertainment that can’t be beat, opportunities to contribute to the IBAT PAC and keynote speakers who will make you think long after their sessions.

Additional Convention information can be found here.

Comment Letter

On Monday, IBAT filed a comment letter speaking out against a proposal by the National Credit Union Administration (NCUA) to allow more member business lending by tax-exempt credit unions. As it stands, credit unions are statutorily limited to a cap of 12.25 percent of total assets for member business lending. 

“The NCUA’s proposal is a blatant and offensive attempt to sidestep the authority of Congress,” said IBAT Executive Vice President Steve Scurlock. “Tax-exempt credit unions have already been given a free pass, via loosened membership standards, to buy the auto loan and small consumer credit market with low rates,” he added. “Any attempt to extend their reach in the marketplace to do the same with business lending ought to be dismissed outright.”

The IBAT letter can be read here. Additionally, ICBA has provided an online tool for community bankers to weigh in on this issue with their lawmakers and the NCUA. IBAT members are encouraged to comment to the NCUA and/or write a letter, email or otherwise contact their members of Congress and two Senators on this issue during the August recess.

Let's Hear It for Hoenig

In prepared remarks delivered last week, FDIC Vice Chairman Tom Hoenig expanded on his proposal to create a bifurcated regulatory system based on the complexity of banks’ business activities. “Under the plan,” Hoenig said, “a bank would be eligible for regulatory relief if:

  • it holds no trading assets or liabilities;
  • it holds no derivative positions other than interest rate and foreign exchange derivatives;
  • the total notional value of all its derivatives exposures - including cleared and non-cleared derivatives - is less than $3 billion; and
  • it maintains a ratio of Generally Accepted Accounting Principles equity-to-assets of at least 10%.”

Hoenig emphasized the importance of business model, rather than asset size, being the guiding principle in consideration of regulatory relief. He went on to suggest that banks meeting this criteria should be exempt from Basel III capital requirements, treated with greater discretion with regard to fair lending requirements, subject to an 18-month examination cycle, earn automatic QM status for mortgage loans held in portfolio, and be able to exhibit compliance with the Volcker rule by having clear policies and procedures that place appropriate controls on activities.

IBAT President and CEO Chris Williston and Executive Vice President Steve Scurlock recently met with Vice Chairman Hoenig in Washington, D.C. to discuss the proposal. “Hoenig has given this a lot of careful thought and although we disagree that a minimum capital standard should be included for qualifying banks, we commend him for moving the needle towards a tiered regulatory environment,” Williston said. “I am hopeful Congress will look seriously at this idea and soon.”