Baker Market Update: August 11, 2014

While news from the European Union may not be very uplifting (Italy has slipped back into a recession), the reports coming out of the European Space Agency have reached new heights. Their Rosetta space vehicle (launched in 2004) has rendezvoused with a comet. On purpose. The two of them are now hurtling along together while scientists try to unlock what secrets the comet may be harboring about the origins of our universe. A lofty goal, to be sure, and it’s unclear whether they’ll come up with anything in time to help Italy, but think about all the ciphering that went into this project. That’s a lot of math.

Read more in the Baker Market Update

Now Accepting Auction Items

In less than two months we hope to see you at our Annual Convention in Fort Worth. Two of our biggest highlights are the PAC Auction and the Best of 100.

Auction items are coming in to the IBAT office and we appreciate your support. Something new to remember this year is that the absolute deadline to get your items listed in the PAC Auction Guide is Monday, September 15. We'll gratefully accept anything after that time, but the items won't appear in the Auction Guide or be considered for the Live Auction, unless we receive your pledge form by September 15. As items come in, they will be posted on the website so you can decide on the items you can't live without!

You can also click here to purchase your Best of 100 ticket. Tickets are $100 and if your ticket is drawn before the beginning of the Live Auction, you may select any item to take home. No worry about outbidding your friends…it's yours!

If you are unable to attend this year's Convention, you can still participate. All live items will be posted on the website on September 18. Purchase your ticket and let Mae Beth know what item you want if your name is drawn! How easy is that?

Community Banks...

The chart below, released last week by Morning Consult, confirms that community banks are the most trusted financial institutions across party lines.

“The report confirms that community banks have a great story to tell and have earned the support of policymakers on both sides of the aisle,” said IBAT President & CEO Chris Williston. “We just need to stay the course and continue to push for meaningful regulatory reform that recognizes that a one size fits all approach to bank regulation makes no sense and regulation should be commensurate with risk and business models.”

Larger View

Full poll results can be viewed here.

GAO Report

Last Thursday’s Government Accounting Office (GAO) Report to Congress set off a firestorm of spin from opponents and proponents of ending too-big-to-fail, re-energizing the debate that large systemically important financial institutions enjoy a funding advantage in the marketplace.

"The new report confirms that the biggest and riskiest financial firms still have a competitive advantage,” wrote ICBA President and CEO Cam Fine.  "They can still access subsidized funding more cheaply than smaller financial firms because creditors believe the government would bail them out in the event of a crisis."

IBAT President and CEO Chris Williston echoed Fine’s remarks.  “Is it fair that the sheer size of a financial institution and implicit government backstop should create an unlevel playing field in the marketplace? The GAO report makes it clear that Dodd-Frank didn’t end too-big-to-fail and Congress should act expeditiously to restore free market discipline.”

It is unclear whether the report will resurrect legislation introduced earlier in the year by Senators Vitter and Brown to address the issue.  Congress is on a five week break and little is expected to be accomplished in advance of the November elections.

Dell Sale!

Dell has been providing IBAT members with great savings opportunities throughout the year. August is no different - Dell's hot offer this month is 40% off of any OptiPlex computer. To take advantage of this deal, simply visit the dedicated IBAT member website, and use coupon code MRBD1VJH9KG3VN. Don't forget, the member deal is for business and personal use. 

There are three ways to order:

  1. Visit Dell's IBAT member website;
  2. Call 1-800-757-8442 and mention IBAT members link #GS126658178; or
  3. For orders of more than 5 units, call Bryan Horten, IBAT's Strategic Account Manager, at 512-942-9120.

We hope you take advantage of this great offer and pass it on to everyone at the bank.

CFPB Tips Hand on Overdraft

The CFPB released a report (Data Point: Checking Account Overdraft) raising concerns about the impact of opting into overdraft services for debit card and ATM transactions. The study found that the majority of debit card overdraft fees are incurred on transactions of $24 or less and that the majority of overdrafts are repaid within three days. CFPB’s press release expressed it in what it called “lending terms,” declaring, “if a consumer borrowed $24 for three days and paid the median overdraft fee of $34, such a loan would carry a 17,000 percent annual percentage rate (APR).”

The study raised concerns at the CFPB that a small number of consumers are paying large amounts for overdraft. The report finds that among the banks in the study, overdraft and NSF fees represent more than half of the fee income on consumer checking accounts. The study found that about 8 percent of accounts incur the vast majority of overdraft fees.

Last year, a CFPB report raised concerns at the CFPB about whether overdraft costs can be anticipated and avoided by consumers. The report showed big differences across financial institutions when it comes to overdraft coverage on debit card transactions and ATM withdrawals, causing the CFPB to question how banks sell the overdraft account feature. The report also found that consumers who opt in end up with more costs and involuntary account closures.

“Overdraft programs offer consumers a valuable tool to access short term credit for a reasonable cost," said Chris Williston, IBAT President and CEO. “IBAT has long advocated clear and concise disclosures to ensure bank customers are aware of the benefits and costs of these programs . . . and then allow them to make an informed choice. We believe that community banks go out of their way to make sure this is the case.”

The CFPB plans further studies on how overdraft works and how it is affecting consumers. The Bureau is also weighing what consumer protections are necessary for overdraft and related services.

Take Action

Last week, the Independent Community Bankers of America (ICBA) launched efforts to call attention to the increasingly burdensome nature of the quarterly call report.   As part of the effort, community bankers, directors and industry allies are being urged to sign a petition which highlights the increasing length and complexity of the quarterly call report and advocates streamlined reporting rules to help community banks devote more of their resources to their customers and local communities.

The petition also reiterates ICBA's and IBAT’s call for revised rules that would allow highly rated, well-capitalized community banks to file a short-form call report for the first and third quarters of each year. This streamlined report would provide sufficient information for regulators to monitor safety and soundness while being significantly less burdensome to prepare, allowing community banks to focus more resources on their customers and communities.

According to the 2014 ICBA Community Bank Call Report Burden Survey, which was released earlier this month, 98 percent of respondents said the short-form call report would reduce their regulatory burden, and 72 percent said the reduction would be “substantial.” The survey also found that the annual cost of preparing the call report has increased for 86 percent of respondents over the past 10 years. The total hours dedicated to preparing the call report has increased for 73 percent in that time.

Week in Review: August 1, 2014

Seventeenth-century English poet John Donne reminds us all that “no man is an island." Well, tell that to Philadelphia Fed President Charles Plosser. At this week’s FOMC conclave, he was the lone vote against the Committee’s decision to maintain the current target range for fed funds as well as guidance indicating that the current range will be maintained for “a considerable time after the asset purchase program ends.” After the release of this morning’s Employment Report from the Bureau of Labor Statistics, it is unclear whether or not Mr. Plosser will remain an island unto himself.

Read more in the Baker Market Update.

IBAT Teach the Lender Program

Regions 2, 3 and 4 of the IBAT Leadership Division will host IBAT Teach the Lender Programs this week! The FICO 101 Presentations will be given by Eddie Johansson, founding president of Credit Security Group. Get ready to have your credit score assumptions shattered.  Learn ways to accurately reflect your customers’ credit risk that raise their credit scores – vital information to lead your bank and your customers in these times.  Gain knowledge you can teach others to take your organization to a new level in credit expertise and service.  From the basics to the advanced, Johansson is a well-known, popular and experienced educator on how the FICO scoring model works.  This presentation includes new information on the How/What/When of the FICO ‘08 model. You don't want to miss it!

Click on the region name(s) below to learn more and register:

FDIC Financial Institution Letter

In response to concerns of banks organized under Subchapter S of the tax code, the FDIC issued a Financial Institution Letter (FIL-40-2014) detailing how it will consider requests to pay dividends to shareholders to cover taxes on their pass-through share of the bank's earnings, when these dividends would otherwise not be permitted under the capital conservation buffer requirements in the Basel III rule.

The letter emphasized that decisions on dividend payments will be evaluated on a case-by-case basis with consideration of the following facts and circumstances:

  • Is the S-corporation requesting a dividend of no more than 40 percent of net income?
  • Does the requesting S-corporation believe the dividend payment is necessary to allow the shareholders of the bank to pay income taxes associated with their pass-through share of the institution’s earnings?
  • Is the requesting S-corporation bank rated 1 or 2 under the Uniform Financial Institutions Rating System and not subject to a written supervisory directive?

Is the requesting S-corporation bank at least adequately capitalized, and would it remain adequately capitalized after the requested dividend? (If not, the dividend is not permitted pursuant to statutory PCA, 12 U.S.C. § 1831o(d)(1)(A).)

2014 BOI

If you want to be a part of the strategic planning team in your bank, you'll need to be up-to-date on the latest changes affecting the community banking industry.  New CFPB mortgage rules, increased scrutiny of fair lending and IT security are just three of the most pressing issues operations officers must be prepared to help their financial institutions address in the days ahead.

Come to the 34th year of the IBAT Bank Operations Institute October 12-17, 2014 on the campus of SMU in Dallas.  We invite and encourage you to select someone from your bank to attend this critical operations school. Your bank will benefit from greater operational efficiencies, enhanced regulatory compliance and a greater awareness of income opportunities driven from the operational side of the bank. 

To learn more about BOI, please click here.

Deadline Today

Today is the last day in the data collection period for IBAT’s Salary & Compensation Survey. Submit your bank’s data online at the IBAT Salary Survey home page or via fax before the July 31 deadline. Banks submitting information will receive a complimentary copy of the comprehensive PDF report, due out in early September, thanks to exclusive sponsor Bank Compensation Consulting.

Click here to download the form to submit data via fax.