- Diebold, Incorporated (#6);
- First Data (#13);
- D+H (#33); and
- Computer Services, Inc. (#56).
Additionally, a number of IBAT's associate members were also included on the list. More information about this award will be included in the January/February issue of The Texas Independent Banker.
Last week IBAT hosted an informational call with ICBA's James Kendrick on FASB's proposed changes to the accounting methodology for calculating allowance for loan and lease losses. In short, the response from IBAT members participating in the call was clear: "we have to stop this."
If the rule were allowed to go into effect as written, community banks would be subjected to complex modeling requirements and abandon the traditional incurred loss model with an "expected loss" model. The Office of the Comptroller of the Currency (OCC) estimates that loan loss reserves will increase, on average, by 30-50% with adoption of the proposed expected credit loss model. The impact on some banks will be much greater.
"The FASB proposal warrants the same industry-wide response as Basel III," said IBAT President and CEO Chris Williston. "The industry must continue to stand strong against out-of-touch regulatory proposals that serve only to undermine the industry and wide spread economic recovery."
For your convenience, you can now listen to the call on the IBAT website. IBAT urges all members to sign the ICBA petition in opposition to this proposal and to file a comment letter. Although we encourage all banks to write custom comment letters, you can view IBAT's letter online here.
As previously reported, there are a number of bills introduced in Congress to reduce the regulatory burden on community banks. You are no doubt aware that there is plenty happening in D.C., and action is needed to elevate the urgency of community bank regulatory relief.
H.R. 1750/S. 1349, also referred to as the "CLEAR Act," are important legislative initiatives (with minor differences) exempting community banks from some of the more onerous mortgage regulations, providing additional opportunities for small bank holding companies, and containing other pro-community bank provisions.
At this juncture, only four (Farenthold, Neugebauer, Thornberry and Veasey) of our thirty-six Texas Representatives, and neither of our Senators, have signed on as cosponsors. Your help is needed to substantially increase that number and send a strong message that this is an issue that needs to be addressed - NOW!
There are several options for you to pursue. First, the ICBA has an excellent "Action Alert" page which allows you to send an email directly to your member of Congress and Senators. Please customize the form letter with some personal observations and anecdotes.
A phone call would also be appropriate in lieu of, or in addition to, an email. If you know your member of Congress, you can access the phone numbers here. If you need some assistance in finding who represents you, you may do so by zip code. Contact information for our two Senators may be accessed here.
Thank you in advance for your engagement on this critical issue. It's time to convert the rhetoric into reality and roll back some of this oppressive - not to mention expensive and unnecessary - regulatory burden.
Bankers in today’s environment face a number of challenges, including deciphering and complying with ongoing regulatory changes, developing and conducting adequate stress testing methods, and justifying or defending changes in their allowance reserves.
But bankers can do many things to mitigate risk in those areas, according to several industry experts participating in the 2nd Annual Sageworks Risk Management Summit next month. Here are four pieces of advice:
1. Document the rationale for loan upgrades. Linda Keith CPA, whose firm trains business lenders in credit analysis, says bankers should be careful to document the thinking behind their judgment that a loan should be upgraded for purposes of the allowance for loan and lease losses (ALLL). “It’s important to eliminate regulator guesswork,” she says. It’s also important, she says, for financial institutions to verify that guidelines for analyzing a potential upgrade are “clear, clearly communicated to, and consistently followed.” Keith will help lead a presentation on deciding and defending upgraded loans for the ALLL at the Dec. 5-6 summit.
2. Don’t be afraid to uncover vulnerabilities. RMPI Consulting partner Jay Gallo, who will discuss “Integrating Risk Appetite, Stress Testing and Capital Planning,” says stress testing is positive in that it enables financial institutions to gauge their potential vulnerability to exceptional but plausible adverse events. “Stress testing should assess and quantify your institution’s vulnerabilities under multiple unfavorable scenarios,” he says. “Once the potential downside is understood, you can take steps to reduce or mitigate those risks, or you can ensure you have sufficient capital to manage those risks.”
3. Develop a successful stress testing framework with three “knows.” Jack Gregory and Dave Keever, senior stress testing and credit experts for Crowe Horwath, say financial institutions looking to prepare and manage stress test forecasts need to know three key things:
- The institution’s portfolio
- The scenarios and their impact on the bank’s capital and liquidity
- The forecasts including what they show and why.
Gregory and Keever’s presentation will also outline three lines of defense all institutions need for stress-test production.
4. Set deadlines. “To make the year-end ALLL as efficient as possible, it is best to get as much work done as possible prior to year end,” says Mike Lubansky, director of consulting services at Sageworks. To do that, financial institutions should set hard deadlines for:
- Risk-rating changes
- Updating the core system to reflect the risk-rating changes
- Determining the loans that need to be reviewed for impairment (FAS 114/ ASC 310) and
- Updating the data on the impairment analyses (appraisal values and selling costs, or cash flows).
Industry experts will participate in a panel discussion on year-end ALLL calculations at the summit.
For more information on the risk management summit, visit the event page.
Communicating with your Board of Directors is often a cumbersome and daunting task, particularly when making sure you are being compliant with all of the regulations surrounding board communications. Learn how hundreds of community bankers have gone paperless and improved their communications with their Board of Directors at the same time.
Join IBAT Endorsed Service Provider CSI for a 30 minute webinar on November 14, 2013 at 2:00 p.m. Bill Evers will reveal everything you need to know to have a successful, productive and paperless board meeting. Register now!
It's been said that the key to happiness is having low expectations. That allegorical statement was personified this morning in the form of the Bureau of Labor Statistics' monthly Unemployment Report. Today's announcement that Non-Farm Payrolls rose by 204k looks positively rip-roarin' when compared to the market's expectation of 120k. Happy days are here again! Well, not so fast, my friend. The Labor Force Participation Rate fell by .4 to 62.8% as the number of discouraged workers grows. Not happy days for them. The Employment/Population Ratio declined by .3 to 58.3% and the Unemployment Rate rose by .1 to 7.3%. The U6 underemployment rate rose from 13.6% to 13.8%. These always "noisy" statistics are even "noisier" with this report due to the uncertain effects of the recent, partial government shutdown.
The market’s reaction to this confusing report is... Read more in the Baker Market Update.
In observance of Veterans Day, the IBAT offices will be closed on Monday, November 11, 2013. We thank all the men and women who fought to give us a safe place to live in.
Click here to read a short history of this special day.
The Office of the Comptroller of the Currency (OCC) issued a bulletin that provides guidance for assessing and managing risks associated with business arrangements between banks and other entities. Banks must practice effective risk management with all activities whether performed by bank employees or through third parties.
The responsibility of the board and senior management to ensure that all activities comply with applicable laws and are performed safely and soundly are the same whether the activities are performed by bank staff or third parties.
Thanks to the 100 community bank directors who helped make IBAT's first Certified Community Bank Director's (CCBD) Program a rousing success. We appreciate the opportunity to add a layer of service to Texas community banks by equipping your boards for effective oversight. Save the date for next year's CCBD Program, October 31-November 1, 2014.
Not able to participate in the CCBD? There are more great opportunities for bank director education on the horizon, including:
- FDIC Banker Outreach - Join leaders from the FDIC and Texas Department of Banking in Austin (November 20) or Richardson (November 22). The event includes breakout sessions tailored for bank directors, as well as general session exploring the regulatory/compliance issues of greatest interest to Texas community banks.
- SWGSB's 138th Assembly for Bank Directors - Directors and senior management teams from throughout North America will convene February 20-23, 2014 to plan for the future at the beautiful Grand Hyatt Kauai Resort and Spa. Featuring some of the top talent in community bank education and strategy, this event is a can't miss for directors or a full-board retreat.
If you would like to be notified when registration opens for the next CCBD program, contact Julie Courtney and she'll add you to the waiting list.
Just as progress is being made at the federal level to address dramatically increasing flood insurance premiums, IBAT has entered into the debate of how to deal with insuring against catastrophic losses from wind damage, especially along the Texas coast. In a letter written in response to a recently-proposed informal rule to address the funding of the Texas Windstorm Insurance Association (TWIA), IBAT President and CEO Chris Williston expressed a number of concerns that community bankers share regarding the future of property casualty coverage in Texas's coastal counties.
"The economic viability of the Texas Coast is important to all Texans," Williston said. "A stable and affordable insurance market is critical to provide not only continued economic activity in this region, but also to ensure an efficient conduit for consumer and industrial products coming through our ports, as well as petrochemical products we all use and rely upon."
In his letter, Williston referenced efforts in Congress to fix the fallout of the Biggert-Waters Flood Insurance Reform Act, which has resulted in unprecedented rate increases and many concerns for coastal lenders. A bipartisan coalition of lawmakers in the House and Senate emerged last week with a deal to delay those increases. The fix, known as the Homeowner Flood Insurance Affordability Act, would delay the increases for four years, allowing the Federal Emergency Management Agency (FEMA) enough time to develop an affordability framework for flood insurance.
We will continue our involvement in this important area, and will provide additional information as becomes it available.
AFFECTED TEXAS COUNTIES AND/OR NWS REGIONS:
NWS: NORMAN, FORT WORTH, SHREVEPORT, HOUSTON, AUSTIN/SAN ANTONIO, SAN ANGELO
THIS IS A MISSING SENIOR ALERT ISSUED BY THE TEXAS SILVER ALERT NETWORK
THE RED OAK POLICE DEPARTMENT IS SEARCHING FOR ROBERT RAYMOND GIBSON, DIAGNOSED WITH A COGNITIVE IMPAIRMENT, BLACK, MALE, 74 YEARS OLD, DOB 02/21/1939, HEIGHT 5’ 7”, WEIGHT 168 LBS, BLACK/GREY HAIR, BROWN EYES, LAST SEEN WEARING A TURTLENECK, JEANS AND WHITE SHOES. THE SENIOR CITIZEN WAS LAST SEEN AT 1000, 11/01/2013 IN THE CITY OF RED OAK, DRIVING A WHITE, 2005 CHEVROLET TRAILBLAZER WITH TX LICENSE PLATE DH7G899.
LAW ENFORCEMENT OFFICIALS BELIEVE THIS SENIOR CITIZEN’S DISAPPEARANCE POSES A CREDIBLE THREAT TO HIS/HER OWN HEALTH AND SAFETY.
IF YOU HAVE ANY INFORMATION REGARDING THIS MISSING SENIOR CITIZEN, CONTACT IS RED OAK POLICE DEPARTMENT AT 972-617-7632.
NEWS MEDIA POINT OF CONTACT IS RED OAK POLICE DEPARTMENT AT 972-617-7632.
In remarks delivered at the Ninth Annual Community Bankers Symposium hosted by the Federal Reserve Bank of Chicago last week, CSBS President and CEO John Ryan spoke passionately and convincingly about the important role of community banks in the American economy and what must be done to ensure their survival.
Ryan described the U.S. financial system as a "truly American system... [that] reflects core American values, such as checks and balances, dispersion of power, and a balance of national interests with local control."
"If we want a more sustainable banking system that promotes real economic growth, we may need to spend a little less time worrying about the ability of U.S. banks to compete with European banks, and a little more time focused on how to empower local banks to serve their customers," he said.
Further, Ryan praised regulators' recent efforts to better understand community banks, and urged them to preserve the small bank role in the American economy. "I challenge us regulators to ensure that regulation is not the reason that a $35 million bank sells or self-liquidates. If we can't differentiate between business models, if we must accept centralized, complex and intrusive regulation as necessary for all to respond to the risks posed by the largest banks, then I believe we need to go back to the drawing board."
In sum, Ryan said, "Community bankers... base their business decision on data and analysis combined with a healthy dose of judgment. Policymakers and regulators should do the same."
IBAT President and CEO Chris Williston praised Ryan's comments. "John Ryan's comments are in lock step with IBAT's continued advocacy for a two tiered regulatory system; a system that recognizes that community financial institution business models are different and should be regulated accordingly."