A Closer Look

Last week's unanimous vote by the Board of Governors of the Federal Reserve System adopting final Basel Rules has drawn generally positive reactions from community bankers.  Many IBAT members who responded to IBAT's breaking news email last week were relieved that federal regulators abandoned preliminary plans to apply complicated risk weighting categories to various real property assets.

Bankers also rejoiced when learning that community banks under $250 billion in assets have an option to opt out of marking to market the value of their bond and securities portfolios (AOCI) and the potential devastating impact that requirement would have meant for capital impairment as rates begin to rise. Still others (banks under $15 billion) celebrated the grandfathering of Trust Preferred Securities consistent with the phase out (2031) in the Dodd/Frank Financial Modernization Act.

While IBAT was disappointed that regulators chose not to provide an outright Basel III exclusion for community banks under $50 billion, as advocated in IBAT's comment letter, IBAT President and CEO Chris Williston offered these observations. "Generally, we are ecstatic with the final rule.  While we didn't get everything we hoped for, we commend the regulatory community for listening to our concerns and making the necessary adjustments with the realization that community banks operate under a different business model than the large systemically important banks and deserve special considerations and exemptions accordingly."

ICBA has raised concerns about the new threshold limits of mortgage servicing rights which could affect some members who maintain large mortgage portfolios and the new capital conservation buffer (2.5% of risk-weighted assets) that will be required under the proposal. The Fed has provided a one page guide on the implications of the final rule on community banks that can be found here.

So what's next?  The FDIC and the OCC are both expected to approve identical final rules this week. Once approved by all three agencies, the new Basel III requirements will go into effect for community banks under $50 billion on January 1, 2015 barring any Congressional attempts to modify the final rules. Lawmakers are carefully reviewing the implications of the new rules and it is possible that legislation will be introduced to further modify or eliminate the rule entirely prior to its implementation.

Staff contact: Chris Williston, cwilliston@ibat.org, 512-474-6889

Week in Review July 5, 2013

Judging by the “ooooo’s” and “ahhhh’s” being heard around trading rooms [Friday] morning, one might think that market participants were still enjoying [Thursday] night’s 4th of July fireworks. Well, think again. The source of today’s expressions of amazement and wonder was a better-than-expected Jobs Report from the Bureau of Labor Statistics (BLS). It was announced this morning that not only did June’s 195k jump in Non-Farm Payrolls beat the market’s expectation of +165k, May’s reported 175k gain was upwardly revised to 195k with April’s +50 recount bringing the two month net revision total to +70k. Things are/were looking up! Looking up, however, would not help one find out where bond prices have gone. In early morning trading, thin though it is, a 1 ½ point slide in the price of the Treasury’s Benchmark Ten Year Note has taken that issue’s yield up to 2.70%; a level not seen since August 2011... Read more in the Baker Market Update.

God Bless America

Our nation celebrates its 237th birthday this week and despite the many challenges facing our country all Americans pause to celebrate the freedom we enjoy.  We are reminded of the countless men and women who have fought valiantly throughout our history to preserve those freedoms and all who have served or are serving the public good throughout this nation.

Your IBAT family wishes you a fun-filled and safe Fourth of July holiday.  Our offices will be closed July 4 and 5 in observance.

May God continue to bless the United States of America and Main Street community banks!

Week in Review: June 28, 2013

From a galloping horse, one might be hard pressed to see what Ben Bernanke and Paula Deen have in common. Both, it seems, have had difficulty lately in being understood by their respective followers. For Ms. Deen, the problem may lie with her message; for Mr. Bernanke, the problem may lie with his audience. Ben’s audience, which is pretty much everybody, seems to have heard things that were never actually said. So, it’s been an interesting week as a veritable Murderer’s Row of Fedspeakers have gone to great lengths to clarify the Chairman’s previous clarification. Attempts to assuage the markets’ vexation have focused on reassurances that monetary policy is not reversing course. Remarks made yesterday by New York Fed President William Dudley were supposed to remind everyone that it will be, as it has been, the performance of the economy that determines the flavor of monetary policy. Nevertheless, markets remained roiled as the Benchmark Treasury Ten Year note reached a yield of 2.61% before returning to something nearer the 2.50% level... Read more in the Baker Market Update.

4th of July Office Hours

In observance of the July 4th holiday, the IBAT offices will close at 4 PM on Wednesday, July 3, 2013, and will remain closed for the remainder of the week.  Business hours will resume to normal on Monday, July 8.

ICBA Payments Survey

ICBA seeks your assistance in setting a payments course that focuses on emerging issues of great importance and impact to community banks. Please take a few moments to complete the 2013 Community Bank Payment Survey between now and Friday, June 28.  

Findings will enable ICBA to:

  • Communicate community bank payment trends and directions to legislative, regulatory, and other rulemaking entities.
  • Prioritize its payment strategies and identify efforts to assist community bankers in charting a payment course.
  • Develop a peer-comparison tool that can be used to measure community banks’ current payment activities and help them reaffirm their strategic direction.

Community bankers who complete the survey by June 28th will have the opportunity to be entered into a cash drawing, with prizes totaling $1,000.

100 Year Celebration

IBAT would like to congratulate Schertz Bank & Trust for celebrating 100 years of community banking on Monday, June 17, 2013.  IBAT Deputy General Counsel, Shannon Phillips, was on hand for the celebration and presented the bank with a congratulatory Resolution on behalf of the IBAT Board of Directors. 

Credit Union Tax Exemption

In a letter sent to leadership of the House Ways and Means and Senate Finance Committees last week, the Independent Community Bankers of America (ICBA) requested a thorough review of the U.S. tax code, including the exemption provided to credit unions.

"Credit unions were granted a special tax exemption because they were originally chartered to serve people of modest means and with a common bond among them who otherwise would not have access to credit.  Today, credit unions are virtually indistinguishable from tax-paying community banks," said ICBA President and CEO Cam Fine.  

Fine pointed to a recent study which valued the credit union tax exemption at $31.3 billion over ten years, as their number has burgeoned from 70 to 195 over the past decade.

Ryan Esquell Recognition

Ryan Esquell, Vice President - Abound Resources, was recognized for his leadership and service to IBAT and community banking through his service on the Associate Member Advisory Council.

Ryan has been a member of the Advisory Council since 2009 and served as chairman of the Council since 2010. Under his leadership, the Council has grown the Associate Member Exchange at the IBAT Convention and created Associate Member Area Networking Events across the state.

"This is a well-deserved honor and we appreciate Ryan's commitment and hard work as chairman of the Advisory Council and his dedication to the Texas community banking industry," said IBAT President and CEO Chris Williston.

Home Equity Rules

The wheels of justice turn slowly.  In 2004, the Finance Commission and Credit Union Commission adopted rules interpreting the home equity lending constitutional amendments. Within weeks, ACORN, along with 6 individuals, and with the assistance of other organizations including AARP, filed a lawsuit challenging some of the rules.  IBAT considered intervening, but there were a number of potential liability issues that the intervention could have triggered.  Since the case turned on "legal" instead of "factual" considerations,  IBAT decided to work behind the scenes until an appeal was filed and file thorough amici curiae ("friend of the court") briefs on the legal issues.

The Texas Supreme Court issued a decision in the case last week. In a special email from IBAT last Friday, we shared an initial analysis from an attorney involved in the case.  IBAT General Counsel Karen Neeley has shared her thoughts on the consequences and possible actions for community banks to consider.

"Often lost in the discussion of this lawsuit are the dozens of rules that were not challenged—or were upheld by the Court of Appeals and not further appealed—and the fact that these rules have made home equity loans in Texas both widely available and safer for Texas consumers," remarked Chris Williston, IBAT President and CEO. "We hope that those on both sides of this suit will join IBAT in commending the joint commissions on their hard work and dedication."

Karen Neeley will share her thoughts in more detail during IBAT's free State Legislative Update Webinar today, Tuesday, June 25th. To register, please click here.

Week in Review - 06.21.13

We've all been warned about the potential folly of making wishes. They might come true. Market participants [last] week were wishing that Fed Chairman Bernanke would elucidate his position on the future of Quantitative Easing. You know, clear up that little misunderstanding about the prospect of a "tapering off" of the Fed's monthly $85B asset purchases. Well, Ben cleared things up a bit, but it was clearly not the kind of clarity the markets wanted to hear. His lucidity about reducing the size of the asset purchases later this year and ending them altogether in 2014 sent equity and credit markets reeling. The sell-off in bonds continue[d] [Friday] morning with early trading taking the yield to near 2.50% on the Treasury's Benchmark Ten Year... Read more in the Baker Market Update.

CSI Webinar

Communicating with your Board of Directors is often a cumbersome and daunting task, particularly when making sure you are 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 by joining us for a 30 minute informative webinar:

Date: June 27th
Time: 10:00am CT
Presenter: Bill Evers

In this webinar, you will learn:

  • How portal technologies are being used to improve board communications;
  • How directors can gain secure 24/7 access to online board materials;
  • How you can host paperless board meetings using tablet technologies, online voting, policy management and more; and
  • How you can effortlessly move to paperless board books

Follow this link to register for the webinar. Reserve your spot today!

BOCB Entry Deadline

The deadline for submitting your Best of Community Banking Award entries is June 25th.  

This is your opportunity to tell the story of your bank's involvement in your community and the exceptional projects you've undertaken over the past year.  

Gold, silver and bronze awards will be given in the categories of Architectural Design, Community Service, Financial Literacy and Marketing. All entries will be on display during the IBAT Convention and Gold Eagle Award recipients will be recognized during the Best of Community Banking Awards Luncheon on September 23, 2013 at the Westin La Cantera in San Antonio.

Legislative Update Webinar

IBAT will provide a thorough review of the 83rd Texas Legislative Session on June 25, 2013 from 3:00-4:30 p.m. The webinar will be conducted by Karen Neeley and Steve Scurlock and is FREE of charge. A recording will be available after the fact, for future reference.

Additionally, our post-session white paper should be ready for distribution electronically prior to the program date.  

We hope you plan to join us for an informative discussion on issues impacting the community banking industry. Click here to register for the webinar.