Baker Market Update: 2.20.18

This past Wednesday may have been Valentine’s Day, but there hasn’t been a lot of affection shown to bond markets this week. While others might have received flowers, candy, or even sporty lingerie, bonds got a gift card to Applebee’s. An expired gift card. Where’s the love?! Well, the Fed must surely be loving the perceived return of inflation; its prodigal son.

Read More in the Baker Market Update

Tour de Texas

IBAT hit the road last week for the first round of our Tour de Texas regional meetings, talking to hundreds of community bankers, vendors and industry advocates in ten cities about issues important to community banking.

Media in tour markets were also interested in learning about community banking opportunities and challenges, the latest on regulatory reform efforts and other topics addressed at each meeting. Coverage resulted in the Wichita Falls Times Record, Amarillo Globe-News, San Angelo LIVE!, Waco Tribune-Herald and El Paso Inc. with other outlets pending. 

Legal Ease

We have income tax refunds being made via ACH to an account that is not in the name of the taxpayer receiving the refund. Can we accept the deposit?

Learn the answer here. For this week's Legal Ease in a printable PDF, click here.

Contact Kelly Goulart (512-275-2231) or Janie Daniel (512-275-2221) if you have further questions or need clarification on the topic above.

Legal Ease is chosen from questions received through the IBAT Compliance Adviser Helpline, available to IBAT members free of charge at 1-800-749-4228 or kgoulart@ibat.org. IBAT members can also read and/or initiate discussions with other community bankers in the IBAT Compliance Forum..

Comment Letter

IBAT submitted a comment letter this week to the Federal Reserve Board of Governors regarding proposed guidance on supervisory expectations for boards of directors.

IBAT’s letter is brief because the majority of the proposal affects banks over $50 billion in assets. However, we believe it is important to file this letter in support of the basic principles laid out—shifting the emphasis to management from boards in certain respects.

Mark Your Calendar

One challenge that is top of mind for all community bankers is succeeding in a highly competitive marketplace. That is why the IBAT Education Foundation created the Human Resources and Operations Summit, April 24-25, 2018 at the Omni Mandalay in Irving.

This Summit will provide an overview of recent regulatory changes, litigation of interest and practical recommendations for implementation at community banks while specifically addressing employment compliance priorities, HR audit, employee engagement strategies, hiring and nurturing generations, vendor management and more.

This is a must-attend event for supervisors, operations officers and HR officers. Watch your email for additional information and registration coming shortly.


Baker Market Update: 2.12.18

Remember when a 500 point swing in the stock market was considered a big deal? Back when baseball bats were made of wood and golf shoes had real spikes. Ah, the good ol’ days. Now, little-leaguers are armed with aluminum bats, golf shoes look like sneakers, and a 500 point plummet in the Dow is just Wall Street having a bad day. 

Read More in the Baker Market Update

Orrin Hatch's Letter

Last week, Senate Finance Chairman Orrin Hatch sent a letter to the National Credit Union Administration (NCUA) expressing his concerns over whether credit unions are sticking to their intended purpose while remaining exempt from federal corporate income tax. Hatch questioned NCUA Chairman Mark McWatters about his efforts to relax restrictions on credit union activities, specifically loosening the field of membership constraints, allowing credit unions to lend to businesses and expanding their financial portfolios.

In his letter, Hatch notes he’s “concerned that the credit union industry is evolving in ways that take many credit unions further from their original tax-exempt purpose.”

Both IBAT and ICBA have long sought to ensure credit unions stay within their original purpose while keeping their tax-advantaged status over tax-paying community banks.

New Resource

IBAT’s compliance team has released new compliance guidelines regarding loans made on manufactured housing. Available free of charge to IBAT members, this resource answers critical questions like:

  • Does Texas have specific rules for loans secured by manufactured homes?
  • Is a loan secured by manufactured housing subject to the right of rescission?
  • Is a loan secured by manufactured housing subject to the Interagency Appraisal Guidelines?

Click here to access and download this resource from the IBAT website. 

PHH vs. CFPB: Who Won?

You gotta love a case where each party can claim victory!

The US Court of Appeals for the DC Circuit found that the CFPB’s structure was constitutionally valid even though the President could only fire the director for cause rather than “at will.”  So, consumer advocates can be pleased that the agency is continuing in existence, and the director is theoretically independent.  However, they are now stuck with a Trump appointee (when he gets around to it) that will carry over into the next presidential term.  Meanwhile, Mulvaney (interim director) is busy dismantling rules and procedures.  Even the tagline for the CFPB press releases has been changed to add the fact that the CFPB helps “markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations….”

PHH has to be pleased that the appellate court upheld part of the prior decision, which concluded that CFPB director Cordray’s decision-making violated due process.  The case involved a potential violation of the anti-kickback provisions of RESPA.  Cordray retroactively repealed HUD rulings—without going through the Administrative Procedures Act.  Plus, he basically nixed the idea of a statute of limitations for the alleged violation.  The original opinion on this point is a great primer on US Supreme Court decisions on overreach and violation of due process by agencies.  So, industry wins big on this issue.

Now, it will be intriguing to see whether this latter issue (violation of due process) can translate into an effective defense in other cases where regulators “write” rules through the examination and enforcement process!

Karen Neeley
Kennedy Sutherland LLP

Baker Market Update: 2.05.18

Did everyone get the memo? No, not that memo. The one from the Labor Department that was chock full of fun facts to know and tell about the nation’s employment situation. The 200k addition to NonFarm Payrolls was a pleasant surprise, but the fact with the most fun was the 2.9% rise in year-overyear Average Hourly Earnings in the face of a 2.6% expected growth rate. While Average Weekly Hours slipped a bit, the 0.3% monthly gain in worker compensation was slightly above the anticipated 0.2% increase. Last month’s 4.1% Unemployment Rate is still 4.1% while the Labor Force Participation Rate held steady at 62.7%. For a little hysterical perspective, that measure was 65.7% when this recovery began in June of 2009

Read More in the Baker Market Update

Nomination of Powell

Last week, the Senate confirmed the nomination of Federal Reserve Governor Jerome Powell for Fed chairman. Powell has served on the Fed board since 2012 and was approved on an 85-12 vote.

Additionally, the presidential nominee to head the FDIC heavily advocated for community bank regulatory relief while testifying at a Senate Banking Committee nomination hearing recently. Jelena McWilliams indicated support for a community bank exemption from the Volcker Rule, simpler capital rules and an environment more conducive to de novo charters, among other things.


IBAT's Appraisal Toolkit

Developed by IBAT’s compliance team, this toolkit will help your bank create policies and procedures for your appraisal program. All documents are developed in commonly used formats to allow for easy edits and revisions.

The Appraisal Toolkit includes the following:

  • Guidance sheet (in Word)
  • Appraiser engagement letter (in Word)
  • Evaluation/extrapolation sample forms (in Excel)
  • Real estate evaluation/appraisal review worksheet (in Excel)

Click here to learn more or purchase the product online. The toolkit will be automatically sent via email upon checkout.


Congressional Visit

IBAT’s 26th Annual Congressional Visit is just around the corner—April 10-12, 2018—and we’re excited to announce that registration is now open. It’s time to fight for much-needed regulatory relief and do so in high numbers.

Over the past year we’ve seen many changes in Washington, D.C. and are very optimistic that community bank regulatory relief will become reality in the coming months. For the first time in years, the community banking industry has the opportunity to make a significant impact with our lawmakers to effect real change. We need to stand together and make our voice heard to send a strong message to our Capitol Hill representatives. Reserve your spot today.

Baker Market Update: 01.29.18

If something is booming, it ought to be making some noise. Right? Well, the fortissimo of economic frenzy that many seem to be hearing these days, has not experienced the crescendo that some thought today’s flash estimate of Q4 GDP might bring. While many were expecting a growth rate in the 3 ½% range, the Bureau of Economic Analysis muted those expectations a bit when it reported an actual rate of 2.6%. If wishes were horses, we would have had three consecutive quarters of 3+% growth for the first time since before the financial crisis. But we didn’t. 

Read More in the Baker Market Update

Register Today!

As IBAT staff puts finishing touches on round one (February 5-9, 2018) of the annual Tour de Texas Regional Meetings, we’d like to remind you there is still time to register. While it’s free for bankers to attend, we ask that you register for meal-planning purposes.

This year, IBAT Chairman Kim King will be joined by IBAT’s Chris Williston, BKD’s Debbie Scanlon, the Texas Department of Banking’s Kurt Purdom and The Baker Group’s Dale Sheller as panelists. The renowned group will offer its thoughts on the community banking industry in the year ahead. The agenda will include an economic outlook for 2018, the state of Texas community banking, and a legislative and regulatory prognosis, among other important topics and issues of the day. Register here.

Blankenship Testimony

IBAT, along with ICBA and other industry groups, supports the bipartisan Small Business 7(a) Lending Oversight Reform Act of 2018 (H.R. 4743 and S. 2283). The legislation would strengthen the SBA Office of Credit Risk Management and Lender Oversight Committee, codify the SBA’s “Credit Elsewhere Test” that requires lenders to substantiate why applicants cannot receive conventional credit, and allow the SBA to lift the cap on general business loans by up to 15 percent of the limit if the cap is reached.

IBAT board member Cindy Blankenship of Bank of the West in Grapevine testified in support of the bill on behalf of ICBA at a House Small Business Committee meeting last week. Watch her testimony here (begin at 17:45). Committee mark-up of this bill could begin by the spring.

Impact of New Tax Laws

Tax Concerns Addressed

The Financial Accounting Standards Board (FASB) proposed updated accounting standards to address complications from the Tax Cuts and Jobs Act, one of which is the need to assess impairments of deferred tax items due to the change in the corporate tax rate and imbalances in accumulated other comprehensive income (AOCI). Due to the new tax law, banks would reclassify amounts from AOCI to retained earnings.

The proposal would be effective for all banks for fiscal years beginning after December 15, 2018 as well as interim periods within those fiscal years. Early adoption would be permitted. Additionally, federal banking regulators issued an interagency statement on accounting and reporting under the tax law that provides an overview of the law’s impact with specifics on the AOCI issue.

ICBA submitted a comment letter last week asking FASB and the agencies to ensure tax reform doesn’t distort earnings and regulatory capital. 

It’s Time for CECL

As the effective date of the Current Expected Credit Loss (CECL) model approaches, IBAT is offering a half-day summit to get you and your team ready for the changes.

The program will take place in three different locations around the state – Lubbock, Dallas and San Antonio – on April 17, 18 and 19, respectively.

These CECL workshops will provide in-depth discussion about how to prepare your bank for CECL implementation. Be on the lookout for additional information and registration links coming your way soon.

Additionally, have you seen the January/February edition of IBAT’s magazine, The Texas Independent Banker, that includes an article about CECL’s effect on taxes, plus a compilation of accounting methods for the timing of bad debt worthlessness. Be sure to read about it here.

Baker Market Update: Jan. 22, 2018

Think how this must look to the untrained eye; the government cuts taxes in December, and then runs out of money in January. To the trained eye, however, it looks like the government cut taxes in December and then ran out of money in January. But, even the untrained eye knows, this is not a unique condition (the running out of money part) and can be easily “fixed” with the legislative passage of new budgetary funding measures. The trained eye, though, has seen this movie before, and knows that nothing in Washington, D.C. is easily fixed.

Read More in the Baker Market Update

Legislative Update

While a Senate vote on comprehensive regulatory reform is expected before the end of January, the House of Representatives is preparing for the arrival of the bill in the lower house by teeing up several regulatory reform measures contained in the Senate bill.

Last week, the House Finances Services Committee considered measures to:

  • Allow banks with less than $5 billion in assets to file short-form call reports.
  • Exclude some veteran medical debt from consumer credit reports.
  • Delay expanded HMDA reporting requirements until 2020.
  • Exempt banks with less than $50 billion in assets from CFPB oversight.
  • Increase the number of sell-financed homes that can be sold and be exempt from the Truth and Lending Act to five from three.

IBAT Welcomes Panelists

IBAT is pleased to welcome both BKD’s Debbie Scanlon and the Texas Department of Banking's Kurt Purdom as panelists for the first round of IBAT’s Tour de Texas Regional Meetings.

“I am so pleased to add both Debbie and Kurt to our panel presentation,” said IBAT President and CEO Chris Williston. “With so many questions about the new federal tax bill and its impact on the industry, along with the current regulatory environment and regulator expectations, their participation will be invaluable,” Williston added.

Scanlon and Purdom will join IBAT Chairman Joe Kim King of Texas Country Bancshares, Dale Sheller of The Baker Group and Williston as panelists. IBAT’s Mark Few will moderate. Registration for the Tour is free to IBAT members and can be accessed here.

Congratulations IBAT Members


Congratulations to the following IBAT members who distinguished themselves by their support of IBAT and community banking throughout 2017 and have earned the status of Five*Star Associate Members. These companies will be recognized in the months ahead and are eligible to receive IBAT’s Five*Star Award, which will be presented at the IBAT Annual Leadership Conference in June.

1-10 Employees

  • BFS Group
  • Catalyst Financial Company
  • J. Keith Hughey Company
  • Kennedy Sutherland, LLP
  • The Todd Organization

11-199 Employees

  • Advantage Health Plans Trust
  • The Baker Group
  • The Bankers Bank
  • Bank Compensation Consulting
  • CalTech
  • Cornerstone Home Lending
  • Fenimore, Kay, Harrison & Ford
  • Garland Heart
  • John M. Floyd & Associates
  • Norton Rose Fulbright
  • Pierson Patterson

200+ Employees

  • BKD, LLP
  • Briggs & Veselka
  • Deluxe/Deluxe Strategic Sourcing
  • Fitech Payments
  • Q2 Software


In Honor of Former First Lady

The state has lost a distinguished former first lady of Texas with the passing of Rita Clements. As a mark of respect for her public service, it is fitting that flags in Texas be lowered to half-staff.

Therefore, pursuant to Chapter 3100 of the Texas Government Code, I do hereby direct the lowering of Texas flags statewide to half-staff in memory of former First Lady Rita Crocker Clements. Flags should be at half-staff from sunrise until sunset on Thursday, January 11, 2018. Please notify all pertinent personnel within your agency and other state agency leaders of this directive.

Individuals, businesses, municipalities and other political subdivisions and entities are encouraged to fly their flags at half-staff for the same length of time in memory of this distinguished former first lady.

Our prayers of comfort are extended to the Clements family in their time of grief. I urge all Texans to appropriately remember Rita Clements’ life of service to the State of Texas.

Baker Market Update: Jan. 12, 2018

Mark Twain once famously told a newspaperman that “the reports of my death have been greatly exaggerated.” This week, famed bond-fund manager Bill Gross proclaimed that the bull market in Treasury bonds was also dead and the time had come to short the market. Mr. Gross may have forgotten that he made a similar declaration way back in February of 2011. Back then, the Ten Year’s yield was about 3.50%. So, Billy, an obvious question comes to mind; how’d that work out for ya’?

Read More in the Baker Market Update

Top Legal Ease

Here are the top 10 Legal Ease questions of 2017! IBAT members have accessed the 600-plus Q&As from the Legal Ease archive more than 195,000 times. This compliance resource is available to our member banks anytime at no extra cost.


Should we be concerned that preparing certain documents “in house” constitutes an Unauthorized Practice of law? 
Read the answer.


We have income tax refunds being made via ACH to an account that is not in the name of the taxpayer receiving the refund. Can we accept the deposit?
Read the answer.


We just want to be sure about the Home Mortgage Disclosure Act (HMDA) reporting thresholds for 2016 and 2017. What is the new threshold? What about collecting and reporting the new “data points?” 
Read the answer.


Our applicant is an attorney who wants to add a large office and reception area on to his home to work out of fulltime. Is this application subject to TRID? 
Read the answer.


If we provide a Loan Estimate, and the applicant does not express their intent to proceed, do we have to provide either an Adverse Action Notice or a Notice of Incomplete Application within 30 days?
Read the answer.


We have a mortgage loan in which our borrower had “sold” the home under a contract for deed to the people living in the house. No surprise in that this blew up and all three parties ended up with attorneys. We have now reached a settlement in which we will allow the people in the home to assume the loan. Do we need to provide the people assuming the loan with disclosures?
Read the answer.


Simple question – Is a Texas home equity loan HMDA reportable?
Read the answer.


A bank originates a temporary construction loan with the intent to provide permanent financing (if the borrower does not find permanent financing elsewhere) when the home is completed. However, they do not do a one-time close. They close the construction loan and when the home has been completed, they document the permanent loan with a modification agreement. Is that HMDA reportable?
Read the answer.


Can a state bank take stock in that same bank as collateral? Can a state bank take stock in a holding company that owns that same bank as collateral?
Read the answer.


Wasn’t there a bill from the last legislative session (2015) that becomes effective this year (2017) that could impact the escheatment of deposit accounts and safe deposit box contents?
Read the answer.


Refresher on Tax Reform

Busy during the holidays and need a refresher on tax reform? Click here to read the ICBA recap.

By and large, many of the issues of concern for community banks were addressed in the final version of the bill, which served as a compromise between the House and Senate proposals.

IBAT thanks Congressional leaders for hearing community banker concerns throughout the legislative process. And, we thank you for staying tuned in and answering the calls to action as tax reform took shape.