TX Leadership in D.C.

Texans are playing an increasingly significant role in shaping policy for our industry and our nation. Senior Senator John Cornyn was recently named Majority Whip, the number two most powerful position in the Senate.

In addition to the reappointment of Congressman Jeb Hensarling as Chairman of the Financial Services Committee, several other Texans will head up important committees for the upcoming 114th Congress. Retaining their chairs are Michael McCaul (Homeland Security), Pete Sessions (Rules) and Lamar Smith (Science, Space and Technology). Newly appointed Chairmen include Mike Conaway (Agriculture) and Mac Thornberry (Armed Services).

“Texas members continue to make a significant impact in Washington, D.C., and we are obviously pleased that such qualified and dedicated Texans have earned these positions,” said Chris Williston, IBAT President and CEO. “We extend our hearty congratulations to each of these impressive individuals, and look forward to working with them and their colleagues to move meaningful community bank regulatory reform forward on a timely basis."

De Novo News

After years of stagnation in new bank charters due in part to stringent requirements set by the Federal Deposit Insurance Corporation (FDIC), the regulator softened expectations in a recent document clarifying chartering policy.

The document, which was released at the FDIC’s advisory committee on community banking, clarified that:

  • New charters must retain an 8% tier 1 leverage ratio for the first three years of operation, not seven years. This applies to applications displaying a “traditional risk profile” and the FDIC could seek a higher level of capital for proposals with heightened risk and complexity. 
  • Applicants are required to detail their business plan for the first three years of operation, not seven years.

According to reporting by American Banker, officials at the meeting “also highlighted a change eliminating the requirement for FDIC-supervised state banks to seek approval to engage in activities through limited liability companies.”

The document said the FDIC also “strongly encourages” meetings between regulators and potential applicants before formal filings, in the interest of setting regulatory expectations and “promot[ing] open communication.”

Comment Letter

Last week IBAT filed comment on the Department of Defense’s proposed changes to the Military Lending Act (MLA), which would extend the protections of the Act to a broader range of closed-end and open-end credit products including consumer installment loans, unsecured open-end lines of credit and credit cards.

In the letter, IBAT President and CEO Chris Williston expressed concern that the proposed rule will simply reduce credit products offered by insured banks and will have the unintended consequence of affecting a number of products that are not of concern to the Department. For this reason, IBAT proposed exempting insured depository institutions completely from newly proposed limitations of the MLA.

Williston outlined concerns in proposed restrictions on refinancing and modifications, on access to bank accounts for payment or security, and on the ability for interest rates to be changed – even if they are being lowered. He also articulated IBAT’s belief that compliance with the changes would result in unnecessary regulatory burden with which many community banks simply cannot comply, thus resulting in further limits of credit availability.

The comment period closed on November 28, 2014.

Card Wars

Late last week, PULSE filed suit in a Houston federal court against Visa, citing many antitrust violations including monopolization of the debit network services market.

The PULSE suit is based on Visa's actions since the enactment of the Durbin amendment as part of the Dodd-Frank legislation in 2010. Besides restricting bank interchange fees, Durbin was intended to enhance competition among debit networks. PULSE maintains that Visa launched several anti-competitive initiatives in response including the establishment of a fixed-acquirer network fee and a PIN-authenticated Visa debit mandate. As a result, network fees paid by merchants have risen and competition has been thwarted.

"PULSE does not resort to litigation lightly," said PULSE President and CEO David Schneider. "Through this lawsuit, PULSE hopes to restore competition to the market."

Schneider assured PULSE participants that the lawsuit will not impact PULSE's day-to-day business with Visa.


Baker Market Update: Dec. 1, 2014

Once again, Black Friday is upon us and everything is on sale. Everything! That’s right, Uncle Jed, even Black Gold. Despite the Thanksgiving holiday for America’s financial markets, the rest of the world was open for business. And for those in the oil business, not many were thankful for OPEC’s decision yesterday to maintain current production levels. The cartel’s decision not to support the crude oil market by curtailing output sent crude oil prices tumbling yesterday. The plunge in domestic prices to below $70/barrel is a reprise of market levels not seen in over four years. The good news for consumers is that the less they are required to spend on energy, the more they’ll have available to spend on video games. Thank you OPEC!

Read more in the Baker Market Update

Cybersecurity Seminar

Texas community bank CEOs, directors and other officers are encouraged to participate in "Executive Leadership of Cybersecurity (ELOC) – Taking the Fear Out of Cyber Threats." This event is designed for CEOs and directors who have focused their careers on the non-cyber aspects of banking to help them manage one of today’s most challenging aspects of bank risk management. Too often cybersecurity is fully delegated to operations personnel, but the changing world requires that everyone at a CEO and board level take a proactive role in understanding and managing cyber risk.

IBAT, TBA, SWACHA, law enforcement, and both federal and state banking regulators have partnered to bring this overview of cyber threats to the banking industry on December 3, at the Hilton Austin Airport Hotel. The deadline to secure the discounted hotel rate ($139/night) is November 5. A full brochure, registration information and other details can be found here. Seven hours of continuing education with the Texas Board of Public Accountancy will be given to attendees. 

Happy Thanksgiving!

Thanksgiving is a time to reflect on our many blessings. Your IBAT team considers it a great privilege to work to advance a great industry that does so much for so many. We are blessed with your continued support and friendship.

On behalf of the officers, directors and staff of IBAT, we wish you and your family a very safe and happy Thanksgiving surrounded by family and friends.

Your IBAT offices will be closed on Thursday, November 27 and Friday, November 28 and will resume normal business hours on Monday, December 1.

Compliance Video

The FDIC released the first in a series of videos to help banks comply with CFPB mortgage rules. The initial video - divided into nine segments - addresses Ability-to-Repay and Qualified Mortgage Rule. The video is aimed at compliance officers and bank staff and addresses determination of ability to repay, QM presumptions, establishing QM status, charges counting toward QM points and fees cap, non-QM and QM supervisory expectations, and building an ATR/QM compliance management system. The individual segments, which can be watched separately, vary in length from just under 3 minutes to nearly 14 minutes and total about 65 minutes.

Two additional videos focusing on the rules concerning mortgage servicing and loan originator compensation will be released in the upcoming months.

And don’t forget that IBAT has created a webpage devoted to the CFPB mortgage rules and has several Legal Ease Q&As dealing with CFPB mortgage rules (enter CFPB in the search box).

Texans in Key Roles

As expected, Texas Congressman Jeb Hensarling will continue to serve as Chairman of the House Financial Services Committee. Additionally, Chairman Hensarling has named Texas Congressman Randy Neugebauer to serve as Chairman of the critically important Financial Institutions and Consumer Credit Subcommittee. Finally, Texas Congressman Roger Williams was appointed to the Financial Services Committee.

“We are so pleased to have Texans in these key roles on the jurisdictional committee dealing with the vast majority of community banking issues,” said Chris Williston, IBAT President and CEO. “All of these gentlemen ‘get it.' They understand the importance of community banking as well as the challenges we face. We look forward to working with these members and a multitude of others to effect meaningful - and long overdue - changes as quickly as possible in the new Congress.”

ICBA Webinar Recording

By now, you’ve most likely seen the abundance of research about millennials and their banking preferences. Hint: the majority distrust big banks and value a personal relationship at a locally owned bank. Check out Reaching Millennials and Reaching Gen Y as a refresher.

To help community banks capitalize on the opportunity to win the millennial generation - which currently encompasses 80 million Americans and will represent approximately $200 billion in buying power by 2017 - ICBA hosted the “Must-Know Millennials Research for Community Banks” webinar last week. If you would like a better understanding of this new generation of community bank customers, including how to win over potential customers, a recording of the webinar is available for free here.

Week in Review: Nov. 24, 2014

With all the talk about executive actions these days, the nation’s makers of monetary policy might want to consider how such an approach could fit into a macro-economic application. It seems that patience is growing a bit thin among those clamoring for more inflation. Unprecedented efforts by the central bankers to ignite aggregate demand have not, in the eyes of many, been successful. Clearly, the system is broken. There are lots of observers out there that think that inflation has had plenty of time to get to the 2% level desired by the FOMC and the time for waiting is over. The Fed should just order the inflation rate to rise. While such a step might seem heavy-handed to some, others maintain that it would be well within the scope of Chairwoman Janet Yellen’s power.

Read more in the Baker Market Update.

Ongoing Celebration

McGregor, TEXAS (November 7, 2014) -- First National Bank McGregor was joined by more than 250 guests on the evening of Thursday, November 6, 2014 as it celebrated its 125th anniversary at a public event. The festivities were held in the bank's downtown McGregor location on Main Street, not far from its original founding site in the 19th century. First National Bank McGregor (FNB McGregor) is the oldest bank in McLennan County, and the seventh oldest national bank in Texas still operating under its original charter.

“We are celebrating the bank’s 125th anniversary throughout 2014, “ said First National Bank McGregor’s president, David Littlewood, “But we believed inviting the public to a charter celebration, almost like a birthday party, was the perfect opportunity for us to say thank you for their support and trusting us to meet their financial needs since 1889.”

Littlewood and FNB McGregor Chairman and CEO Mike Beard were presented a certificate by Scott Ward, assistant deputy comptroller of the Office of the Comptroller of Currency, and a plaque by Brien O’Connor, vice president of the Texas Bankers Insurance Agency, given on behalf of the Texas Bankers Assocation. In addition, City of McGregor Mayor Pro Tem Francisco “Frank” Leos read a proclamation naming November 6, 2014 First National Bank McGregor Day.

“NOW, THEREFORE, I… on behalf of the McGregor City Council, do hereby proclaim Thursday November 6, 2014 as


and encourage all citizens to join me in celebrating the lives of the employees of First National Bank McGregor and in remembering the bank’s leadership and impact in our City of McGregor.”

The bank’s oldest customer, 100-year-old Jeannette McGinnes, was honored at the celebration, and shared her memories of banking with FNB McGregor for more than 80 years.

“Several decades ago, I was studying abroad at a university in Mexico City, and had to get money from home, like all the other students did,” said McGinnes. “First National Bank McGregor always got my money there on the first of the month, while all the other big name banks were late for everyone else!”

Representatives from 29 nonprofits in Bell, Coryell and McLennan counties were also honored at the celebration, as participants in the First National Bank McGregor Charity Champions program. Charity Champions was launched by FNB McGregor as a 125th anniversary initiative in partnership with Baylor University. The mission of the program is to increase awareness of the work done by charities across Central Texas by recognizing a different winning nonprofit at each home football game played at McLane Stadium. With a desire to reinvest into these organizations, FNB McGregor will cover costs associated with executive leadership training in partnership with 360 Solutions, for board members of each winning charity.

So far this season, FNB McGregor has announced four Charity Champions, including CASA of McLennan and Hill Counties, AVANCE Waco, Generations Adoptions and the Waco Family Abuse Center. Two additional winning nonprofits will be announced during 2014, and the Charity Champions program is slated to continue through 2016.  To be considered as a First National Bank McGregor Charity Champions candidate, applicants should visit the program site www.fnb-mcgregor.com/charity-champions  to register. To qualify, an organization must have a service office located in Bell, Coryell or McLennan counties.

 First National Bank McGregor CEO and Chairman Mike Beard explained that, through Charity Champions, the bank hopes to establish an endearing,
community-based program that will help organizations already working to make a difference in our area.

“Our customers and the communities of Central Texas are the reasons First National Bank McGregor is still here after 125 years, and we want to continue to help meet their needs,” said Beard. “That always has been and always will be our mission, and it certainly remains the focus of our 125th celebration throughout 2014.”

LIBOR Licensing Fee

The vast majority of community banks will be exempt from licensing fees for using or referencing the LIBOR index, according to new rate categories issued by the Intercontinental Exchange last week. The final decision was a positive turn from the Exchange’s initial proposal in July of this year, which would have subjected all financial institutions to a $16,000 annual fee.

Banks under $1.5 billion in assets will be completely exempt from the fee. Banks between $1.5 and $10 billion in assets will face a $2,000 licensing fee.

According to the frequently asked questions document issued by the ICE Benchmark Administration, “from 2015 onwards, the asset size of each institution will be subject to annual review, such that the asset size of the institution on 1st January of each year will determine the appropriate license fee for that year.”

ICBA, with the support of state banking associations, was actively engaged in advocating for community banks on this issue and noted last week that their activity in achieving a carve out for banks under $1.5 billion translates into a savings of more than $100 million annually.

Richard Fisher

Dallas Federal Reserve President & CEO Richard Fisher formally announced the date of his retirement last week, pinning March 19, 2015 as his last day on the job. Fisher, who has led the Dallas Fed since 2005, has been an outspoken advocate for community banks and a voice of reason among federal regulators.

In remarks offered at IBAT’s Annual Convention in 2013, Fisher spoke pointedly against policies which created the “too-big-to-fail” distinction for the largest banks. “Large banks are a dagger aimed at the heart of our economy” he said, “extreme size and complexity are the enemy of prudence in too-big-to-fail banks.”

"I cannot think of a better man to have been at the helm of the Dallas Fed during some of the most tenuous times in our industry," said Chris Williston, IBAT President and CEO. "Richard has been a leader, a mentor and a friend. Very few will ever know the impact this impressive gentleman has had on the everyday operations of community banks in Texas and across the country. I will look forward to an ongoing relationship with him in the next chapter of his remarkable career."

New Compliance Tool

As Texas community banks continue to adapt to new regulatory challenges, we have heard from a number of IBAT members looking for industry best practices in building the internal infrastructure to better monitor the consumer compliance process.

In response, IBAT Deputy General Counsel Shannon Phillips has studied federal banking regulator expectations in developing a Compliance Management System (CMS) to avoid litigation, monetary penalties and other enforcement actions. His findings are condensed in a short white paper, now available for IBAT members to download.

The white paper offers IBAT members insight into:

  • The basics of developing and structuring a CMS,
  • Tips for effective board and management oversight,
  • Developing policies and procedures to support the CMS, and
  • Building training, audit and internal controls around the CMS.

Click here to download the free white paper from the IBAT website. Additional compliance management resources are available on the Bankers Resources page of IBAT’s website.

Guide Update

The CFPB has updated the Ability-to-Repay/Qualified Mortgage Compliance Guide and the RESPA and TILA Mortgage Servicing Rules. The adjustments include two changes that will help certain nonprofit organizations continue to provide mortgage credit and servicing to underserved populations. Other changes lay out limited circumstances where lenders that exceed the points and fees cap can pay a refund of the excess amount plus interest to consumers and still have the loan be considered a Qualified Mortgage.

The updated guides are effective November 3.