Greetings from Guy
By Guy Sims
I hope everyone enjoyed the convention. It was great to see so many bankers from across the state. I want to thank the OBA staff for all the work it puts into making our convention successful.
I also would like thank Curtis Davidson for his leadership over the past year. Curtis is an outstanding community banker and both he and Candy did an outstanding job representing Oklahoma bankers over the past year. Thanks for all you have done for our industry.
This Friday, June 2, we all have a chance to be an advocate for our industry by attending the breakfast supporting Sen. James Lankford. In addition, Sen. Mike Crapo, chairman of the Senate Banking Committee, will join us from Washington D.C. This event provides a unique opportunity for Oklahoma bankers to give input to one of the key decision makers in the regulatory reform battle.
This is an opportunity for Oklahoma bankers to get involved by not only supporting Sen. Lankford but also demonstrating to Sen. Crapo the grassroots support for common sense regulatory reform.
Our time is now. Let’s take advantage of this opportunity.
Through the end of the first quarter, Oklahoma banks earned a solid $367 million and are on pace to set another earnings record. The chart above shows the comparison of earnings through the end of the first quarter since 2000.
“It’s an outstanding result, again, and it reflects the ongoing strength of Oklahoma banks,” OBA President and CEO Roger Beverage said. “When taken together, the nation’s 5,856 banks earned nearly $44 billion for the quarter. That compares to $39 billion at the end of the first quarter in 2016, and $39.8 billion during that same time period in 2015. So, even though the total number of banks is on a steady decline, the industry’s earnings are strong, and that’s a good thing.”
FDIC Chairman Marty Gruenberg pointed out earnings are up 12.7 percent compared to last year. More than 57 percent of FDIC-insured institutions reported year-over-year increases in quarterly earnings, while only 4.1 percent reported negative net income for the quarter. In the first quarter of 2016, 5.1 percent of banks were unprofitable.
According to the FDIC, the average return on assets rose to 1.04 percent, compared to 0.97 percent a year ago. In Oklahoma, the average ROA was 1.30 percent. ROE nationwide, on average, was 9.37 percent at the end of March. In Oklahoma, it was 12.60 percent.
Chalk one up for the retail merchants They were able to make enough noise about a provision in H.R. 10 that would have repealed the “Durbin Amendment (thus eliminating their newest “profit center”) that House leadership simply removed the provision before consideration of its merits even began.
“I guess I shouldn’t be surprised,” OBA President and CEO Roger Beverage said. “The result was based on simple arithmetic: The number of retailers pushing to keep Durbin in place was much larger than the number of those pushing for its repeal and who believe generally that government price controls are a bad thing. I had just hoped it would be different under Republican leadership.”
After conducting a whip count to determine how members would vote on final passage of the CHOICE act, a significant number of members “expressed concern” about including Durbin repeal language in the bill.
”This may be the last time we have a shot at getting rid of this language in a while,” Beverage said. “If it’s viewed as politically ‘toxic’ by the leadership, then there’s not going to be much of an appetite for going up against the merchants again.
“I’m just disappointed to see Republicans going against some of their core beliefs. We had hopes – at least I had hopes – that if Republicans controlled the agenda, they would look at the issue (of government price controls) from a policy standpoint, not from a political one.
“Call me naive and idealist if you will, but my hope continues to be that somewhere in the bowels of Washington, there’s someone who will stand up and say, ‘Enough with the political stuff; let’s do what’s right.’”
ABA’s chief lobbyist, James Ballentine, said: “This is unfortunate, but certainly not the end of this debate. There are a number of members that realize that this price fixing language has been bad for consumers and has served as a financial windfall for retailers.”
We sure hope he’s right.
You may remember that in late 2015, Congress was frantically trying to come up with a “pay for” at the last minute generally to fund highway construction under the FAST Act. It came up with the idea of taking money from dividends on Federal Reserve stock held by banks above a certain size and President Obama signed the bill to do so into law in December of that year.
During the process, the OBA joined with every other state bankers’ association and the ABA in objecting to this process. In February of this year, Washington Federal and the ABA filed a class action lawsuit seeking more than $1.1 billion in damages caused by the federal government’s reduction in the number of dividends paid to Federal Reserve member banks.
Last week, Washington Federal and the ABA filed a motion for summary judgment in the case asking the Court of Claims to enter judgment on its behalf, asking the court to find the bank had entered into a contract with the United States when it subscribed to Federal Reserve Bank stock and the United States breached this contract by paying a dividend of approximately 2 percent in 2016.
Washington Federal alternatively asked the court to find the government breached its implied covenant of good faith and fair dealing by depriving Washington Federal of its expected 6 percent dividend under the contract.
Finally, ABA and Washington Federal asked the court to deny the previously filed U.S. motion to dismiss and for partial summary judgment. It will be some time before the Court rules on this motion.
In 2016, banks lost $1.1 billion to the taking, an amount estimated to balloon to $17 billion over 10 years.
Last week, Secretary of Labor Alexander Acosta announced the Department of Labor will not further delay the effective date for the “fiduciary rule,” developed under the Obama Administration, to significantly expand the definition of who is a “fiduciary” under the Employee Retirement Income Security Act and the Internal Revenue Code. Based on what we’ve read, the labor secretary simply concluded no further delays were permitted under the Administrative Procedures Act.
DOL issued a bulletin on its “temporary enforcement policy” of phased implementation:
[T]he department has repeatedly said that its general approach to implementation will be marked by an emphasis on assisting (rather than citing violations and imposing penalties on) plans, plan fiduciaries, financial institutions and others who are working diligently and in good faith to understand and come into compliance with the fiduciary duty rule and exemptions.
The document also states, “during the phased implementation period ending on Jan. 1, 2018, the department will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule.”
A bit of a different approach than former Labor Secretary Tom Perez was inclined to take.
Late last week, the Consumer Financial Protection Bureau released its plan to assess the effectiveness of its final Ability-to-Repay/Qualified Mortgage rule. The bureau’s review of the effectiveness of the rule is required by the Dodd-Frank Act, and comments on the plan will be accepted for 60 days after publication in the Federal Register.
“I doubt this would have happened if the (Dodd-Frank Act) didn’t require it,” OBA President and CEO Roger Beverage said. “I’m also doubtful – if not just a bit cynical – it will lead to and real meaningful reform. The people responsible for the process simply don’t understand or don’t care about the real world and how it works, especially in small towns across the Midwest.”
According to the announcement the Bureau intends to examine the rule’s effects on:
- mortgage costs, origination volumes, approval rates and loan performance;
- underwriting policies and procedures and the extent to which they have changed as a result of the rule;
- outcomes for:
- self-employed borrowers,
- borrowers with seasonal or intermittent income,
- borrowers seeking smaller-than-average loan amounts,
- borrowers who use asset-derived income to repay the loan,
- borrowers with debt-to-income ratios above 43 percent,
- lower-income/minority borrowers and
- borrowers in rural areas.
“If they actually do talk to smaller community banks and their customers, then it’s possible they will be able to get some meaningful information,” Beverage said. “My guess is they won’t do that, in part because they don’t give a rip about traditional community banks like we have here (in Oklahoma).
“I hope I’m wrong. But, when they use words like making a ‘limited’ request of data directly from creditors and other stakeholders, I don’t get very excited. They tend to rely almost exclusively on HMDA and other kinds of data rather than real-life experiences.”
A breakfast supporting Sen. James Lankford will be held on June 2 at the OBA. During the breakfast, Sen. Mike Crapo (R-Idaho) is scheduled to Skype in to discuss banking matters with those in attendance.
Did you miss our annual convention and the opportunity to watch the opening video that featured several of our bankers singing our state song? Or, would you just like to see it again? Either way, here’s your chance to see some of our most well-known bankers tune up their vocal cords to get our convention off to a fun start!
Convention is over and summer is officially here for the OBA education department, and while that means things might slow down a bit, it sure doesn’t mean they stop! Take a peek at the upcoming events:
- Writing An Effective Credit Memo, June 5, webinar — Learn skills required to write an effective credit memorandum.
- Notary Public, June 6, webinar — Notaries and others will learn best practices for dealing with issues unique to the financial industry.
- Three Key Risk Assessments in ERM Program, June 6, webinar — This webinar will take you through a step-by-step process to develop three key risk assessments you must have as critical components of your ERM Program.
- Prepaid Accounts – The New Rules, June 7, webinar — This two-hour webinar will address all requirements of the new rule which primarily becomes effective on Oct. 1, 2017.
- Call Center Training, June 13, webinar — This webinar will focus on the customer service aspects of call centers.
- ACH Risk Management & Compliance (two-part series), June 14 – Managing Your ACH Risk, June 16 – ACH Compliance, webinars — This webinar series is designed to help you understand the risks associated with the ACH and how to help mitigate those risks. Can register for either or both.
Additionally, the 2017 Senior Fraud Conferences, hosted by the Oklahoma Insurance Department and featuring the OBA’s Elaine Dodd, will be taking place at various locations throughout June. These events are FREE for the public and would be a good opportunity to refer your senior customers to attend. Click here for more information!
Finally, take note Bankers Toolbox will be hosting a free webinar on the state of sanctions on June 8. The sanctions landscape is evolving – exposing institutions to greater sanctions risks, operational and oversight challenges and obligations to comply with sanctions administered by OFAC and other agencies. OFAC expert Tim White will address these issues and what you need to be aware of moving forward. Click here to register.