Wednesday, December 2, 2020

Week of Jan. 1

In This Issue…

Fed report on rural employer firms confirms importance of small banks
Credit union regulator to head to CFPB?
Government Relations Council, OBA Board to meet
OBA education corner …

Fed report on rural employer firms confirms importance of small banks

The results of a recent Report on Small Business Credit published by the Federal Reserve confirms what most Oklahoma bankers already knew: local, more rural small businesses prefer to get funding from smaller banks than small businesses in urban areas.

This report is part of a series of reports that use data from the 2016 Small Business Credit Survey (SBCS), a national data-collection effort by the 12 Federal Reserve Banks. Here’s a quick summary of the report:

Compared to firms located in urban areas,  

1.    Firms in rural areas are more stable.

a. Rural small employer firms are less likely to be growing: 23 percent compared to 30 percent of urban firms.

b. Rural small employer firms tend to be older than urban firms: 30 percent are over 20 years old compared to 22 percent of urban firms.

c. Rural small employer firms are less likely to apply for financing to expand their business: 57 percent of applicant rural firms compared to 65 percent of applicant urban firms.

2.    Firms in rural areas face less financing constraints.

a. Rural small employer firms, on average, report having higher credit scores: 71 percent of rural small employer firms are low credit risk compared to 64 percent of urban firms.

b. A smaller share of rural small employer firms experienced financial challenges in the prior 12 months: 55 percent of rural small employer firms compared to 62 percent of urban firms.

c. Rural small employer firms were more likely to indicate that they had sufficient financing: 51 percent of rural small employer firms compared to 45 percent of urban firms.

d. A larger share of rural small employer firms received the full amount of financing they were seeking: 51 percent of applicant rural firms compared to 38 percent of applicant urban firms.

3.    Small banks play a bigger role in rural areas.

a. Banks in rural areas are more likely to be small, and rural small employer firms are more likely to apply to a small bank than to a large bank.

b. Rural small employer firms’ ability to access credit is partially attributable to differences in firm characteristics and the share of small bank branches in a respondent’s zip code. Small banks comprise a relatively larger portion of the banking sector in rural areas. When the market concentrations of small banks in urban and rural zip codes are held constant, urban and rural small employer firms received similar shares of the amount they requested.

Thanks to the ABA for providing the summary of the report. Click here to read the Fed’s report.

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Credit union regulator to head to CFPB?

In case you missed it, the American Banker has reported in several editions that President Trump is considering J. Mark McWatters as a possible nominee to be the Director of the Consumer Financial Protection Bureau. McWatters is currently the Chairman of the National Credit Union Administration.

According to the Banker article, McWatters wrote to former CFPB Director and current candidate for Governor of Ohio, Richard Cordray asking that credit unions greater than $10 billion in total assets should be exempt from the Bureau’s oversight.

“As not-for-profit, consumer-owned and -controlled financial institutions,” literally deserve this exemption because credit unions’ “serve a unique, positive role for consumers . . .” which in his mind is better than “the role played by for-profit, investor-owned and -controlled financial institutions.”

What? 

Wake up America!   

  • “Not-for-Profit” in this instance is a TAX STATUS; it is NOT a way of doing business for Pete’s sake.
  • Credit unions are not eleemosynary institutions.
  • The only thing a credit union customer owns is his or her deposits!
    • That’s the only asset (the cash) a consumer can show on a financial statement.
    • The consumer/customer does not “own” anything that represents the customer’s share of the value of the credit union as a whole.
  • And what possible difference does it make if the institution’s customers vote on the make-up of the institution’s board of directors, or if the shareholders (i.e., the REAL owners of a financial institution) do it?

(Aside: credit unions laughingly call their customers “members.”  By doing so, they then claim that such a label somehow makes them different than just being a “customer.”)

  • “Membership” implies some sort of “exclusivity” one has that separates them from any other person on the street.
  • “Exclusivity” can hardly be said to include a “membership” that’s open to anyone who can literally breathe air.

Click here to read the article.

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Government Relations Council, OBA Board to meet

The Association’s Government Relations Council is scheduled to meet at noon on Tuesday, Jan. 23, to consider any and all matters that are to be considered by the Second Session of the state’s 56th Legislature beginning in February. That meeting will be followed by the OBA Board meeting the following day, Jan. 24.

“So far there doesn’t appear to be much on the Legislature’s agenda that will impact banks in a negative way,” said Adrian Beverage, OBA’s chief statehouse lobbyist. “We will review the bills as they come in to try and identify any bill that does have an impact on banking, and we’ll present those bills to the Council and the Board for direction as to what position the OBA should take.”

The Council will also consider and review the progress of federal bills that have been or will be introduced or considered in the Second Session of the 115th Congress.

“(Senate Majority) Leader (Mitch) McConnell has announced he plans to take up S. 2155, the regulatory relief bill for traditional banks, soon,” OBA President Roger Beverage said. “It’s just a bit delicate at this point, because the current language was about as far as the Senate Banking Committee could go in terms of crafting a bipartisan bill. Any changes may well upset the balance that’s been struck, and we would end up getting nothing again.

“The bill should pass, because it has 10 Democrat co-sponsors, and that should be sufficient,” Beverage said.  “But – and this is the potential problem – we must make certain that the Republican caucus (now 51 votes) hangs together. If it doesn’t, then we’re screwed.  Again.”

Any recommendations made by the Council will be presented to the Board of Directors the next day for any action the Board may decide to take with respect to legislative proposals.

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OBA education corner …

The calendar has flipped over to a new year – make your resolution to further your banking education during the next 12 months! You can start with the following:

  • Digital Marketing: Deep Dive, Jan. 9, webinar — This presentation will be a deep dive into digital marketing geared towards people who have responsibility over marketing initiatives.
  • Implementing Beneficial Owners on Legal Entities, Jan. 9, webinar — This program is designed to focus on business accounts and the opening procedures, changing ownership, implementing this process and all the questions it brings.
  • Incident Response: Plan to Fail Well, Jan. 10, webinar — Explore the importance of incorporating forensic analysis procedures into your standard procedures to better address emerging threats and decrease liability.
  • Cash Management: Generate More Fee Income, Jan. 10, webinar — During this two hour webinar, you will gain a more in-depth knowledge of cash management (aka treasury management) products and services.
  • Scrubbing and Submitting 2017 HMDA Data, Jan. 11, webinar — While the world of the Home Mortgage Disclosure Act (HMDA) is about to undergo major changes, creditors cannot afford to lose focus on the basic requirements of Regulation C that remain in effect until Jan. 1, 2018.
  • Opening Accounts for Nonresident Aliens, Jan. 11, webinar — Opening these accounts and covering the required documentation and identification bases makes dealing with these accounts more challenging than ever.
  • Loan Underwriting Mistakes, Jan. 16, webinar — This seminar focuses on common underwriting mistakes that can ultimately lead to problem loans and loan losses.
  • IRA Update & Review, Jan. 17, webinar — Participants will get the answers to timely questions (Ex. What are the legislative updates for 2018?) and many more common questions.
  • CRE Appraisals, Jan. 17, webinar — Fundamental principles and features and CRE appraisals are covered.
  • Online Deposit Accounting Opening, Jan. 18, webinar — We’ll examine the life cycle of this service from start to finish, and you’ll receive checklists and thoughts about how to begin offering this service or check your existing process.
  • Compliance Roundups 2018, Jan. 23-Oklahoma City; Jan. 25-Tulsa — The OBA’s annual compliance roundup seminars provide a comprehensive review of new bank compliance laws, amendments to existing laws and regulations, important court cases and common compliance mistakes.
  • 2018 Intermediate School, Session I: Feb. 5-9; Session II: June 4-8, Oklahoma City The school provides excellent training for bank leadership and management development. This school offers an intense curriculum that exposes participants to the overall banking functions.