In This Issue…
• Greetings from Guy
• ABA shares preliminary analysis of tax reform
• Fed report on rural employer firms confirms importance of small banks
• Credit union regulator to head CFPB?
• Government Relations Council, OBA board to meet
• OBA Bankers’ Night Out programs ready for spring
• Register for OBA’s 2018 Contact Banker Program
• OBA education corner …
Greetings from Guy
By Guy Sims
We have kicked off 2018 with a bang at the OBA. The education calendar is full for the next several months with outstanding webinars and seminars for all levels of bankers.
The Intermediate Banking School begins Feb. 5. This is an excellent school to broaden the perspective of a young banker in your organization. The Commercial Lending School is scheduled to begin March 4, which provides another outstanding opportunity for younger lenders to gain valuable technical expertise.
The Community Bankers Leadership and Senior Management Conference is scheduled for April 8-10 at the Four Seasons Hotel in Las Vegas. Janis has assembled an outstanding group of speakers for this conference. For the golfers, we will be playing two outstanding mountain courses at the Revere Golf Club in Henderson, Nevada.
The Bankers’ Night Out series will begin in Krebs (Pete’s Place) on Tuesday, March 13, followed by the BNO in Lawton on Thursday, March 15. Four more are set across the state. Here’s the complete schedule:
• Tuesday, March 13 — Krebs; Thursday, March 15 — Lawton.
• Tuesday, March 27 — Enid; Wednesday, March 28 — Oklahoma City.
• Tuesday, April 3 — Tulsa; Thursday, April 19 — Guymon.
These Bankers’ Night Out programs provide great information for bankers at all levels, and I encourage each of you to come and visit with us and bring your younger bankers so they can see what industry advocacy looks like.
We end the OBA’s fiscal year with our 2018 Leadership Forum and Annual Convention to be held in Tulsa, May 21-23 at the Hard Rock Café. I encourage you to take advantage of the outstanding educational and networking opportunities over the next several months. I’m confident it will be time well spent.
We’ve had several questions come up about the impact of the tax reform bill signed into law on Dec. 22, and how to account for deferred taxes. Accounting Standards Codification (ASC) Topic 740 (Income Taxes) provides guidance about what to do when income tax rates change. Here’s what ABA tells us:
- ASC 740-10-25-47 says the effect of a change in tax laws or rates is to be recognized as of the date of enactment.
- ASC 740-10-35-4 says deferred tax liabilities and assets must be adjusted for the effect of a change in tax laws or rates. Importantly, any change in the tax laws or rates may also require a reevaluation of a valuation allowance for deferred tax assets.
- The law was signed on Dec. 22. That means deferred tax assets (DTAs) and deferred tax liabilities (DTLs) are accounted for in 2017 financial statements to reflect the new rates.
- In addition to DTAs/DTLs, tax credit/benefit investments will need revaluation as of year-end, because changes to DTAs/DTLs in AOCI are also recorded through net income.
- ABA expects FASB to propose a change that reclassifies the deferred tax adjustment from retained earnings to AOCI. Therefore, while net income will continue to be impacted, the remaining DTAs/DTLs in AOCI should be back to the expected amount after the revaluation.
- Other possible FASB projects on tax reform include:
a. Classification of AMT tax loss carryforwards (DTA or income tax receivable?);
b. Certain international tax issues.
Tax Reform Capital Realities: The elimination of loss carrybacks will have implications for your bank’s capital:
- Ten percent/15 percent DTA limitations may cause an immediate charge;
- The 25-percent limitation proposed by regulators may alleviate the impact on capital sensitive items such as MSAs;
- When tax rates are lowered by Congress, that result increases risk weighting for capital requirements because of higher net MSA;
- In stress-testing scenarios, both the carryback and DTA/DTL issues will likely be present for all banks. This could provide a significant change in approach to capital calculations and related capital plans.
Thanks to ABA for all of the work involved in their analyses!
As of Jan. 4, 2018 – (This is a preliminary analysis of the tax reform bills and could change, based on the final law, further ABA analysis, and any regulatory action).
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, 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. You can click here to read the Fed’s report.
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; they must make a profit in order to stay in business;
- 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.” What they don’t say, and which makes this claim ridiculous, is this:
- “membership” implies some sort of “exclusivity,” that the “member” has that separates him or her from any other person on the street. It is not an open invitation to anyone who happens by to come on in and “join” this “exclusive” full-service bank.
- “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.
The Association’s Government Relations Council is scheduled to meet at Noon on Tuesday, Jan. 23, to consider any 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 OBA’s chief statehouse lobbyist, Adrian Beverage. “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,” said OBA President and CEO Roger Beverage. “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. 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 OBA Board of Directors the next day for any action the board may decide to take with respect to legislative proposals.
The dates for the OBA Bankers’ Night Out programs have been finalized. Mark your calendar for the date of the program that’s in your area of the state and plan to attend. Bring your coworkers with you so that everyone can be up to speed on the most recent developments affecting their job.
As in the past, the schedule for each of these meetings is:
5:30 p.m. – Drinks
6:15 p.m. – Program
7 p.m. – Dinner
PRE-REGISTRATION IS REQUIRED. The cost is $40 per person. Click here for a registration form.
Locations and dates for this year’s events are:
- Krebs, March 13.
- Lawton, March 15.
- Enid, March 27.
- Oklahoma City, March 28.
- Tulsa, April 3.
- Guymon, April 19.
We have set the dates for the 2018 Contact Banker Program. Many of you are seasoned veterans of the program and we look forward to seeing you again this upcoming year.
Click here to find a sign-up form that has all the dates listed for this year’s program. We ask that you look and see what dates work best for you and send it back to me. Once we have the groups finalized, we will send you an email confirmation of your date.
On the date you have selected, we will meet at the Capitol around 8:30 a.m., with groups usually consisting of 10-15 bankers. Once the group has arrived, we will have a short briefing about the issues we are tracking and what our plan is for the morning. Please know, we will stay together as a group the entire morning. We will go and meet with your individual senator and representative and you will have a few minutes to chat with them about anything you want. Depending on what week you select, the group will sit in on a committee meeting or we will sit in the gallery of both chambers and watch action on the floor. We try to finish our business about 11:30 a.m. – afterward, the OBA will take everyone to lunch to discuss the events of the morning. There is no charge to attend; the only cost is your time.
This is our 18th year to have this program and it gets more popular every year. All legislators know that on Tuesday’s there will be bankers at the Capitol and we always have legislators asking when their bankers are going to visit. The fact legislators know bankers are involved in the process and watching what they do is very valuable to your industry.
Many of you are probably thinking you haven’t been to the Capitol since you were in elementary school. This is the perfect opportunity to come back and see all the changes. We encourage you to sign up and bring as many employees as you would like.
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:
- 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.
- Health Savings Accounts, Jan. 23, webinar — This two-hour, extremely informative webinar will give you the information you need to make sure you are setting the accounts up correctly and performing the proper maintenance and reporting.
- Smart Social Media, Jan. 25, webinar — One simple post can destroy years of building trust and goodwill!
- Credit Analysis Basics, Jan. 31-Tulsa; Feb. 1-Oklahoma City — Review the basics of loan structure,
loan support, documentation and loan compliance.
- 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.
- 2018 CFO & Financial Officers Conference, Feb. 15, Oklahoma City — This conference is specifically designed to provide strategic insights and critical industry updates you need to lead your bank to success. Our impressive line-up of national experts will provide presentations on regulatory changes, interest rate risk, capital planning, and other relevant topics.
One education program, in particular, to be aware of is the OBA Intern Program. The Intern Program will again be active in 2018 and we’re looking for participating banks! For more information on this IMPORTANT program – important not only to aspiring students, but also to participating banks – Click here for more information or contact the OBA education department at (405) 424-5252!
Additionally, GSB-Madison will be holding its 2018 Human Resource Management School on April 15-18. Expand your knowledge of banking, human resource management and employee performance at this respected school—and establish a network of colleagues to exchange ideas for years to come. Topics are timely and relevant. Click here for more information! The GSB will also host its 2018 Bank Technology Management School on April 8-13. This state-of-the-art program will broaden your understanding of the business of banking and information technology management, improve your productivity and value at your bank. Click here for more info.
Speaking of the GSB-Wisconsin Human Resource Management School, it has a scholarship available for prospective students from Oklahoma banks. There are also several other scholarships available for other banking schools:
Also, several scholarships are now available to bankers from OBA-member banks for various graduate schools of banking. Applications should be submitted to the OBA’s Janis Reeser by email (firstname.lastname@example.org), regular mail (643 N.E. 41st St., OKC, 73105) or fax (405-424-4518). The scholarship recipients will be selected and announced no later than April 20.
Click on each link for more specific information about each scholarship: