Saturday, September 21, 2019

Week of July 1

In This Issue…

H.R. 3182, S. 1564 introduced to study CECL impact

For some time now, we’ve been focused on understanding the proposed Current Expected Credit Loss proposal that’s being pushed by the Financial Accounting Standard Board.

We believe this proposal – brought to you by the “one-size-fits-all” believers at the national regulatory agencies – poses significant operational challenges for the banking industry generally, and for community banks in particular.

We’ve explained to members of the Oklahoma delegation that CECL will change the way all banks account for credit and loan losses. Bank directors will be asked to approve a loan request at origination which they believe will not be repaid in full, thus asking the Board to violate its fiduciary responsibility.

“I’m not very good at forecasting future rate issues,” OBA President and CEO Roger Beverage said. “I doubt many bankers are. But this new standard requires you to do just that: forecast the economic future of your community and assess potential losses over a loan’s lifetime.

“Not only will this new and complicated standard require a dramatic and immediate increase to your bank’s loan loss reserves, it will also be quite costly and challenging from a compliance perspective. Overall, it will fundamentally change the economics and methodologies of basic banking processes, and especially in lending. These changes are very likely to change credit availability, product mix and cost of credit, particularly for consumers and small businesses.”

Dramatic changes to bank accounting standards such as this should be studied and analyzed – before implementation – to fully understand the implications and impact it will have on the availability of credit in our communities. Fortunately, some in the U.S. Senate and House understand and have introduced legislation (S. 1564/ H.R. 3182) that would delay implementation of FASB’s CECL standard until regulators can properly assess the effect this new standard will have on financial institutions, their customers and the broader economy.

These two bills will delay the actual implementation deadlines for CECL until its full effects can be assessed and mitigated. Please ask Sen. Inhofe and Sen. Lankford to co-sponsor S. 1564. In addition, please ask your congressman to co-sponsor H.R. 3182.

Here’s the contact information for each of our delegation members:

Senator Jim Inhofe (R)                               Senator James Lankford (R)
Main Phone: 202-224-4721                       Phone: 202-224-5754
Banking LA: Jake Hinch                            Banking LA: Jesse Mahan
Jake_Hinch@inhofe.senate.gov               jesse_mahan@lankford.senate.gov

Rep. Rep. Kevin Hern (R)                          Rep. Markwayne Mullin (R)
Phone: 202-225-2211                                  Phone: 202-225-2701
Banking LA: Mike Martin                          Banking LA: Matthew Brownlee
Michael.Martin@mail.house.gov             Matthew.Brownlee@mail.house.gov

Rep. Frank Lucas (R)                                  Rep. Tom Cole (R)
Phone: 202-225-5565                                 Phone: 202-225-6165
Banking LA: Mitchell Wilkinson              Banking LA: Shane Hand
mitchell.wilkinson@mail.house.gov       shane.hand@mail.house.gov

Rep. Kendra Horn (D)
Phone: 202-225-2132
Banking LA: Charlie Chamness
Charlie.Chamness@mail.house.gov

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OBA past president passes over weekend

With sadness in our hearts, we received news this morning that one of the Association’s past presidents died over the weekend. Homer Paul, who had retired from banking several years ago, apparently fell at his home in Oklahoma City and struck his head on a hard surface.

“I don’t have any more information about this tragic incident at this point,” OBA President and CEO Roger Beverage said. “Homer was a great friend of mine, and served this industry effectively from 1980-81 as its president (now chairman). He was responsible for bringing Bob Harris to the OBA and Bob ran the Association from 1980-1988, when he moved to Austin to serve as president of the Texas Bankers Association. Bob died 10 years later.

“Our hearts go out to Homer’s family as we offer prayers of support and caring,” Beverage said. “As soon as more details are known, I’ll make certain we get the information out to the membership.”

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Bankers at the Brewery event scheduled in August

Join us from 4:30 to 6:30 p.m. (come & go) on Tuesday, Aug. 6, and enjoy beers and time with your banking peers at the Enid Brewing Company. The brewery is typically closed on Tuesdays, but they are opening their doors specifically for us.

Bankers at the Brewery will provide a unique atmosphere to meet fellow banking leaders. The first round is on the OBA!

Enid Brewing Company
126 S Independence Ave
Enid, OK 73701

Email megan@oba.com to let us know you’re coming, or click here to register!

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Deadline approaching to take Compensation Survey

The OBA is partnering with Blanchard Consulting Group to offer the 2019 Salary and Cash Compensation Survey, with specific reporting on Oklahoma banks.

This survey focuses on gathering salary and cash compensation (salary plus annual cash incentive/bonus) data for approximately 20 executive positions and over 100 middle management and staff level positions. In addition, the survey provides information on actual bonuses paid (as a percent of salary) as well as the earning opportunity level positions eligible to earn under a performance-based cash incentive plan. Under this new format, position descriptions for lending include guidelines related to portfolio size to better clarify the classification and, ultimately, utilization of report data.

This data can be used by human resource professionals to assist in assessing the competitiveness of base salary for most positions in your bank, developing or managing salary grades, and making salary increase decisions. In addition, this survey provides information on the amount of annual cash incentive/bonus amounts paid to all positions throughout the bank. Data cuts will be broken out by asset size and region (coast, non-coast and Oklahoma) when we have a large enough sample size.

Below is the pricing for the 2019 Salary and Cash Compensation Survey results (survey findings will be provided via email in PDF format):

  • OBA Member & Participant: $300.
  • OBA Member & Non-Participant: $600.
  • Non-OBA Member & Non-Participant: $800.

To complete the survey, please click on the link below. Download the excel file and email the completed survey to surveys@blanchardc.com by July 5. 

2019 Salary and Cash Compensation Survey Link (OK)

If you would like to pre-order your copy of the survey or if you have any survey questions, please contact Laura Roth at surveys@blanchardc.com or 612-886-1225.

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Answer leadership’s call: OBA Emerging Leaders Academy accepting applications

Take note the OBA 2019-20 Emerging Leaders Academy is currently accepting applications.

We’re looking for the best and brightest bankers who seek to sharpen their leadership skills. The Academy will help you reach new heights with powerful speakers offering information leaders need for effectively maneuvering in today’s business climate. Each session helps participants become true leaders by understanding those around you through non-traditional methods.

The OBA extends an invitation to any employee of a bank that is a member of the OBA to apply. A panel of bankers will review the applicants and choose those accepted into the Academy. Participants must attend all sessions to successfully graduate from the program.

There are six sessions to the Academy: Oct. 4, Nov. 15, Dec. 12, Jan. 10, Feb. 25, March 27. Graduation will take place on May 19, 2020, at the OBA Annual Convention in Tulsa.

Click here for more information or to apply! For more information, please contact Megan McGuire at (405) 424-5252 or megan@oba.com.

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Report: Credit unions do little to serve those of ‘modest means’

We reported last week about the results of a study by Karen Shaw Petrou from Federal Financial Analytics that found credit unions are not meeting their statutory mission of serving individuals of “modest means.”

The study also confirmed that credit union members are disproportionately from middle- and upper-income households.

The report also notes that credit unions’ lack of “mission compliance” deepens economic inequality in the United States. Some of Karen Shaw Petrou’s other findings included the following points:

  • NCUA imposes no mission-related requirements on any credit union: Credit union regulation is often premised on profit maximization, not mission compliance. The regulatory framework does not focus on the “small means” mission.
  • The federal credit union regulatory agency NCUA has redesigned the credit-union business model into one often indistinguishable from banks, without the comparable CRA requirements or a duty to serve low- and moderate-income households.
  • Credit unions are not fulfilling their mission absent regulatory imperatives:  Credit unions appear to lend disproportionately to higher-income households and to deny a greater proportion of African-American borrowers than whites of comparable risk profiles.
  • NCUA regulation is substandard:  NCUA capital requirements and other safety-and-soundness rules are considerably more relaxed than those applicable to banks and require significant revision.
  • Similarities to S&L industry: In today’s reality, the credit union industry is similar to the 1980s savings & loan crisis. Credit unions are enabled by a captive regulator.  Credit union promotion of “toy loans” (e.g., private aircraft), wealth-management services, and multi-million-dollar commercial real estate loans not only furthers economic inequality, but also poses safety-and-soundness risks.
  • Credit union acquisitions of banks tell a story of how the marketplace and regulatory environment has moved: Recently there has been a large number of smaller community banks that have been acquired by credit unions. These acquisitions do a lot of things, but one of the most obvious conclusion one can draw by watching these transactions conclude is that the prior mission differentiation between banks and credit unions is now immaterial.

We believe it’s clear from the report that credit unions are not using their tax subsidy to benefit consumers significantly or serve those of “small means.” We also believe policymakers must examine the credit union tax exemption, particularly when so many large, bank-like credit unions have strayed from their mission.

Click here to read the report.

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OBA education corner …

Summer is officially here and for those of us who spend any amount of time outside, it’s easy to believe! Take advantage of the following OBA education opportunities and stay inside where its cool!

Take note of the following events:

  • Executive Total Compensation – Strategies to Motivate and Incent, July 10, webinar — This will focus on the primary elements of the executive total compensation package and how these elements can be utilized to motivate and incentivize members of the senior leadership team to effectively achieve the bank’s strategic goals.
  • Best-Ever Compliance Checklists for Consumer Loans, July 10, webinar — The colorful and easy-to-use checklists are designed to chronologically lead lenders and processors through the various compliance requirements, and financial institutions that properly use these checklists will virtually eliminate compliance errors.
  • Lending to Local Government Units, July 11, webinar — Learn the major credit factors to examine to predict the repayment capability of a municipality or other governmental unit.
  • UDAAP: An Acronym You NEED to Know!, July 12, webinar — Because UDAAP risk is present at every level of the organization, almost any financial institution employee would benefit from attending this webinar (including new accounts representatives, loan officers, managers, etc.)
  • ATM Jackpotting and Unlimited Operations, July 15, webinar — In this session, we will explain the differences between ATM jackpotting and ATM unlimited operation.
  • Dealing with Subpoenas, Summonses, Garnishments, Tax Levies, Etc., July 16, webinar — If you find these documents confusing and intimidating, attend this multi-state seminar to learn the best practices of how to deal effectively with these documents and the parties who serve them upon you.
  • New BSA Officer Training, July 16, webinar — You have been appointed the new bank secrecy officer for your bank. You now feel like a deer caught in the headlights: what to do, where to start, who can help?
  • Implementing the Revised Uniform Residential Mortgage Loan Application, July 17, webinar — Find out more about regulatory requirements (Regulations B and C and OCC Part 27) for collection of demographic data.
  • 10 Overdraft Privilege Hotspots Regulations, Lawsuits & Guidance, July 23, webinar — It’s 2019 and your examiners are due at your financial institution next month. Will your bank pass the test?
  • 2019 OBA Compliance School, Aug. 19-23, Oklahoma City — This school is designed for those directly involved in the day-to-day compliance function as well as those who are involved in specific areas. Compliance officers, auditors, bank counsel, loan officers, cashiers and bank trainers will benefit from the course.

Finally, save the date and plan ahead now! The dates and site for the 2020 OBA Convention are set! The Convention will take place May 18-20 at the Doubletree-Warren Place in Tulsa. Keep an eye out in the upcoming months for more information!

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