The 13 banks based in Idaho earned $40 million in the first six months of 2018, according to data released by the FDIC Thursday. Net income for the period was up 54 percent over the same time in 2017. Loans grew by 11.3 percent to $4.29 billion, and deposits increased by 6.9 percent to $5.36 billion during the first half of the year. Net interest margin also improved to 4.37 percent, which is above the national average. For the quarter, the state’s banks earned $21 million, an increase of 58 percent over the second quarter 2017. “The performance numbers validate what we’re hearing from members that the economic conditions in general remain strong around the state, and that, in turn, leads to improved industrywide bank results,” said Trent Wright, IBA President and CEO. Family and business finances remain relatively stable as well, with the amount of noncurrent loans and loans charged off declining. Nine of 10 loans are being paid on time. Nationally, increased operating revenues and a lower effective tax rate helped industrywide earnings increase 25.1 percent for the quarter.
Glenn Martin, Regional Director
Promontory Interfinancial Network, LLC
A lesser-known provision of a new law just changed the market for deposits, and it could not have come at a better time for banks, especially community banks. The provision, which is part of the regulatory relief package for banks just signed by President Trump, provides that most reciprocal deposits are no longer treated as brokered. As a result, well-capitalized banks can now attract more large-dollar, local relationships and, in turn, have more cost-effective funding on hand to finance lending in their communities.
In recent months, U.S. banks have been bracing for increased competition for customer deposits. According to the Bank Executive Business Outlook Survey (2018, Q1) a record number of bank respondents (76 percent) reported facing more competition for deposits over the past year and almost 90 percent believe it is only going to get tougher.
Source: Bank Executive Business Outlook Survey 1st Quarter, 2018
In fact, the combination of rate hikes (more are expected later this year) and the Federal Reserve’s $1.5 trillion reduction of its balance sheet should continue to push deposit costs upward. With the Fed not reinvesting the principal proceeds from maturing securities, liquidity will be pulled from the markets and banking system, reversing the impact of the first and second Quantitative Easing. And banks are bracing themselves for more competition from the nation’s largest banks, as well as from non-traditional players that include the likes of fintech companies, Goldman Sachs’s Marcus, and the potential entry of Amazon.
Fortunately, the enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act should offer banks some relief. This important new law provides that most reciprocal deposits are no longer considered brokered deposits.
Reciprocal deposits are deposits that a bank receives through a deposit placement network in return for placing a matching amount of deposits at other network banks. Although there are a number of providers, the leading reciprocal deposit placement network in the United States is operated by Promontory Interfinancial Network, LLC, which invented reciprocal deposits and offers two of the nation’s largest reciprocal deposit placement services: Insured Cash Sweep®, or ICS®, and CDARS®.
The Economic Growth, Regulatory Relief, and Consumer Protection Act
This new law recognizes something that many in the banking sector have long understood –reciprocal deposits behave as core deposits in that they are “sticky” (CDARS deposits reinvest at a rate of approximately 80%, for example), and that the institution accepting the deposit maintains the relationship with the depositor.
Specifically, the law amends section 29 of the Federal Deposit Insurance Act so that, subject to the definitions, terms, and conditions of the Act as amended:
- If a bank is well capitalized and has a composite condition of outstanding or good (CAMELS 1 or 2), its reciprocal deposits up to the lesser of $5 billion or 20% of the bank’s total liabilities are no longer considered brokered. Reciprocal deposits over these amounts are allowed, but the incremental amount (overage) is treated as brokered.
- If a bank drops below well capitalized, the bank no longer requires a waiver from the FDIC to continue accepting reciprocal deposits, so long as the bank does not receive an amount of reciprocal deposits that causes its total reciprocal deposits to exceed a specified previous average. As before, interest rate restrictions apply while the bank is less than well capitalized.
Banks now have a much larger, approved source of stable deposits that can be tapped. This means banks can help even more customers—including businesses (large and small), nonprofits, municipal governments, financial advisers, and even individuals—to safeguard their funds, potentially at even higher levels. All at the same time attracting locally priced, large-dollar deposits, which can be used to reinvest in the bank’s community.
Furthermore, banks can use reciprocal deposits to replace more expensive deposits, like routinely collateralized deposits that come with tracking burdens, and those from listing services (generally associated with wholesale pricing and no loyal or local customer relationship).
Making the Most of This New Opportunity
Now is the time to act by taking advantage of this important change in banking law. Read more about the new law and about the nation’s largest, most well-known reciprocal deposit services by visiting promnetwork.com. For more information, contact Glenn Martin at firstname.lastname@example.org.
Alan S. Blinder
Vice Chairman and Co-Founder, Promontory Interfinancial Network
Professor of Economics and Public Affairs, Princeton University
Jay came, Jay saw, Jay conquered.
Well, maybe it wasn’t that hard a conquest, but Jerome (“Jay”) Powell’s first Federal Open Market Committee (FOMC) meeting as Chairman of the Federal Reserve has to be scored a success. He delivered the widely expected, 25 basis-point increase in the federal funds rate on a unanimous vote. Yes, it’s true that the FOMC is smaller (only eight voting members these days) and a lot less fractious than it used to be. The Committee’s hawks and doves are no longer very far apart. But still…
He and his fellow Committee members nudged the so-called “dot plot” up a bit, apparently without upsetting markets. The 15-member committee is now about evenly split between expecting (or is it favoring?) two or three more rate hikes of 25 basis points each this year, and a total of about six (150 bps) in 2018 and 2019 together. If that comes true, the funds rate will be in the 2.75-3.00 percent range by the end of next year, just about where the Committee sees the long-run “neutral” funds rate to be. But consistent with a belief that they’ll have some mild overshooting to combat, the FOMC also penciled in another 50 basis points of tightening in 2020.
The Committee bumped up its real GDP estimates for 2018 and 2019 by amounts that are broadly consistent with what the economic consensus—but not the Trump administration—says the new fiscal policies will do to growth. Perhaps more notably, members now project a considerable overshoot of full employment—with the unemployment rate trailing down to 3.6 percent against an estimated NAIRU of 4.5 percent. Yet they barely touched their inflation forecast. That’s a pretty flat Phillips curve.
Last, but certainly not least, Powell’s answers to questions at his first press conference were taciturn, and his words sufficiently well-chosen, that he didn’t make news—which is what Fed chairs generally want to do.
Register Now for the 2018 ABA Government Relations Summit and Bring Your Bank’s Emerging Leaders!
We’re looking forward to seeing you April 23-25 for the 2018 ABA Government Relations Summit in Washington, DC. The Summit presents a great opportunity for Idaho bankers to meet with our Congressional Delegation and representatives from the regulatory agencies to ensure they understand the principles that guide our industry, and incorporate them into policy. Idaho Bankers play a hugely important role in that Senator Crapo is the Senate Banking Chairman. The Idaho Community Bankers Association (ICBA) is pleased to provide at least two travel scholarships up to $750. Scholarships are redeemed through the ICBA following the GR Summit for travel-related expenses.
CLICK HERE TO REGISTER for the Summit and all ancillary events including the 4th annual Emerging Leaders Forum.
2018 Emerging Leaders Forum
The Emerging Leaders Forum is scheduled for Monday, April 23rd from 10:00 a.m. – 4:00 p.m. and will include lunch. It will continue to center on professional and leadership development and the importance of advocacy. Idaho attendees will have an opportunity to share their leadership challenges and network with peers from across the country at a reception following the Forum. There will also be additional events for attendees. Please continue to check the website for additional program elements and event details. In addition to the ICBA scholarship above, the ABA is pleased to provide at least two $750 Emerging Leader Forum scholarships for Idaho. Scholarships are redeemed through the ABA following the Emerging Leaders Forum/GR Summit for travel-related expenses.
2018 Women’s Leadership Forum
The Women’s Leadership Forum is scheduled for Wednesday, April 25th from 11:15 a.m. – 1:00 p.m. and will include lunch with the keynote speaker, Kristi Hedges, author and leadership coach. There will be an opening reception on Monday, April 23rd from 5:30 p.m. – 6:30 p.m.
Hotel Reservation Information
The Marriott Marquis Washington, DC is the conference hotel for the 2018 Government Relations Summit and Forums. ABA does not endorse other sources for making hotel reservations. Registration and Travel: Registration is still open and although the hotel cutoff is April 9th, the hotel is filling up quickly. Please make your reservations as soon as possible. The Marriott Marquis is sold out on Saturday and Sunday night, but there is still rooms available at the Renaissance Hotel, just across the street.
Reimbursements can be to either the bank or to your personally and are post event reimbursements. Hotel and flight costs should come in around $1800/$1900 depending our your flight options. Registration for the event itself is free and most meals are covered by the event or IBA.
The world of community and regional bank directors has certainly evolved over the last five years. While the economic downturn in 2009 triggered some changes, a good number of these were already underway. The role of bank directors has been evolving for years, but changes in the compensation structure for directors has shifted more gradually.
Setting the Stage
The first big shift for bank directors was focused around the level of engagement required. The days where a bank director simply showed up for a monthly meeting, listened to management, collected their fees, and vanished until the next meeting are long gone. Like many businesses, tough times required extra work and banking was not immune. Directors suddenly had to deal with things like TARP, poor company performance, management changes, etc. An increased understanding of banking, credits, regulation, and director liability became high priorities. Director expectations increased significantly and you were either up for the challenge or chose to end your tenure on the board. Unfortunately, what we didn’t see at this time was an increase in director compensation. Poor bank performance seemed to influence a general “flat line” in director compensation from 2009 – 2012. Therefore, directors were working harder and longer, but the resulting pay was not increasing.
The Shift Begins
We finally saw an increase in director compensation levels around 2012 and this trend has continued. Blanchard Consulting Group’s director compensation survey of 107 community banks (completed in early 2017) showed that 32% of banks increased director compensation in 2016 and 31% planned to increase director compensation in 2017. The median increase in total director compensation for 2016 was 16%, up from 10% in 2014. This clearly shows that director compensation has started to catch up to the increase in work-load and expertise required. In fact, 90% of our survey participants feel that they were fairly compensated for the time they spend on board activities.
The biggest movement in director compensation has come in the form of increased retainers and fees for committees and chair positions. An average community bank director’s total compensation levels now range from approximately $15,000 to $55,000 or more depending on the asset size and classification (public vs. private). The general philosophy surrounding director compensation focuses on paying directors appropriately for the time and expertise provided. Basing director compensation on bank performance is discouraged, because directors need to be focused on making the correct long-term decisions for the bank and shareholders. Short-sighted decisions focused on short-term performance are discouraged.
Why an Increased Emphasis on Retainers?
The shift in the type of director required to serve on the board has created a shift in the format of pay for directors. Instead of focusing on per meeting fees and requiring attendance to receive the fee, many boards have moved to paying a large portion of director compensation through retainers. The per meeting fees still exist, but the amounts generally range from $500 to $1,000 depending on the size of institution and other variables. Today, directors are expected to be engaged, put time in reviewing materials, receive outside education, and provide their insights even if they miss a meeting. As such, the emphasis has moved to paying an appropriate amount for board service as a whole. If you have the right directors, attendance/participation will not be an issue and each director will clearly “earn their keep”. Paying a retainer is much easier to administer and provides a clear link between the amount of pay that is provided for director service. Retainers are frequently provided in cash, but are also a great way to provide equity to directors. Equity grants (if used) are typically provided in the form of full-value shares (not stock options) with very short or immediate vesting provisions.
Committee and Chair Fees
The other big change in director compensation surrounds increased fees for service on committees and for chair positions. Once again, the reasoning for such changes is simple. Serving on the committee requires additional time and expertise and these directors deserve to be paid appropriately for this additional work. Chair positions add an extra expectation and expertise, so they should receive a “bump up” in pay as well. The Blanchard Consulting survey found that committee fees range from $200 to $600 per meeting depending on size of institution and the type of committee. The additional chair fees vary by asset size and type of committee, but generally fall in the range of $2,000 to $3,000.
Summary and What’s Next?
Bank director compensation is far from rocket science. At the end of the day, a bank needs to determine a fair total compensation level for directors and structure the pay program accordingly. Whether you pay via retainers, equity grants, per meeting fees, chair fees, etc. doesn’t matter. Just be sure you model out projections (per director and in total) and differentiate each director’s compensation based on work-load and expertise required. Market data is available via the Blanchard Consulting Group (BCG) Director Compensation survey and other industry sources. Our firm can help your bank analyze the data and determine where to position the board of directors’ compensation package in order to meet the goals of the bank and shareholders.
By Kristen Kostner, Senior Compensation Consultant, Blanchard Consulting Group. Kristen can be reached at (314) 394-3374 or email@example.com.
About the Firm: Blanchard Consulting Group is a national compensation consulting firm with offices in Atlanta, GA; Minneapolis, MN, and St. Louis MO. Our mission is to deliver independent compensation guidance to community and regional banks to help them attract, motivate, and retain key employees and directors. With an exclusive focus on the banking marketplace since 2000, our lead consultants have a unique industry perspective and expertise to offer our clients. We work directly with Board of Directors, Executive Management, and Human Resource departments on all facets of director, executive, and staff compensation programs. More information can be found at www.blanchardc.com.
We, at Redhawk Network Security, are excited to be part of this thriving organization!
Based in Bend, Oregon, we are an information security, network infrastructure, and managed security services provider. What does this mean? When it comes to cybersecurity, we integrate, assess, build, manage, discover, design, deploy, detect, and respond. But mostly, we care. We care about your security needs. We want to help you.
We are trusted experts in information security, threat detection, and regulatory issues facing financial organizations. For more than 15 years, we have been working hand-in-hand with banks and credit unions of all sizes to develop their security infrastructures and programs to secure their assets, brands, and reputation.
Let’s face it. In our evolving threat landscape, a strong security foundation is critical. The banking industry is under attack. Security threats—malware, phishing, ransomware, even lost laptops and aging computers—can put your organization and your customers’ sensitive information at risk for being breached.
Security has grown up. It’s no longer simply installing anti-virus software and hiding your network behind a firewall. Consider this. You may not have the security expertise on staff and may need help. You need a partner you can trust—an extension of your team—with extensive security expertise, best-of-breed tools, and industry certifications. You need a partner who can see your blind spots and security holes, a partner that will work to ensure that security is interwoven throughout your entire organization. We not only have backgrounds in security and engineering, but several of us are former bankers. We know regulated industries inside and out.
At Redhawk Network Security, we offer risk assessments, managed security services, including managed threat detection and response services, security training, and network infrastructure services. We can help you with a project or we can conduct full-service, around-the-clock management of your network activity. We can build and upgrade your network and ensure that it’s monitored continuously for threats including Security Information and Event Management (SIEM) managed services. We are available and on alert 24x7x365.
We look forward to chatting.
Kerri Fry, president, Redhawk Network Security
|Early Bird Registration & Hotel Room Discount End TODAY!
Idaho Community Bankers Association
MANAGEMENT & DIRECTORS’ LEADERSHIP CONFERENCE
The ICBA Management & Directors’ Leadership Conference is scheduled to be held on January 29-30, 2018 at the Grove Hotel in Boise, Idaho. This event is tailored to bank management and directors, as well as emerging bank leaders. We encourage you to forward this announcement to your directors! In addition to great speakers presenting on the latest community banking hot topics, the conference will provide the opportunity to attend the popular Legislative Reception and Dinner which will offer outstanding entertainment and a chance to visit with your legislative representatives.
Idaho Community Bankers Association
250 families and individuals will benefit from the funds
(Des Moines, Iowa) – This holiday season, 250 Idaho families will receive the gift of affordable housing, thanks to a collaborative effort between community housing providers, financial institutions and the Federal Home Loan Bank of Des Moines (FHLB Des Moines or the Bank).
FHLB Des Moines recently awarded $1 million in grants from its Competitive Affordable Housing Program to provide housing for low-income families, seniors, persons with disabilities, homeless and at-risk youth in the state of Idaho. The Bank also contributed over $1.1 million throughout the year to assist Idaho families with down payment and closing cost expenses.
“FHLB Des Moines is honored to provide the opportunity for families in the state of Idaho to have a home,” said Mike Wilson, President and CEO of FHLB Des Moines. “We believe each and every individual should have access to safe and affordable housing. These projects inspire us every day to continue our mission of providing funding to lenders so the needs of communities are met.”
Every year, FHLB Des Moines returns 10 percent of its net income throughout communities in its district, consisting of 13 states and three U.S. Pacific territories.
The Competitive Affordable Housing Program encourages partnerships between FHLB Des Moines member institutions and local housing providers to construct new and restore existing homes to ensure housing for the community. Beyond housing, the program works to generate jobs by employing local businesses to complete projects. In 2017, the Bank awarded $44.5 million in Competitive Affordable Housing Program grants to fund housing for 2,636 families across the district.
FHLB Des Moines also offers down payment and closing cost assistance through its Home$tart®, Home$tart Plus and Native American Homeownership Initiative programs to help families realize their dream of homeownership. The Bank distributed $15.2 million in down payment funding in 2017 to support 2,100 families with the purchase of a home.
For a complete listing of 2017 Competitive Affordable Housing program grant recipients, please visit the FHLB Des Moines website. For more information, contact the Bank’s Community Investment Department by calling 800.544.3452, ext. 1173.
# # #
The Federal Home Loan Bank of Des Moines is a member-owned cooperative that provides funding solutions and liquidity to nearly 1,500 financial institutions to support mortgage lending, economic development and affordable housing in their communities. Serving 13 states and three U.S. Pacific territories, FHLB Des Moines is one of 11 regional Banks that make up the Federal Home Loan Bank System. Members include community and commercial banks, credit unions, insurance companies, thrifts and community development financial institutions. The Des Moines Bank is wholly owned by its members and receives no taxpayer funding. For additional information about FHLB Des Moines, please visit www.fhlbdm.com.
Marketing Communications Strategist
Author: Sarah Sauceda
This past year has shaped up to be quite a ride but buckle up—2018 is fast approaching.
Highlights for 2018 include: (1) Home Mortgage Disclosure Act (HMDA) changes; (2) amendments to the Equal Credit Opportunity Act (ECOA); (3) an increased Truth-in-Lending (TIL) threshold; (4) Community Reinvestment Act (CRA) amendments; and (5) “sunset” provisions.
The time has come for the long-awaited changes affecting HMDA to hit the banking world with a bang. HMDA – version 2018 – includes changes relating to institutional and transactional coverage and data collection, recording, reporting, and disclosure.
As for institutional coverage, HMDA 2018 adopts a uniform loan-volume threshold for all institutions. This means that starting January 1, 2018, an institution will be subject to HMDA if it originated 25 or more covered closed-end mortgage loans in each of the preceding calendar years, or if it originated 100 or more covered open-end lines of credit in each of the past two years. Of course, the institutions making these loans also need to meet other applicable coverage requirements to be subject to HMDA.
As for the amendments to transactional coverage, HMDA 2018 modifies the types of transactions that are covered. Basically, the new version of HMDA adopts a dwelling-secured standard. As of January 1, 2018, covered loans will include both closed-end mortgage loans and open-end lines of credit secured by a dwelling. Another major change to this portion of HMDA concerns business-purpose loans. Starting January 1, 2018, dwelling-secured, business-purpose loans and lines of credit will constitute covered loans if they are home purchase loans, home improvement loans, or refinancings.
One other slightly understated change has to do with preapprovals. Under the new rule, covered institutions will be required to collect, record, and report information for approved but not accepted preapproval requests for home purchase loans. In contrast, preapproval requests for open-end lines of credit, home purchase loans to be secured by multifamily dwellings, and reverse mortgages will not be covered under HMDA.
Lastly and as most of you know, reportable data under HMDA has received a bit of a makeover. HMDA 2018 adds a few extra data points. These new data points include: (a) applicant/borrower age, (b) credit score, (c) automated underwriting system information, (d) unique loan identifier, (e) property value, (f) application channel, (g) borrower-paid origination charges, (h) points and fees, (i) lender credits, (j) discount points, (k) loan term, (l) prepayment penalty, (m) non-amortizing loan features, (n) interest rate, and (o) loan originator identifier as well as other data points.
Again, the effective date for these changes is January 1, 2018. Be sure to remember that, although the HMDA 2018 is upon us, you will still need to submit data collected in 2017 under the current rule with the slight change of submitting the 2017 data to the CFPB instead of the Federal Reserve Board.
The updates to HMDA can be found here: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_final-rule_home-mortgage-disclosure_regulation-c.pdf
Because the regulators know that changing one major regulation isn’t enough fun, they have also changed ECOA. ECOA’s current ethnicity and race information collection are updated in the 2018 version of the regulation. Additionally, the amendments add certain model forms and remove others. Thankfully the changes to HMDA and ECOA go hand-in-hand, as the purpose of the amendments to ECOA is to facilitate compliance with HMDA version 2018. Note that all these changes to ECOA come into effect on January 1, 2018 with the exception of the amendment that removes the Uniform Residential Loan Application. This particular amendment becomes effective on January 1, 2022.
The final ECOA rule can be found here: http://files.consumerfinance.gov/f/documents/201709_cfpb_final-rule_regulation-b.pdf
It didn’t happen for 2016…It didn’t happen 2017…but the time you have anxiously been awaiting…has finally arrived! The TIL exemption threshold has been adjusted. The exemption threshold will increase from $54,600 to $55,800, effective January 1, 2018.
The rule updating the threshold can be found here: https://www.federalregister.gov/documents/2017/11/09/2017-24445/truth-in-lending-regulation-z
The regulators are at it again and are making more changes—this time to the CRA. Once again, these changes are aimed at helping banks transition to the new version of HMDA. The new rule updates the definitions of “home mortgage loan” and “consumer loan,” and the public file content requirements to conform HMDA 2018. The amendments also cleanup the CRA by removing now obsolete references to the Neighborhood Stabilization Program. The comments closed on October 20, 2017, and the final rule becomes effective on January 1, 2018.
The updates to the CRA may be found here: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170913a1.pdf
Finally: When I think of sunsets, I picture beaches, long walks, and OF COURSE regulations that are up for renewal. (This is normal, right?) This last topic concerns the regulations that are set to expire in the near future. These are often referred to as “sunset” provisions because the regulatory sun is quickly setting on them. Some of the major sunset provisions include: sections 531 (maximum rent) and 533 (foreclosure) of the Servicemembers Civil Relief Act (SCRA); the U.S. Department of Housing and Urban Development (HUD) SCRA notice; the National Flood Insurance Program (NFIP); and the Federal Home Loan Mortgage Corporation loan limit of $424,100. These provisions are all set to expire at the very end of 2017, with the exception of the NFIP. NFIP authorization was set to expire on December 8, 2017, but received a two-week extension by Congress (currently set to expire on December 22, 2017). As of now, none of the provisions have been extended past 2017. So, be sure to keep an eye on these regulations towards the end of the year.
In conclusion, there are a great many changes in store for 2018, but if you are prepared, you should be able to handle them with ease and confidence.
For any questions or concerns, feel free to give us a call at (888) 353-3933, chat with us on the website (https://www.compliancealliance.com), or email us at firstname.lastname@example.org