Week of Oct. 16

October 16, 2018

In This Issue…

• Banker comments still needed
• Agencies propose amendments to regulatory capital treatment for HVCRE exposures
• StoneCastle seeking immediate opportunity to invest in community bank subordinated debt
• Bankers invited to Mix & Mingles with OSCPA
• OBA education corner …

Banker comments still needed

We have a real chance to make a difference with respect to CRA reform. But, to do that, we need your help.

The idea behind the Community Reinvestment Act was to encourage banks to help meet the credit needs of the communities that they serve, including low-to-moderate-income neighborhoods. Meeting those needs, however, must be consistent with safety and soundness of the bank’s overall operation.

Unfortunately, the burden of proof is on the bank. Banks have a continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered. This remains true today in spite of the consolidation in the industry as well as technological advances that have been brought to this space.

Even though the proposal is coming from the OCC, both the Fed and the FDIC are participating in the process of revising the Act. All of these agencies want more specific information about how banks can encourage more local and nationwide community and economic development —”and thus promote economic opportunity” — by encouraging banks to lend more to LMI areas, small businesses and other communities in need of financial services. What are the roadblocks? How can they be improved?

This Advance Notice of Proposed Rulemaking is a bit different than most of them. None of the national banking trade groups (ICBA, ABA, CBA) are, and no state bankers associations are, planning to submit a “normal” comment or propose anything that fill fix everything, like get rid of the Act altogether.

Instead the ANPR asks a series of questions which allows you to tell your bank’s story. For example, here are the first six (6) questions:

Are the current CRA regulations clear and easy to understand?
Are the current CRA regulations applied consistently?
Is the current CRA rating system objective, fair and transparent?
Two goals of the CRA are to help banks effectively serve the convenience and needs of their entire communities and to encourage banks to lend, invest, and provide services to LMI neighborhoods. Does the current regulatory framework support these goals in light of how banks and consumers now engage in the business of banking?
With the statutory purpose of the CRA in mind, what aspects of the current regulatory framework are most successful in achieving that purpose?
If the current regulatory framework is changed, what features and aspects of the current framework should be retained?

There are 31 specific questions contained in the ANPR. At each of our Bankers Night Out regional programs, OBA Chairperson Sandy Werner has been emphasizing the importance of taking one or two of these questions and tell your story about what changes or tweaks would help you and your bank do a better job. Give some specific examples.

Importantly, if you don’t feel comfortable providing specifics and, thus, potentially increasing your bank’s profile, just send your stories to Roger Beverage – roger@oba.com – and he’ll report those specifics and report your story to the OCC without specifically identifying you or your bank!

Comments are due Monday, Nov. 19.

Agencies propose amendments to regulatory capital treatment for HVCRE exposures

Federal banking regulators (the Fed, FDIC and OCC) are proposing to amend the regulatory capital rule to revise the definition of “high volatility commercial real estate (HVCRE) exposure.” This amendment is intended to conform to the statutory definition of “high volatility commercial real estate acquisition, development or construction loan,” in accordance with section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155).

In addition, the federal agencies want to facilitate the consistent application of the revised HVCRE exposure definition. In an effort to do so, the agencies propose to interpret certain terms in the revised HVCRE exposure definition generally consistent with their usage in other relevant regulations or the instructions to the Call Report, where applicable. The agencies are also requesting comment on whether any other terms in the revised definition would require interpretation.

Comments are due 11/27/2018.

The notice may be viewed at: https://www.gpo.gov/fdsys/pkg/FR-2018-09-28/pdf/2018-20875.pdf. Federal Register, Vol. 83, No. 189, 09/28/2018, 48990-49001.

StoneCastle seeking immediate opportunity to invest in community bank subordinated debt

Our partners at StoneCastle Financial/Premier Capital successfully closed the Community Funding CLO, Ltd. on Oct. 15, 2015. This process led to the funding of 35 community banks with $250 million of capital.

StoneCastle is continuing to leverage its 13-year experience as an investor to reduce banks’ cost of capital. As an endorsed partner of the OBA, StoneCastle seeks to provide another 35 banks the opportunity to access capital at advantageous levels previously available only to larger banks.

Here are the details:

Instrument	Tier 2 capital qualifying subordinated loan, 10-year maturity
Amounts	Between $2.0 and $12.5 million per borrower
Target Closing	Summer 2018
Coupon	Fixed for life, 6.75% – 6.99%, payable quarterly, subject to market conditions
Redemption	Issuer may redeem all of a portion at face value after the fifth anniversary

Potential Benefits to Community Banks:

10-year debt at a fixed rate.
Tier 2 at holding company, down-streamed as common equity to bank.
Interest is tax deductible resulting in an after-tax cost of capital potentially below 5 percent.
No ownership dilution, unlike common stock.

If interested, or for more information, please call (405-424-5252) or email Roger Beverage at roger@oba.com for assistance in getting you to the right people with further information about the status of this offering.

Bankers invited to Mix & Mingles with OSCPA

Want to get to know other young banking and finance professionals in your area?

Grab a seat with us Nov. 1 and enjoy drinks and networking hosted by the OBA Emerging Leaders in partnership with the OSCPA’s Young Accounting Professionals Committee. These Mix & Mingles are 5-7 p.m., come and go.

The November Mix & Mingle will provide a unique atmosphere to chat about career goals and also meet fellow upcoming leaders in Oklahoma City or Tulsa. Don’t miss out – RSVP today by emailing megan@oba.com!

Tulsa location:
Open Container
502 E 3rd St # 39
Tulsa, OK 74120-0001

Edmond location:
The Patriarch Craft Beer House & Lawn
9 E Edwards St
OK 73034-3704

OBA education corner …

Fall is officially here and it seems even the weather has agreed to this reality! Of course, we live in Oklahoma, so the next 90-plus degree day could be just around the corner. One thing ALWAYS just around the corner are OBA educational offerings. Take note of the following:

Reg. Z Open-End Credit Rules, Oct. 23, webinar — This two-hour program focuses on the basic rules for open-end credit. If a financial institution offers any form of open-end consumer credit staff members need to understand the basic rules that govern the product.
Your Strategic Plan, Oct. 25, webinar — Your bank is unique so your Strategic Plan should be unique as well. Too often, bank executives and directors will construct a strategic plan from old plans, strategies found online or just brainstorming based on emotion or intuition.
Deposit Compliance Issues, Oct. 31, webinar — During this program we will cover some of the major issues that affect the compliance of your financial institution from these regulations.
Consumer Accounts – CIP, ID and Risk, Oct. 31, webinar — This webinar will inform you about the deposit compliance rules and tasks your FI must follow and help you turn uncomfortable customer interviews into friendly and supportive conversations.
2018 Key Ratios Seminar, Nov. 2, Oklahoma City — Attend this proactive seminar and learn a “five-step” analysis plan to calculate the key ratios covering liquidity, activity, leverage, operating performance, and cash flow analysis and correctly interpret the financial condition of the business client.
2018 Asset/Liability Management Seminar, Nov. 28, Oklahoma City — Learn about handling assets and liability in this informational seminar.

Make note of the 2019 OBA Schools: 2019 Intermediate School, Feb. 4-8 and June 3-7; 2019 Commercial Lending School, March 3-8; 2019 Compliance School, Aug. 19-23; 2019 Consumer Lending School, Oct. 7-11; and 2019 Operations School, Nov. 18-22.