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Credit union acquisition demands congressional response

Following the 10th acquisition of a community bank by a tax-exempt credit union this year, ICBA issued a national news release renewing calls for Congress to respond. 

 “With tax-exempt credit unions now accounting for 10 bank acquisitions already in 2024 — roughly a quarter of this year’s acquisition total — Congress must act on this dangerous trend, which expands the federal tax exemption for more than $2 trillion in credit union assets and displaces trusted providers of credit in local communities,” ICBA President and CEO Rebeca Romero Rainey said. 

ICBA polling shows public support for reforming credit union policies. Noting that states such as Tennessee, Colorado, Minnesota, Mississippi, and Nebraska have restricted these deals, Romero Rainey said this trend is nevertheless a matter of federal policy and national economic importance and requires congressional action. 

Community bankers can use ICBA’s Be Heard grassroots action center to call on their members of Congress to hold a hearing on credit union policy. Additional resources are available on the ICBA website.

Source: ICBA

Credit unions capitalizing on bank branch sales

The resurgence of bank branch sales is showing no signs of slowing down.

These sales continue a rising trend of banks selling their branches to credit unions. Among the 15 most recent branch sale announcements, credit unions were buyers in one-third of those deals.

As banks search for ways to build liquidity and slash expenses, they are increasingly turning to purging branches, industry experts said.

"There's a need right now for liquidity and funding as much as there's ever been and so it's just created this unique opportunity," Piper Sandler analyst Justin Crowley said in an interview.

As such, 2024 is on pace to be the largest year for branch sales since 2021.

Banks have struck 14 branch sales deals so far this year, surpassing the 13 announced in all of last year and nearing the 20 deals seen in 2022.

The number of branches sold has also surged, reaching its highest level since 2021. The $2.47 billion in total deposits sold so far this year is already well above the total in 2023 and on pace to beat 2022, which saw $2.72 billion in deposits sold for the entire year.

Source: S&P Global Market Intelligence

Continue working with Congress as farm bill advances

ICBA said it would continue working with Congress on the farm bill after the House Agriculture Committee advanced its version with both positive aspects and concerning provisions. 

The House Agriculture Committee passed the Farm, Food and National Security Act of 2024 (H.R. 8467) on a 33-21 bipartisan vote. It now moves to the House floor for consideration. 

In a national news release, ICBA said the bill has numerous positive enhancements for American farm policy, though there are provisions in the bill that cause concerns for community banks. 

Pros: Positive aspects of the bill include provisions to enhance commodity price supports, strengthen the crop insurance program, and bolster USDA guaranteed loan programs with higher loan limits and quicker loan approvals.  

Cons: The bill also contains provisions to expand the Farm Credit System’s powers to conduct nonfarm business lending and reduce the FCS compliance burden under the Consumer Financial Protection Bureau’s 1071 small business data collection and reporting rule, which is not afforded to community banks. 

ICBA has been the only national banking trade group to weigh in against farm bill provisions to expand the FCS’s nonfarm lending authority and disparate regulatory treatment. 

ICBA continues encouraging community banks to use its Be Heard grassroots action center to call and write their members of Congress on the industry’s farm bill priorities as the debate continues. 

Source: ICBA

Capital, commercial real estate at center of bank regulators' scrutiny

Capital and commercial real estate exposure are top of mind for federal bank regulators as they scrutinize banks more harshly during exams.

Still reeling from the sudden regional bank failures in March 2023, federal banking regulators are ensuring they dot their i's and cross their t's to avoid any more failures, bank advisers said on a panel about the regulatory environment at S&P Global Market Intelligence's Community Bankers Conference. As such, regulators are upping the ante in exams and acting much faster to downgrade banks' regulatory ratings and hand out both confidential and public orders, the advisers said.

There is "a lot less patience from regulators in general," said Jonathan Hightower, partner at Fenimore Kay Harrison LLP.

The broader trend is that regulators react much more quickly to any concerns they may have, handing out traffic tickets like MOUs, matters requiring attention (MRAs), matters requiring immediate attention (MRIAs) and downgrading CAMELS ratings instead of giving out warnings, said Kevin Stein, managing director of Klaros Capital at Klaros Group. A bank's CAMELS rating measures its capital adequacy, asset quality, management, earnings, liquidity and sensitivity on a scale of 1 to 5, with 5 being the worst.

Obtaining a 1 rating on any component or overall is much harder to achieve since the failures, Hightower said. "If you are a 1-rated bank, maybe don't make that your identity … because that can change," he said.

Regulators are handing out more MRAs and MRIAs and giving banks much less time to clean up the issues addressed in those than they did before the failures, Stein said. That dynamic has led to the recent uptick in enforcement actions, a trend that will continue this year and into 2025, he said.

Regulators are very focused on bank's capital levels and liquidity, the advisers said, zeroing in on metrics like the common equity Tier 1 (CET1) and tangible common equity (TCE).

"It's really important for you to be able to articulate to a regulator, 'Yes, we're a small community bank ... but we understand the implications of where we are from a TCE standpoint, what that would mean for our capital plan if we had to go out and raise capital,'" Hightower said. "Now, again, some of you probably never have any intention of taking on new investors as long as the bank exists, but you still have to be able to talk about it."

Learn more about Regulator expectations..........

Source: S&P Global Market Intelligence

CFPB rule says BNPL lenders are credit card providers

The Consumer Financial Protection Bureau issued an interpretive rule that says “buy now, pay later” lenders are credit card providers.

The rule requires BNPL lenders to provide consumers some key legal protections that apply to conventional credit cards, including a right to dispute charges, demand refunds for returned products, and receive billing statements. Comments on the interpretive rule are due by Aug 1.

Source: CFPB

Fed’s Barr discusses tiered regulation

Federal Reserve Vice Chair for Supervision Michael Barr said the Fed’s capital, liquidity, and resolution regulatory components are tiered to the greater systemic risks posed by the largest banks. 

In Florida, Barr noted that small community banks are subject to a simple leverage capital ratio and no liquidity or resolution requirements, while global systemically important banks, or G-SIBs, are subject to multiple measures of capital adequacy, long-term debt requirements, and liquidity rules. 

ICBA urges Congress and the regulatory agencies to expand and refine a tiered regulatory and supervisory system that recognizes the significant differences between community banks and large, complex institutions. 

• The House Financial Services Committee advanced I supporting a tiered regulatory approach. 
• ICBA is urging regulators to conduct a comprehensive regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act to eliminate one-size-fits-all mandates.

Source: Federal Reserve; ICBA

94% of Americans have a bank account

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• The Federal Reserve Board issued its Economic Well-Being of U.S. Households in 2023 report, which examines the financial circumstances of U.S. adults and their families.

Highlights:  

• While 94% of adults had a bank account, notable differences remain by income, age, race, ethnicity, and disability status. 
• All adults with incomes of at least $100,000 had a bank account, compared with 77% among adults with incomes less than $25,000.  
• The share of adults who applied for credit has been nearly unchanged in recent years.
• Among adults who applied for credit, the share who were denied credit or approved for less credit than they requested was up 2% from 2022 and up 5% from 2021.

Source: Federal Reserve