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Court ruling on CFPB’s 1071 rule appealed

Following a district court decision denying ICBA’s lawsuit challenging the Consumer Financial Protection Bureau’s 1071 small-business rule, ICBA is now appealing the ruling. 

In a previous court filing, ICBA argued that the bureau violated the law in issuing its 1071 rule by exceeding its statutory authority and by failing to comply with the Administrative Procedures Act. 

In a message to community bankers, ICBA President and CEO Rebeca Romero Rainey announced that following the U.S. District Court ruling last week, it is now in the process of appeal. She also noted that ICBA continues to support legislation to rein in CFPB regulatory burdens. 

“The bottom line: With the 1071 rule posing a serious threat to small businesses nationwide, ICBA will continue utilizing every available channel to mitigate the negative impact of this and other misguided CFPB rulemakings on community banks and the local communities you serve,” Romero Rainey said.

Source: ICBA

Deposit cost pressures stabilize

Deposit cost increases continued to moderate according to comprehensive data on US banks for the second quarter, with markets anticipating an interest rate cut by the Federal Reserve in September that could bring additional relief.

Overall funding costs increased 8 basis points sequentially to 2.63%, flat with the sequential increase of 8 basis points in the first quarter, according to data from S&P Global Market Intelligence.

The cost of savings deposits, the largest category, increased 8 basis points sequentially to 1.98%, down from a sequential increase of 11 basis points in the first quarter. The peak sequential increase during the recent rate-tightening cycle was 41 basis points in the fourth quarter of 2022.

The cost of interest-bearing transaction deposits increased 4 basis points sequentially to 3.18% after a decline in the first quarter, but remained below the 2023 fourth quarter's 3.20%.

Upward pressures on deposit costs are likely to persist even with a rate cut since deposit costs overall would still be substantially less than wholesale rates. However, banks have been saying they expect prices on particularly rate-sensitive balances such as in commercial accounts to fall quickly with cuts, and many banks have already been reining in prices on their highest-cost offerings.

Source: S&P Global Market Intelligence

Reserves grow as percentage of gross loans stagnates

Bank reserves rose for the ninth consecutive quarter, while the industry's ratio of reserves to gross loans held steady.

Total reserves rose to $220.54 billion from $218.62 billion in the previous quarter, an approximately $1.9 billion increase, according to S&P Global Market Intelligence data. This marks a larger boost than the approximately $740 million increase recorded in the first quarter, though it is still smaller than the sequential increases from the second quarter of 2022 through the fourth quarter of 2023. Reserves as a percentage of gross loans was the same as the first quarter at 1.76%.

Year over year, reserves to gross loans grew just 6 basis points, down from 11 basis points in the previous quarter.

Source: S&P Global Market Intelligence

ACB Compliance Event of the Year

September 11 & 12

Little Rock-Live and Virtual

See Agenda and Register

Cybersecurity Assessment Tool sunsetting; IT Examination Handbook updated

Federal banking regulators said they are sunsetting the Federal Financial Institutions Examination Council the Cybersecurity Assessment Tool (CAT) on Aug. 31, 2025. 

In a statement, the FFIEC said: 

• While the CAT, a voluntary tool released in 2015, remains sound, several new and updated government and industry resources are available to financial institutions.
• Banks can use the National Institute of Standards and Technology Cybersecurity Framework 2.0, the Cybersecurity and Infrastructure Security Agency’s Cybersecurity Performance Goals, and CISA’s pending Cybersecurity Performance Goals for the Financial Sector. 

Additional cybersecurity resources are available on ICBA’s Cyber and Data Security center.

In a separate announcement, the FFIEC issued the Development, Acquisition, and Maintenance booklet as part of its Information Technology Examination Handbook. 

Regulators said the booklet: 

• Outlines principles and practices that examiners review to assess an entity’s DA&M functions.
• Focuses on enterprise-wide, process-oriented approaches that relate to the development of IT systems and components.
• Reflects the expanded role of IT in supporting enterprise and business operations. 

Source: FFIEC; ICBA

RansomHub Ransomware warning

The Cybersecurity and Infrastructure Security Agency (CISA) and other agencies issued a joint advisory on RansomHub activity. 

RansomHub is a ransomware-as-a-service variant—formerly known as Cyclops and Knight—which has attracted high-profile affiliates from other prominent variants such as LockBit and ALPHV, according to the advisory. 

Cyber and data security resources—including Sheltered Harbor to add a layer of protection against malware and .BANK to secure customer relationships—are available on the ICBA website. 

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Source: CISA; ICBA

Overdraft fees tick up from 3-year low 

Bank overdraft fees increased in the second quarter after hitting a three-year low during the first quarter.

Overdraft fee income rose to $1.40 billion in the second quarter from $1.36 billion in the first quarter, but fell from $1.41 billion year over year. For the last six quarters, the level has ranged from $1.36 billion to $1.41 billion after a steep decline in the wake of regulatory and competitive pressure in late 2021.

During the quarter, ATM fees increased to $425.5 million from $403.0 million in the previous quarter, while maintenance fees decreased to $1.03 billion from $1.04 billion.

Source: S&P Global Market Intelligence

Majority still rely on local branch despite surge of digital banking

Access to a local bank branch is crucial for 75% of Americans across all generations, with most needing it daily or weekly, according to a survey on banking. 

Highlights: LevLane Advertising’s 2024 Future of Banking Survey found: 

• Only 30% of respondents feel "very comfortable" using digital-only banking services, with Gen X leading this trend at 42%. 
• A strong preference for human interaction is evident across all age groups, particularly those aged 45-60, and an overwhelming 88% of Gen X prefer human interaction over AI. 
• Baby boomers are significantly more likely to visit a branch for opening or closing accounts (36%) than Gen Z (16%). 

Source: LevLane Advertising

Small business optimism rises

The NFIB Small Business Optimism Index in July rose 2.2 points to 93.7, the highest reading since February 2022. Inflation remains the top issue among small-business owners, with 25% reporting it as the most important problem in operating their business, up four points from June. 

Source: NFIB