Federal and state banking regulators, analysts and bankers themselves agree: Director education is vitally important to the profitability and success of community banks. Board members  need to stay fully informed on the challenges, opportunities and potential liabilities they face in their role in guiding the institutions through the minefield of today's business, banking and regulatory environment. On October 21 and 22, come to IBANYS' regional directors conferences in Rochester and Albany. They're designed just for board members (and senior executives) of New York community banks. As our industry emerges from the latest financial/ banking crisis, we have seen a decline in the number of community banks, and an increase in our regulatory burden.  How can community banks survive and prosper in the current regulatory, business and banking environment?  By making certain board members have the necessary tools and best practices to guide the bank to  future growth and success. IBANYS' two single-day regional conferences will help you do exactly that.

Hear About Challenges YOUR Bank Faces   

• According to the Mortgage Bankers Association (MBA), mortgage applications plummeted 27.6%  on a seasonally adjusted basis for the week that ended October 9. from the previous week. The decline followed a 25.5% increase the week before, just ahead of the implementation of new mortgage disclosure rules (TRID). Lenders had to make major changes to their loan processing systems, which may well have slowed applications. Borrowers may well have rushed to get applications in before the rules went into effect Oct. 3. Applications to refinance fell 23% last week, seasonally adjusted, while applications to purchase a home fell 34%. Purchase volume is now one percent below what it was for the same week one year ago. Analysts noted that purchase loans are likely to be more impacted by the regulatory change, as the closing dates tend to be more sensitive than those for refinance transactions. 

• Small business confidence rose slightly last month, according to the National Federation of Independent Business (NFIB). Stock market volatility caused some concern over sales growth. The NFIB's Small Business Optimism Index gained 0.2 point to 96.1 in September, consistent with a 2.5% annualized growth rate. Owners were upbeat about business conditions over the next six months, as well as profits, and believed now was a good time to expand. 

• Federal Reserve Governor Daniel Tarullo believes the U.S. economy likely would not support an interest rate hike this year without signs inflation and wages are increasing. Tarullo, a voting member of the Fed's policy making committee, added: "I wouldn't expect it would be appropriate to raise rates," but cautioned that his outlook could change based on developments in the economy. Tarullo noted a "good bit of uncertainty" as global trends, low energy prices and a stronger U.S. dollar put pressure on inflation.

Compliance Costs: Impact On Community Banks 

According to the recently released report and survey by the Federal Reserve and the Conference of State Bank Supervisors ("National Survey of Community Banks"), compliance costs for community banks represented 22% of their net income.  Respondents reported regulatory compliance accounted for 11% of personnel expenses, 16% of data processing expenses, 20% of legal expenses, 38% of accounting and auditing expenses and 48% of consulting expenses. The report notes that to the extent that these percentages are accurate, they would represent a hypothetical compliance cost to community banks, in these areas alone, of $4.5 billion annually. The survey and related roundtable discussions noted  

"a lack of clear regulatory expectations and perceived aggressive examination tactics," causing many banks to hire more compliance personnel and third-party auditors. Both are in high demand and are expensive. The report also noted:  "Compliance costs have also led banks to abandon certain financial products, forcing consumers to nonbank financial services providers." 

Scott Hildenbrand,

  Principal/Chief Balance Sheet Strategist

Join The Effort: Support "Cure The Blue"  

Senate GOP Leader: Don't Link Business Tax Cuts
To Minimum Wage Hike

Republican Senate Majority Leader John Flanagan (R-L.I.) reacted negatively to the Governor's mention of a potential packaging of a business-based tax cut with a hike in the state's minimum wage. Leader Flanagan called for a "full-blown separate discussion" on the issues. Speaking on a possible business tax cut, he noted: "It should have no connection or ties to any other issues. I want to be talking about tax cuts, I don't want to be talking rebates." He said the GOP conference wanted to take a "deliberative" approach on the issue, and noted  the Senate would hold a series of hearings later this year on the minimum wage issue. Flanagan rejected the idea of a special session before yearend to consider a minimum wage increase. Senate Republicans were unhappy with the Governor's raising of the wage for fast-food workers to $15 an hour through a Department of Labor wage board, and they subsequently called for more legislative input on the issue. Meanwhile, Assembly Speaker Carl Heastie (D-Bronx) has said his conference was willing to listen on a wage increase agreement: "Whatever needs to get done to get that, we'll listen and see where it goes from there."