Congratulations Jack Hartings!

ICBA announced Jack Hartings (President & CEO, The Peoples Bank Co. - Coldwater) as Vice Chairman on the ICBA Executive Committee during the 2013 ICBA National Convention and Techworld in Las Vegas last week.

Bob Palmer Testifies at the Ohio Insurance & Financial Institutions Committee

  

 

  OHIO SENATE INSURANCE AND FINANCIAL INSTITUTIONS COMMITTEE

 

The Ohio Senate

February 27, 2013

 

Briefing From The

COMMUNITY BANKERS ASSOCIATION OF OHIO

 

 

Good afternoon Chairman Hughes, Vice-Chairman Bacon, Ranking Member Turner and members of the committee.

 

My name is Robert L. Palmer. I am President and Chief Executive Officer of the Community Bankers Association of Ohio (CBAO).  CBAO’s sole purpose is to exclusively represent the interests of Ohio’s 218 community banks who serve their communities through 1,229 locations with over 14,600 employees, with more than $59 billion in assets, $46 billion in insured deposits, and $39 billion in net loans.

 

Personally I have had the privilege of being a part of the community banking industry for almost 40 years having served in positions ranging from teller to executive positions as President and Chief Executive Officer of two different community banks, and a director of four different community banks.

 

At CBAO we believe we are more than just an association as we were organized to establish and maintain an informed network of independent community banks in the state of Ohio that will have the influence and commitment to effectively serve, protect and promote the interest of the community banking industry.  We are always looking to the future as we realize that we cannot change the past. In the 38 years of our existence, much has changed, but we still remain focused on our original mission of increasing the value of independent financial institutions.

 

In December, 1973, four Ohio community bankers met to discuss the possibility of establishing an association for the independent community banks of Ohio. At that time, there was a tremendous amount of merger activity occurring in the state. These four community bankers realized that one of the most important benefits of an association would be group purchasing to obtain products and services at a competitive price. Group purchasing strength would allow community banks to remain competitive, slow the merger rate, and preserve a strong community bank presence in Ohio. CBAO and its subsidiaries continue the mission of keeping community banks competitive while preserving a strong community bank presence in Ohio. We continue to offer the highest quality products and services, ranging from insurance to credit cards, with negotiated discount and fee income opportunities, which increase our community banks’ bottom line. We offer unique and useful networking opportunities through our regional meetings and our annual convention and trade show. We offer to our community banks high quality education and training seminars and web casts.

 

CBAO maintains a strong legislative and regulatory focus in Ohio and Washington D.C. Jon D. Myers and Associates has represented CBAO for the last 7 years. As a former member of the Ohio General Assembly, Jon and his associates bring a wealth of knowledge to our organization and the legislative process.

 

In Washington DC, we partner with The Independent Community Bankers of America, the nation’s voice for nearly 7000 community banks of all sizes and charter types. ICBA also is dedicated exclusively to representing the interests of the community banking industry, with nearly 5000 community banks, representing 24,000 locations nationwide and employing 300,000 Americans. ICBA community banks hold $1.2 trillion in deposits and $750 billion in loans to consumers, small businesses and the agricultural community.

 

Many of you may ask what a community bank is and that is a fair question. Generally, community banks have assets of $10 billion or less, (most community banks range in assets from $100 million to $400 million). The criterion to be designated as a community bank is as follows:

 

• Must be operated under the control and direction of an independent management team with decision-making ability in the communities that they serve.

 

• Must have a primary focus of investing local deposits and making loans for the financial and social betterment of the communities that they serve.

 

• They focus attention on the needs of local families, small businesses, and farmers.

 

• They are known for their quality service and personal attention.

 

• They offer nimble decision-making on loans as they consider character, family history and discretionary spending instead of relying solely on impersonal criteria such as credit scoring.

 

• Must be a commercial bank, savings bank, mutual bank, or a savings and loan association.

 

• Must have an independent bank charter from at least one of the appropriate regulatory agencies.

 

• Must be insured by the Federal Deposit Insurance Corporation. (FDIC).

 

• Must represent and promote the independent community bank philosophy.

 

Community bankers are very involved in their communities, often serving on the local school board, volunteering on the fire department, or actively volunteering in their local service clubs.

 

The community bank business model is significantly different from other banks.  We focus on the unique needs of our communities, build strong customer relationships which help attract local retail deposits, take deposits from our local communities and recycle them back in the form of loans.  There is no denying that community banks are the engine that drives the economic growth in our communities across Ohio.

 

CBAO works with legislators and regulators to recognize these differences.  Community banks cannot and should not be required to meet the same requirements of the larger more complex banks as we strongly believe that, “one size cannot and does not fit all.”

 

Mr. Chairman and members of the committee, thank you for allowing me the opportunity to provide an overview of CBAO and the community banking industry and the unique role we play in our communities and Ohio’s economy.

 

I would be pleased to answer any questions you may have.

Congratulations to the Ohio community bankers selected to serve on an ICBA committee this year!

Steve A. Burns (Greenville National Bank, Greenville) - Subcommittee on Tax, Subcommittee Member

Thomas G. Caldwell (The Middlefield Banking Company, Middlefield) - Subcommittee on Lending, Subcommittee Member

Eric A. Gillett (Sutton Bank, Attica) - Bank Operations & Payments Committee, Committee Members

Jack A. Hartings (The Peoples Bank Co., Coldwater) - Policy Development Committee, ICBA Vice Chairman; Large Community Bank Council, Executive Committee Liaison

Shon B. Myers (Farmers & Merchants Bank, Miamisburg) - Subcommittee on Regulation Review, Subcommittee Member

Barry Parmiter (Community Savings, Caldwell) - Bank Operations & Payments Committee, Committee Members

Save the Date for CBAO’s 39th Annual Convention!

The dates have been set for our 39th Annual Convention & Trade Show! We will we back at The Lodge at Sawmill Creek for another year of education, networking and a bit of fun. Be sure to mark your calendar for August 6-8, 2013 to join us!

 

Keep an eye out for our new agenda (it will be released in the next couple weeks) - we've made some noteworthy changes, including moving our golf outing to the the day prior (August 6)!

 

We look forward to seeing in August!

Dodd-Frank Update: Characteristics of profitable, thriving community banks revealed in Fed research

Banking, Inside the Beltway
By: Nathan Marinchick

New regulations, heightened supervisory expectations and challenging economic conditions continue to weigh on community banks as they work to help their communities rebuild in the wake of the economic crisis. However, recent research from the Federal Reserve shows community banks can thrive even under adverse circumstances. Fed Governor and former community banker Elizabeth Duke outlined the characteristics that are strongly linked to banks’ success during a speech at the University of Georgia’s Terry College of Business in Duluth, Ga., on Feb. 5.

For the rest of the story: http://www.doddfrankupdate.com/DFU/ArticlesDFU/Characteristics-of-profitable-thriving-community-b-57190.aspx

Ohio Treasurer of State Praises CBAO for Leadership

In a CBAO-hosted webinar held February sixth, and attended by over fifty community bankers, Ohio Treasurer of State Josh Mandel praised the Community Bankers Association of Ohio for its leadership and advocacy in developing the Star Plus program. Through this program cash balances, including tax funds collected in Ohio and held by local government entities, are placed with community banks, with a priority to have funds placed in Ohio banks. These funds thereby become available as loans to Ohio businesses and consumers, benefiting the communities where they were collected. Two hundred and fifty-three government entities disbursed throughout the state, and thirty-five banks headquartered in Ohio currently participate in the Star Plus program with new banks and entities joining each week.

Community banks can benefit from the program by using it as a stable and low-cost source of deposits, and as a tool to manage liquidity by moving funds both ways through the account. For a bank, participation is simple and routine. There is no initial cost or extraordinary paperwork involved in getting started or maintaining an account, it is just a matter of opening and servicing a business deposit account as the bank would for any other new customer.

State Treasurer Mandel has endorsed the principal of keeping funds collected within local communities working in those communities by supporting and promoting this program. It is important that all Ohio community banks respond and support this principal (a definitive principal of community banking!) by participating in the program. To open an account, request additional information, or obtain a copy of the presentation, you may contact Kyle Moseman at CBAO (kmoseman@cbao.com 614-846-2238) or Lindsay Stavola at StoneCastle Partners (lstavola@scpny.com 866-343-5516).

CBAO needs your comments for upcoming OCC Meeting!

CBAO has been invited to attend an OCC Central District Meeting, with District Deputy Comptroller Bert Otto; Senior Deputy Comptroller, Jennifer Kelly, Ombudsman Larry Hattix and other senior officials, in Chicago, IL on Thursday, April 4, 2013.


The meeting will cover the OCC/OTS integration, the appeals process, lessons learned from bank failures, legal update on pending regulatory matters, Dodd-Frank, examination process, and other supervisory and regulatory items of interest. CBAO has requested that those in attendance also discuss the following.


- Strategic Risk

- Credit Risk

- Credit Risk Management Systems

- Trends in CAMELS Ratings

- Increase focus on Information Technology Ratings

- Improved Problem Bank Trends

- Compliance

- Accounting

- Investment Grade Standards

- Credit Concentrations


We ask that you please let us know if you have other areas that you would like to have discussed or you can offer any comments that would strengthen the value of our conversation.

Mark your Calendar: TAG Alternative Strategies : Exclusive Event for Ohio Community Banks Wed Feb. 6, 10 AM

The Community Bankers Association of Ohio (CBAO) is hosting a special webcast on at 10:00 AM Wednesday, February, 6th , to discuss the current state of community banking and address the potential opportunities and solutions available for banks in a post TAG environment. Special guest, StoneCastle Partners, one of the largest investors in community banks, will provide an update on the current state of banking with an outlook on key issues facing community bankers in 2013.

Watch your CBAO newsletter or contact Kyle Moseman for additional information.

Factoring: What is it and how can it help banks and their customers?

Factoring the sale of invoices is one of the oldest forms of “lending”, dating back until at least the time of the Romans. It’s also one of the simplest and straight forward ways of converting assets to cash, yet it is often misunderstood.

Terms like “hold back,” “reserves,” “advance rate,” and “points” can put people on edge. Add to the fact that just about everyone tries to compare “factoring vs. bank loans” and it is no wonder many people leave the table confused. We all like to begin discussions about financing with terms, but discussing factoring costs in the same way we discuss loan terms is not the best way to help a customer understand factoring.

 Factoring is not a loan! It is a sale of assets. Therefore the customer is not incurring debt (or paying interest on that debt). The customer also has the flexibility to sell as many (or as few) invoices as they want. They are free to spend the money however they see fit, rather than in a manner approved as a part of a loan application.

Because the invoices are the source of repayment to the factor, they are evaluated more carefully that the client’s financials. Many companies that would not be able to obtain a loan can factor to raise cash, and do so quickly! Factoring could also be used in a “work-out” situation for an existing customer.

Why over-complicate the issue? If as banker we are asked to help a customer get cash, let examine the possibilities and let the customer decide what will work for them. Sale of invoices, which is all that factoring is, might be just the solution. It is routine in some industries: transportation, temp agencies, construction contracting, and others where there is a typical long lead time between incurring expense and receiving payment.

Other variables come in to play – especially when it comes to due diligence, but the factor will handle that. CBAO has identified numerous sources for factoring, some of which specialize in certain industries. If you have a customer who might benefit, let’s begin a discussion!

Senate Blocks TAG Extension Bill – Seeking TAG Alternatives?

The Senate recently blocked the Dodd-Frank Transaction Account Guarantee Program (‘TAG’) Bill.  TAG was designed to temporarily insure large commercial and institutional transaction accounts that have more money than is covered by typical deposit insurance, $250,000 per account.

As a result of TAG’s expiration, many banks are seeking solutions that will allow them to continue offering full FDIC insurance coverage and retain those customer relationships.   StoneCastle, a leading investor and advocate for community banks and a CBAO Partner is available to offer immediate support to those banks impacted by expiration of TAG.  StoneCastle Cash Management offers the Federally Insured Cash Account for those depositors which require FDIC insurance on large balances.  Click here if you would like to learn more. 

Governor Kasich Signs Financial Institutions Tax Bill!

Today Governor Kasich signed into law the Financial Institutions Tax Bill (aka HB 510 & FIT). The bill, which replaces the Dealers in Intangibles and Corporate Franchise Tax, benefits our industry in many ways.

First it brings an immediate bottom line impact to Ohio’s 220 community banks that is estimated at $30 million annually. This will allow for increased capital for community banks to meet regulatory requirements and increase lending to small businesses and consumers.

Secondly it brings some fairness to Ohio’s Tax System for community banks by “balancing” the liability and removing loopholes that many larger financial institutions have taken advantage of.

During the signing Governor Kasich reiterated the value of community banks to their local economies and how they are the economic engine that will continue to move Ohio forward.

CBAO was engaged in this legislation from its introduction and recognizes the efforts of all who made today a reality, especially Chairman of the House Ways and Means Committee Ron Amstutz, (R-Wooster) and Chairman Tim Schaffer, (R-Lancaster) of the Senate Ways and Means and Economic Development Committee.

 

 

HOUSE BILL 510 PASSES OHIO SENATE

On Wednesday, December 5, House Bill 510, known as the Financial Institutions Tax Bill, passed the Ohio Senate with bi-partisan support by a vote of 25-8. During his floor speech, Senator Schaffer thanked the Community Bankers Association of Ohio for their work on the bill. It is expected that the Ohio House of Representatives will concur with the Senate amendments on Tuesday, December 11, 2012.

HB 510 Passes Senate Committee - Saving Ohio's 221 Community Banks $30M Annually

The Ohio Senate Ways and Means and Economic Development Committee passed HB 510 which will change the way Ohio's community banks are taxed. CBAO has been working closely with the General Assembly during the past year to get the bill enacted. The bill will bring fairness and equity to the way Ohio's financial institutions are taxed. It is expected the bill will be sent to the Ohio Senate for consideration on Wednesday, December 5, 2012.

CBAO would like to thank community bankers, Scott McComb and Jack Hartings for providing proponent testimony to the committee. We would also like to thank the many community bankers from around the state who attended committee meetings and contacted their Senators in support of HB 510.

How to Stand Out in Business

Kyle Moseman
Product and Service Manager, CBAO Service Corp

Being well into my sixth decade of life and fourth decade of a business career, I feel qualified to provide historical perspective on some things, and offer unsolicited advice. If you are not interested, you are free to ignore it, I know you know how.

At the beginning of my business career in the late 1970’s, there were really only three ways to communicate: in person, by letter (delivered by the US Postal Service), and by telephone (including what we called “long-distance”, which was relatively expensive).  So if you wanted to communicate with someone, you went to see him, sent a letter (of which you kept a”carbon copy”), or called on the phone (which sat on his desk).

My first boss, “Bud”, was a retired Army Colonel and a veteran of WWII and Viet Nam. I’d like to be able to describe him as “no-nonsense”, but in fact he was “much-nonsense.” He played practical jokes, teased and tormented me (and others) for entertainment, sexually harassed all the women (aged 25-70) in the office as a matter of course, and took several of us to a two hour lunch nearly every day. At lunch he normally had several cocktails-expensed it all to the company-and drove us back to the office for an afternoon of more of the same.

Bud is not my role model, but he was very successful and gave me some advice that has stuck with me for decades. Bud said that if you want to stand out in business, it is very simple. Here is what you do:

1.     Take phone calls, but don’t take a phone call when you are with a customer.

2.     Return all phone messages as soon as possible, always before you leave the office in the evening.

3.     Reply to letters with a letter. If it is going to take some time to do that, acknowledge the letter with a phone call.

4.     Don’t make the receptionist (receptionists were what we had before voice-mail, frequently an attractive young woman whose job it was to answer the phone) do your dirty work. Don’t hide behind the receptionist. If someone you don’t want to talk to is trying to contact you, let them know why you don’t want to talk to them. Be direct, but not mean. If there is bad news to be delivered, stalling on the delivery doesn’t make it better.       

Communications has certainly changed! Fed-Ex, fax machines, voice mail, cell-phones, e-mail, e-mail on your cell phone-all have come into being since Bud gave his advice. Yet, it is still possible to stand out in business by following this advice! How often do you say “thanks for calling me back” as if this is a novelty? In reality, sometimes it does seem like a novelty! While communication potential has changed, communicators have not.

It is just common courtesy. We all know what that is, because we practice it when it comes to dealing with our superiors, people we want to sell something to, when we are trying to get a job, etc. The test is whether or not we practice it in all situations. That’s how you stand out, and you stand out because many of your contemporaries and competitors don’t do it. It really is just that easy!

Thanks Bud. I’ll always recall your advice, and that you were generous towards me in every way. May you rest in peace.

CBAO Board of Directors shows support for HB 510 at Ohio Senate Committee Hearing

The CBAO Board of Directors took a trip to the Ohio Statehouse to show support for HB 510 at the Senate Ways and Means and Economic Development Committee Hearing this morning. Each board member introduced themselves to the Senate committee members and other attendees, representing statewide support for the Financial Institutions Tax bill.

Scott McComb, CBAO board member and President & CEO of Heartland Bank, testified in favor of the FIT Bill. "The current tax on financial institutions in Ohio is obsolete and inequitable, particularly for smaller community banks. HB 510, if passed in its current form as voted on by the Ohio House, will level the competitive playing field for Ohio's community banks... The potential savings under the new FIT will allow community banks like Heartland bank, and community banks throughout Ohio to be able to provide more capital to loan to our customers, hire additional employees, deal with the new onslaught of burdensome regulation, and continue to support the local communities they serve."

Notice to Loan Originators and Mortgage Loan Originators Regarding 2013 Renewal Process

The Ohio Division of Financial Institutions encourages Loan Originators and Mortgage Loan Originators to file their annual renewals as soon as possible. The annual renewal period began on November 1 and ends December 31. Early renewals are being processed with quick turnaround times. As of the close of business on Friday, November 2, 2012, 161 licenses had already been issued.

To renew an Ohio license, Loan Originators and Mortgage Loan Originators are required to complete eight (8) hours of approved continuing education in order to meet the Secure and Fair Enforcement (SAFE) Act and the Ohio requirement of authorizing a new FBI background check.  In addition, Originators should check “license items” on NMLS to see if any other requirements have not been met. After resolving a license item deficiency, Originators should immediately notify the Division at webdfi-cf@com.state.oh.us so that the license item can be cleared. Directions for viewing license items are in the NMLS Status and Deficiency Quick Guide. After all SAFE Act and Ohio requirements have been met, including Continuing Education; Originators will be in renewal-eligible status. Failing to clear license items or submit supplemental documents to the Division will result in an incomplete application and your license will expire by law on December 31.

For guidance on how to renew an Originator license, please consult the NMLS Renewal Handbook for Individuals.

Please be aware that delaying your renewal process increases the possibility of not having your license renewed by January 1, 2013

CFPB publishes remittance rule guide for small businesses

By: Nathan Marinchick

The CFPB is seeking public feedback on a guide intended to help small firms understand and comply with the agency’s new rules for international money transfers.

The rules, scheduled to take effect on Feb. 7, 2013, implement new consumer protections under the Dodd-Frank Act. The rules require remittance transfer providers to disclose fees upfront, as well as the exchange rate and the amount to be received by the recipient. Disclosures must generally be provided when the consumer first requests a transfer and again when payment is made. The rule also provides consumers with error resolution and cancellation rights.

The CFPB said its guide may be helpful to any business that sends money internationally for consumers. The guide is intended to help institutions determine whether the transfers they send are regulated by the rule, and if so, what compliance obligations they face. For instance, the guide highlights that companies that send 100 or fewer remittance transfers a year do not qualify as remittance transfer providers and are not covered by the rule.

In determining whether a company’s remittance activities exceed the 100 transfer threshold, the CFPB said companies should remember remittances are often sent by various departments.

“You may need to identify and contact each department to determine how many remittance transfers you provide per year,” the agency wrote. The CFPB also said companies must count all types of remittance transfers covered under the rule together.

“If you sent 60 international wire transfers and 50 international ACH [automated clearing house] transactions last year, then you provided over 100 remittance transfers last year,” the agency explained.

The guide also sets forth key rule exceptions, including a temporary exception that allows insured depository institutions and credit unions to use estimates in certain disclosures.

Businesses seeking additional information on the remittance rule are encouraged to call the CFPB at: (202) 435-7700.

The CFPB asked industry participants to share their thoughts on the guide to ensure the publication is as helpful as possible.

Link to article: http://doddfrankupdate.com/DFU/ArticlesDFU/CFPB-publishes-remittance-rule-guide-for-small-bus-56328.aspx

© Copyright 2012 October Research LLC. This article is reprinted with permission from the October edition of Dodd Frank Update. Any copying or republication without the express written or verbal consent of the publisher is a violation of federal copyright laws. Daily updates concerning the Dodd-Frank Act can be accessed at www.doddfrankupdate.com.

What do you know about Credit Scores?

Automated credit scoring has had a greater impact on how loan applications are considered than any other change since the beginning of credit bureaus. Many consumers can tell you what their credit score is, but fewer have an accurate understanding of what their credit score number really means.

Credit scoring is not new or recent idea. In early “scoring” lenders used manual systems whereby “points” were assigned to certain characteristics within a loan application. For instance, over five years employment might rate ten points, less than two years might be assigned only one point. Each thirty day delinquency might be given a negative two. Points were totaled. An application might be approved or declined, or an interest rate determined based on what total points indicated about the risk level.

Improvement in this idea of risk prediction became possible as credit reporting became a national system with huge credit databases. Fair Issac and Company, now known as FICO, was an innovator in the standardized credit scoring industry, and remains dominant.  It uses a model that draws information directly from the credit reporting repository to calculate a “score”, which has become a standard measure of the likelihood of loan default.

Consumers commonly misunderstand the meaning of their credit score. Perhaps because it’s called a “score”, they think it is a “report card” on their past behavior. While past payment history is a significant factor in determining a credit score, the score is actually predictive of future behavior.  In developing the model, FICO analyzed millions of credit reports, and then looked at those consumers status two years later. By this means they were able to assess what those who defaulted and those who paid well had in common when originally analyzed. They then built the scoring model around those commonalities.

Widespread misunderstanding that credit scores are predictive, not reactive, leads to misunderstanding about how consumers can improve their score. While it does improve a score over time to pay off delinquent accounts and collections, it may damage scores to close accounts or consolidate several credit cards onto one.  Other actions that can improve scores are keeping credit card balances below fifty percent of the maximum credit line, and being added as a borrower to a good account that a spouse or parent many have.

FICO and other scoring companies’ actual scoring models are proprietary and trade secrets, but they have provided insight into things consumers can do to improve their scores. Other businesses have developed credit score improvement plans based on analyzing the changes in scores relative to actions taken by consumers.  There are many sources offering “credit score improvement” assistance for a fee and, while some are legitimate, others take a fee and produce little or nothing in the way of results. Consumers should be very cautious before paying anyone to help them improve a credit score.

Credit scores are in widespread use because they work, and they are here to stay. In addition to loan rates and availability, insurance rates and even employment opportunities can be affected by credit scores. Consumers and lenders need to know and understand what they are, what they are not, and what they need to do to maintain a good credit score.

The CBAO does not offer or endorse any credit score improvement program, but we do have a partner that offers unsecured business credit lines to applicants with good credit. As part of this program, credit score improvement assistance may be offered free of charge.

Submitted by Kyle Moseman, CBAO Product and Service Manager

Senate President Tom Niehaus Indicates New Financial Institutions Tax Bill Will Likely Pass During Lame Duck Session

Ohio Senate President Tom Niehaus, (R-New Richmond), has indicated that the Ohio Senate will likely pass the new Financial Institutions Tax legislation after the November elections.  President Niehaus noted there would not likely be any major changes in the proposed bill. The Kasich administration drafted the bill earlier this year to close tax loopholes for out-of-state banks and bring fairness to Ohio’s community banking industry.  Senator Tim Schaffer, (R-Lancaster), who chairs the Ohio Senate Ways & Means & Economic Development Committee said, “We have some housekeeping updates to make, a few word changes-nothing substantive.”  CBAO believes the new FIT legislation will bring much needed tax relief to the community banking industry and looks forward to the bill being passed in its present form. CBAO will have community bankers testifying before the committee when the committee dates are confirmed.

Basel III’s Effect on Community Banks

In a piece for American Banker’s Bank Think blog, Shea Dittrich, a director at Sageworks, outlines the harmful effects that Basel III may have on community banks.  Dittrich carefully explains the dangers of raising capital requirements for community banks, including the potential effects on shareholders and the surrounding communities.

Read the full article here.