April 10, 2012, Vol. 4, No. 2
Senate Confirms Thomas Curry to be Comptroller of the Currency
Before leaving town for recess, the Senate last Thursday confirmed, by unanimous consent, Thomas Curry to be Comptroller of the Currency. This effectively ends John Walsh’s tenure as interim Comptroller, a term he had served since 2010.
Curry, who previously served as a director of the FDIC, will remain on the FDIC board as the now-confirmed head of the OCC.
Prior to joining the FDIC board in 2004, Curry was Commissioner of Banks in Massachusetts for a total of 10 years. He has a wealth of experience with mutual institutions in Massachusetts, which has more mutuals than any other state, and at the FDIC, which regulates about half of all mutuals at the federal level.
ABA Suggests Improvements to Mutual Community Bank Bill
ABA yesterday offered some suggestions -- developed by its Mutual Institutions Council executive committee -- to improve House Financial Services Committee member Michael Grimm’s (R-N.Y) bill (H.R. 4217) that is intended to preserve mutual community banks and facilitate their growth.
“ABA’s MIC is pleased by your willingness to advocate on behalf of the mutual bank industry… [that] has thrived for almost 200 years by focusing on the local communities it serves,” James Ballentine, ABA EVP for congressional relations, said in a letter to Grimm.
Ballentine said, among other things, that ABA’s MIC supports adding a provision to H.R. 4217 that would create a national mutual bank charter. He noted that the MIC supported language authorizing such a charter that was in the Dodd-Frank Act’s House-passed version, but was not included in the final bill.
“The House language mirrored many of the provisions of the federal savings association mutual charter, but also allowed a national mutual savings bank to become a fully diversified lender without subjecting it to the real estate concentration requirements of the Home Owners Loan Act,” Ballentine said.
He also provided Grimm with the MIC’s thoughts and suggestions on mutual investment certificates; mutual holding company dividends; the optional “preserving mutuality bylaws”; tax-qualified charitable foundations; and private right of action. Read the letter.
2012 ABA MUTUAL COMMUNITY BANK CONFERENCE – ANOTHER SUCCESS
One hundred mutual community bankers convened in Washington on March 19 at the nation’s largest annual gathering of its kind—ABA’s Mutual Community Bank Conference. Key topics on the agenda included mutual community bank business models and performance, the federal and state regulators’ outlook on mutual institutions, examination trends and experiences, interest rate risk requirements, capital and liquidity planning, and enterprise risk management strategies.
Mutual Community Bank Business Models and Performance–FinPro Exec Scott Polakoff said that all in all, mutuals are doing very well across the board, and he presented supporting data. He also recommended that mutuals should not only compare themselves to other mutuals, but to stock institutions as well. Though mutuals may manage to different objectives than many stock banks, a mutual bank is well advised to compare itself to all competitors. Click here for Polakoff’s presentation.
Federal and State Regulators’ Outlook on Mutual Institutions–The importance of banker-examiner communications was the prime focus of the federal and state regulators’ panel discussion. Mutual savings associations who feel that their institution’s OCC examiners don’t understand the mutual process should push back, talk to the examiner-in-charge and “push it up the chain,” said Jennifer Kelly, the OCC’s senior deputy comptroller for mid-size and community banks. She also said that almost all exams since the integration of OTS into OCC had resulted in no change in capital rating.
The New Hampshire Banking Department looks closely at an institution’s risk profile, added Ronald Wilbur, the department commissioner and a former mutual banker, who provided the state regulator’s perspective. “We know the players and the community in New Hampshire, and we let you make the calls about risk -- within parameters,” he said. He also said that it is important for all banks, regardless of charter, to have best practices and constantly think about what it should or should not adopt in terms of those practices.
James Watkins, the FDIC’s deputy director for supervisory examinations, said that most mutuals perform very well and that there are very few on the problem list. Mutuals are very well capitalized, he said. The FDIC is conducting a study on community banks which will, among other things, seek a definition of community banking based on size and activity. The agency is initiating this study to ascertain what the future may hold for community banks, and also to determine why some banks succeed and others don’t, he said. Click here to view his presentation.
James McKenna, president and ceo of North Shore Bank FSB in Brookfield, Wis., who moderated the panel, reminded his mutual bank colleagues that “we have options that investor owned banks do not,” and that’s the greatest thing about mutuality.
Examination Trends & Experiences Including Interest Rate Risk Requirements–ABA EVP Wayne Abernathy moderated the examination trends panel and reported to the bankers on the latest findings from an ABA and State Bankers Association online survey and “Regulatory Feedback Initiative” in which bankers report their latest examination experiences. He said that with over 1100 responses collected, bankers report that over the last year, for every downgrade, there has been an upgrade. Eighty-three% of those polled said they received no criticism over capital levels, while 98% of the industry is well capitalized. But pressure for maintaining supercapitalization is a problem.
Three panelists added their perspectives to the trends study. Bob Oeler, president and CEO of Dollar Bank in Pittsburgh, PA stated that for his large federal association, the big difference found in exams is that there is more work, especially for the board, but that he had no complaints. Click here to view his presentations.
Bill Smigiel, chairman, president and CEO of FDIC-regulated Liberty Bank for Savings in Chicago, IL, said that while he was not unhappy with his exam, there was confusion at times over items that did not pertain to their bank.
Steve Swiontek, president and CEO of OCC-regulated Gate City Bank in Fargo, ND, said that his examiners came to his board meeting, and that he believed that those examiners understood mutuals. The regulators interviewed two of his board members. Bankers agreed that the integration of the OTS into the OCC is a process, not an event, and that it will take time to explain mutuality to all of OCC.
Capital and Liquidity Planning–ABA’s Hugh Carney, senior counsel, set the lay of the land by saying that we are on the verge of substantial capital changes with BASEL III. There will be a narrower definition of capital, and higher risk weightings on certain securities and on-balance sheet mortgages. He expected mortgages to be risk weighted based on LTV instead of a flat rate. A proposal from the banking agencies is expected in the next few months.
George Hermann, president of Windsor Federal Savings & Loan Assn. in Windsor, CT, stated that capital planning as required by OCC is new and helpful for federal savings associations, but he is familiar and comfortable with the processes from his days at a national bank.
Levon Mathews, president and CEO of First Federal in Port Angeles, WA, said that earnings are strong and that he is rebuilding capital. He does, however, have concern about rising interest rates and BASEL III. He also places great emphasis on succession planning for both management and the board, as well as understanding mutuality.
Tom Barnes, former OTS deputy director and now banking advisor, raised numerous examples of thorny capital and liquidity management issues, and the panel discussed possible responses and personal experiences.
Enterprise Risk Management Panel—Chandler Howard, president and CEO of Liberty Bank in Middleton, CT, and Ray Lipman, chairman, president and CEO of Westbury Bank in West Bend, WI, discussed their approaches toward enterprise risk management. Each felt that lack of communication is the biggest problem with risk management. When a bank has an ERM program in place, awareness and the ability to address issues is more profound, regardless of size. With a formal ERM effort, there is little to no concern about retribution. It is not a program, but rather an evolving effort. Getting board involved is important too. What all community banks need to answer are the questions of how well do we identify risk and how well do we mitigate risk. The trick is finding the right balance between risk and earnings for your culture and business model. Click here for ABA VP and moderator Doug Johnson's presentation.
Peer Groups–Bankers had a list of issues to discuss and picked the topics most important to them. Questions such as “Have you altered your strategic business plan since the passage of Dodd-Frank?” “What are your Mutual Holding Company’s successes?” were on the list. They also discussed interest rate risk, governance as a key variable in bank’s operation, board expectations and compensation, succession planning, finding individuals committed to mutuality and rewarding customers. Click here for peer group questions.
Today’s Mutual Community Banks Fact Sheet
ABA used the Mutual Community Bank Conference to unveil its new Today’s Mutual Community Banks fact sheet. This fact sheet lists the basic facts and figures on mutuals—information that bankers can use to better communicate with their legislators and regulators, as well as their customers and potential board members. Click here to view and download the fact sheet. Bankers will want to plan now to attend next year’s Conference as part of ABA’s Government Relations Summit, April 14-17, 2013, in Washington, DC. All Conference presentations and other materials are available on our ABA mutuality website at http://www.aba.com/Solutions/Mutuality.htm
First Country Bank Celebrates Its Success by Publishing Its History
First County Bank of Stamford, Connecticut, has celebrated 160 years of business success with the publication of “The Feeling is Mutual,” a 200 page history of the bank’s commitment to its community, its customers and to mutuality. The book is an historical perspective on the bank’s service.
Like many community banks, First County counts among its customers the employees of some of the world’s largest international corporations. As a mutual, the $1.3 billion bank takes “the long view of things” and identifies its constituents as its customers, employees and the non-profit community to which it contributes.
For all the changes the bank has seen, it remains “a mutual institution devoted entirely to helping” its customers provide for their financial future and security.
Join ABA’s Mutual Institutions Council
If you are not a member already, we hope you will consider joining our 108+ member council which reviews all aspects of statutory, regulatory, and marketplace influences on the status and role of the mutual form of organization. The committee considers both the preservation of the basic viability of mutuality and retention of management discretion on the exercise of the option of conversion from mutual to stock form. The Committee also considers all aspects of corporate governance and the balancing of stakeholder interests under both state and federal banking institutions and tax law. Click here for link to sign up.
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