August 26, 2020

IBANYS Weekly E-Newsletter

Visit our website at www.ibanys.net to review all our daily updates on COVID-19 beginning on March 16.

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The President's Message: IBANYS News and Updates By John Witkowski, President & CEO In just over one month, IBANYS will host our 2020 Virtual Annual Convention, which will be held September 30 - October 2. In the midst of the changes caused by the pandemic, our virtual convention is an innovative way for all of us at IBANYS to provide important and timely educational programming to New York community bankers -- just as we have always done in the past in our in-person programs. Please take a moment to read the many updates in today's newsletter about this new and exciting approach, learn how your bank can participate and be a part of this event in our new “normal”. We have information on topics, speakers, sponsorship opportunities and the opportunity for banks to make the virtual convention available to all bank employees. It's our way of continuing to provide the important information your banks need. ********** The Banking New York Magazine is reaching out to our industry leaders and partners asking you to nominate exceptional and qualified candidates for the New York Women in Banking Awards. Please take a few minutes to nominate a friend or colleague who you believe is deserving of being honored in our New York Women in Banking feature. Please click here to submit your nomination or view additional information. The deadline to submit your nomination is Thursday, September 4. *********** IBANYS newest endorsed vendor Bankers Healthcare Group (BHG) is pleased to invite you to an exclusive free meet & greet webinar on Wednesday, September 2nd at 10:00 a.m. ET   Meghan Crawford, SVP Bank Relationships will provide in depth details on how you can purchase high-quality loans using their state-of-the-art delivery platform, the BHG Loan Hub, designed for community Banks.   Click here to learn more and to register for the exclusive event.    Mark your calendars and registered today!! Don’t wait this is an outstanding opportunity to hear how you could grow your loan portfolio. ********** Here is a link to an article in Forbes on the unbanked and underbanked. The under-banked and un-banked population has always been an interesting question for banks. There are new ideas covered in this article to help 25% of the population have a bank account. While it's not mentioned in this article, IBANYS works with a company called SeeTek who has an answer to eliminating payday lenders and other high cost check cashing businesses. We are working with Kevin Kerridge, President and CEO of SeeTek to schedule a webinar for banks in NYS. Forbes.com Article - What Banking For The Unbanked Means For You click to read article ********** The FDIC's Quarterly Banking Profile reported that Community bank net income increased 3.2 percent in the second quarter from the same time last year. That contrasts with the overall banking industry's 70 percent decline in net income, due to the economic impact of the coronavirus pandemic. More than half of community banks reported higher net income despite a 273.2% increase in provision expenses. The increase was driven by gains on the sale of loans (up 142.2%) and securities (up 130.7%). Community banks reported year-over-year loan growth of 13.5%, driven by Paycheck Protection Program lending. The net interest margin for community banks decreased 17 basis points year-over-year to 3.51%, as the decline in average earning asset yields outpaced the decline in funding costs. The Deposit Insurance Fund (DIF) balance rose $1.4 billion from the previous quarter to a record $114.7 billion. The reserve ratio declined 9 basis points to 1.30 percent due to an influx of more than $1 trillion in new deposits. During the second quarter, one new bank opened, 47 institutions were absorbed through mergers, and one bank failed. ********** There's a lot happening in both Washington and Albany, with potential impact on our banks' future operations and profitability. Check out our newsletter's Albany and Washington sections for all the details.

IBANYS VIRTUAL CONVENTION

SAVE THE DATES September 30 - October 1-2, 2020

NEW INFORMATION: IBANYS is adapting to the new normal brought about by the pandemic including switching our 2020 Annual Convention to a “Virtual” Convention this fall. The 2020 IBANYS “Virtual” Annual Convention will take place starting Wednesday, September 30 – Friday, October 2, 2020. Banks can register for one price, and the event will be open for all bank employees. Employees may attend all or just some of the sessions. CPE credits will be awarded. Each week we will feature our speakers who will share their knowledge and expertise during this event. Registration materials will be sent to your email with very soon. We hope you and your team will be a part of the this year's event. We would like to thank our all of our generous sponsors of this event and their continued support of IBANYS and all community banks. Please take a moment to click on the company logo below to learn more about each sponsor and how they help the community banks. If you would like to be a sponsor, please contact me at johnw@ibanys.net or 518-436-4646 for details.

Meet the Speakers

Mike Burke, Senior Robbery and Crisis Management Consultant, SHAZAM read bio here Skimming, Scammers and Security Across the country, skimmers and the cloned cards they produce are costing banks millions of dollars in fraudulent transactions, re-issued cards and damaged reputations. Understand how skimming happens and what to do when it does occur. We’ll share real world examples and short videos to demonstrate how skimmers work, how data is collected and how easy it is to clone a card from the collected data. Once a card is compromised, learn how to mitigate the risk and ways to fight back. Manish Nathwani, Senior Vice President, Product Development, SHAZAM read bio here Building Bridges with AI Artificial intelligence provides opportunities for community institutions and fintechs to partner using richer data and enhanced computing power in pursuit of a leading-edge consumer experience. In this session you’ll learn how AI could potentially shape the future of banking and where your institution has opportunities to maximize its potential with strategic partnerships.

Steven Greenberg, Founder and Principal of Greenberg Public Relations (click for here for bio) Keynote Speaker: Wednesday, September 30 Insight on the Political and Electoral Landscape   Steve Greenberg is a veteran political analyst and commentator who will preview the critically important 2020 Presidential election for community banks. Jaison Abel, Assistant Vice President and Function Head/Regional Analysis Function/Federal Reserve Bank of New York (click here for bio) Update on the Economic Conditions in NYS

Our Convention Sponsors Click each company to learn how they can help your bank.

Barrett School of Banking

Federal Home Loan Bank of NY

InfoAgora

LaMacchia Group

Luse Gorman, PC Preferred Partner

Piper Sandler

Pursuit

SHAZAM

ICBA

The Bonadio Group

Pentegra Retirement Services

COCC

WEBINARS

IBANYS Webinars Are you participating in IBANYS webinars? Now is the time! IBANYS webinars provide timely, important information on subjects of interest to New York community bankers including human resources, business development, investment, compliance and security and much more. They are valuable not only for their content, but for their convenience and low-cost. Take part from the comfort and privacy of your office, without leaving the bank.  Click for full list of webinars

Subscription Tokens The More You Buy, The More You Save   How does it work: Tokens can be used to purchase live or recorded webinars anytime, with no expiration! Tokens for both live and recorded webinars are available for an additional fee. (What’s the difference? Click here for the full description.)   Once you have your Subscription Token code, you can immediately register for webinars by using the code at checkout! (Subscription tokens not applicable for full series registrations, or other specials.)

IBANYS Preferred Partners & Associate Members

Looking for Coveted, Top-Tier Borrowers? Looking for coveted, top-tier borrowers to grow your loan portfolio? The BHG Loan Hub is where New York Banks shop!   Join IBANYS in a live meet & greet event to hear from Meghan Crawford, BHG's SVP of Bank Relationships, and learn how you can purchase high-quality loans using their state-of-the-art delivery platform, the BHG Loan Hub. When: September 2, 2020 - 10:00 a.m. EST Click to register

The NextGen Scholarship is Back!  The LEAD FWD Summit is Sept. 21-22 and offered in virtual format   Due to the success of last year's NextGen scholarship program, we are excited to announce that ICBA is once again offering this exciting scholarship opportunity for our state association friends.   With the ICBA 2020 NextGen Scholarship you have an opportunity to award one community banker from your membership a fully-paid scholarship to ICBA's virtual leadership conference, the 2020 LEAD FWD Summit (Sept. 21-22).   This is your scholarship to award to a deserving community banker in your state! We’re thrilled to assist you in further engaging the future of our industry and we’re delighted to partner on this NextGen Scholarship opportunity. For more details, including how to participate, please refer to this informational brief and our ICBA State and Regional Partner web page where you will find customizable promotional tools and assets.

Kickoff! A football fan’s guide to portfolio management By Jim Reber As the calendar turns to the fall, millions of Americans gear up for their favorite sport of football. Of course, with this being a year unlike any other, we’re still trying to figure out what it will look like. Nonetheless, what better way to usher in the new football season than to relate common gridiron phraseology to its investment portfolio equivalent? Some of this may sound like a stretch for the sticks, but perhaps you can find a loose ball in the pileup. If so, hopefully you can convert the takeaway into a visit to the sweet land of six. Read Article Here

Albany Update

What's On The Horizon In Albany? Governor Cuomo signed an executive order extending a coronavirus-related emergency moratorium on evictions and foreclosures of commercial properties until Sept. 20, saying: "While we have made great progress in keeping New York's infection rate low, this pandemic is not over... we are continuing to protect New York businesses and residential tenants who face financial hardship due to COVID. I am extending the State's moratorium on commercial evictions to ensure business owners across New York will not be forced to close as a result of the pandemic."   State legislators are preparing for a potential session in September, which may address the state's finances. There is some talk of new revenue-raisers, including eliminating rebates the state now provides on stock transfers; imposing higher income taxes on people with more than $1 million in annual income and creating a new tax on super wealthy people with more than $1 billion in assets. “It’s true that everybody has been holding their breath until they turn blue to not cut the budget … or to do what we can to make Washington deliver like it needs to," State Senate Finance Chair Liz Krueger stated: “We’re getting closer and closer to the ‘everything blows up moment.   Meanwhile, former Gov. David Paterson is the public face and leader of a new group, the Campaign for New York's Future, a coalition of civic and business leaders pushing back against proposals to raise taxes as a result of the pandemic. The group plans to spend millions to advance efforts to help the state’s economic recovery that wants to boost New York's economy, but is opposed to increasing taxes.   Lawmakers in the State Senate on Monday urged lawmakers on the federal level to find a funding solution for New York's schools, as the state withholds 20 percent in funding amid the recession created by the coronavirus pandemic.   The economic shutdown triggered by the COVID-19 pandemic has resulted in a $14 billion state budget deficit, with projections of up to $30 billion by 2022, according to Governor Cuomo. In efforts to minimize the cash flow crunch and increase capital funding of the state’s economy, state legislators have turned to the New York City real estate market for relief. Most relevant is the revival of the “pied-à-terre” property tax surcharge on qualifying non-primary residences within the state. https://www.natlawreview.com/article/covid-19-real-estate-revival-new-york-pied-terre-tax; Please click here to access the full text of the proposed Senate Bill S44A.   When the Legislature does reconvene, it will likely consider additional forbearance legislation for residential and commercial investment property mortgage payments. The agenda could well include A.10532A, Bichotte (see link below). IBANYS opposes the legislation (see second link below and is working with the Legislature and the NYS DFS.  Click here to read the legislation.  Click here to read IBANYS Memo in Opposition.     DFS FAQ On Forbearance For Residential Mortgages Held In Portfolio By NYS Chartered Banks The NYS Department of Financial Services (DFS) has issued the "Frequently Asked Questions (FAQ) document on the state's new Residential Mortgage Forbearance Law on forbearance for residential mortgages held in portfolio by NYS chartered banks. IBANYS would like to thank the DFS team for providing guidance through this document, which IBANYS had suggested. The FAQ document may be accessed through the link below: https://ibanys.net/wp-content/uploads/2020/07/FAQ-on-Mortgage-Forbearance-Bill-7.22.20-Dist-update-2.pdf   The New York State Department of Labor has prevented more than $1 billion from falling into fraudsters’ hands during the coronavirus pandemic, identifying and stopping more than 42,200 fraudulent unemployment benefit claims since mid-March. In the last five months, DOL has referred more unemployment fraud cases to federal prosecutors than the department did in the last ten years combined. Department of Labor Commissioner Reardon and Department of Financial Services Superintendent Lacewell have also released a new public service announcement educating New Yorkers about how to protect themselves against identity theft.

Washington Update

The Small Business Administration issued an interim final rule updating Paycheck Protection Program guidelines on owner-employees. The interim rule notes that owner-employees with less than a 5 percent ownership stake in a C- or S-corporation are not subject to the owner-employee compensation rule. The PPP loan-forgiveness rule issued June 26 caps the amount of loan forgiveness for payroll compensation attributable to an owner-employee. The interim final rule also clarifies that the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses. However, rent payments to related parties may be eligible for loan forgiveness under certain conditions. Additional PPP guidance and resources are available on Treasury’s PPP webpage and ICBA's COVID-19 resource center. IBANYS Urges New York Congressional Delegation To Support PPP Changes As the stalemate between Congress and the Trump administration regarding the next coronavirus legislative package continues, IBANYS has written to the New York Congressional Delegation (and shared the letter with members of the NYS Legislature as an FYI) urging support of a number of important changes ICBA has suggested be made to the Paycheck Protection Program. Read IBANYS' letter to Congress. Read IBANYS letter    FHFA Changes Course On New GSE Fee ICBA welcomed an announcement by the Federal Housing Finance Agency delaying the Fannie Mae and Freddie Mac Adverse Market Refinance Fee and exempting smaller loans. Following an ICBA grassroots and media campaign, the FHFA announcement delays the 0.5 percent fee on refinance mortgages from Sept. 1 to Dec. 1. It also exempts loans with balances below $125,000 and the Fannie Mae HomeReady and Freddie Mac Home Possible affordable refinance products. The FHFA said the fee is needed to cover projected losses of at least $6 billion at the government-sponsored enterprises caused by coronavirus-related renter and borrower protections. In a news release, ICBA said the delay will give borrowers and lenders time to close and fund loans already in process, while the exemption for lower-balance loans will help keep them affordable. ICBA immediately pushed back against the fee when it was announced earlier this month, including via an American Banker op-ed and a grassroots campaign--supported by IBANYS-- that generated more than 3,700 messages to policymakers. ICBA thanks all the community bankers who have weighed in. ICBA continues urging community bankers to call on policymakers to overturn Fannie Mae and Freddie Mac's decision to charge a 0.5 percent fee on refinance mortgages. Community bankers can use ICBA's Be Heard grassroots action center to tell Congress to insist that the enterprises and the Federal Housing Finance Agency reverse the policy, which would cost the average homeowner $1,400 amid the COVID-19 pandemic. In American Banker, ICBA's Ron Haynie wrote that the new “adverse market" fee comes at a significant cost to homeowners at precisely the wrong time. "For many Americans, $1,400 means a lot," he wrote. Haynie also discussed the fee hike in a separate American Banker report, noting that it will lead to slightly higher interest rates for borrowers that will noticeably increase payments. ICBA Seeking ILC Grassroots Outreach ICBA continues calling on community bankers to urge their senators to co-sponsor legislation to close the industrial loan company loophole. The customizable message on ICBA's Be Heard grassroots action center notes that ILCs pose a significant risk to the financial system and should be regulated like other banking institutions. The Eliminating Corporate Shadow Banking Act (S. 2839) would subject ILCs to the Bank Holding Company Act. ICBA recently called on the FDIC to deny Rakuten Bank America’s resubmitted ILC application and urged the agency to strengthen its proposal to enhance oversight of ILC parent companies.   If Democrats flip control of the Senate this fall, Senator Chuck Schumer is poised to make history as the first Jewish Senator and the first New Yorker to hold the post of Senate Majority Leader. "The must-read profile": https://politi.co/34zzo1A The Federal Reserve's response to the COVID-19 pandemic has benefitted from having a board seat dedicated to someone with community banking experience, Fed Governor Michelle “Miki” Bowman said. Bowman—the first person to fill the Fed's community banking seat—said diversity on the Fed board is a strength that benefits the broader economic and financial system. "Our actions in response to the recent pandemic have clearly benefited from this perspective, as we understand how the varying state and local approaches have affected economic conditions across the nation," she said. The Fed position exists because of ICBA’s successful advocacy -- strongly supported by IBANYS -- for Congress to require community bank representation on the board. Banks Win First Court Decision On PPP Agent Fees Banks won the first legal battle over Paycheck Protection Program agent fees, with a court ruling against plaintiffs who argued they are entitled to payments from lenders that the banks haven't authorized. A U.S. district judge ruled in the first of many lawsuits that banks are not required to pay fees to accountants and consultants that "helped" small businesses with PPP applications, unless they have reached upfront agreements to do so. Any agent fees must be paid out of the funds provided by the SBA to PPP lenders, the judge ruled, as indicated by PPP rules and guidance. The plaintiffs can appeal, and many similar cases have been filed in other jurisdictions. ICBA recently called on the Treasury Department and SBA to clarify rules on PPP agent fees. In a letter earlier this month, ICBA asked the agencies to confirm that contractual relationships are required to form agency relationships, as Treasury Secretary Steven Mnuchin has suggested in congressional testimony. ICBA urges transparency in JPMorgan, Postal Service talks ICBA called on the U.S. Postal Regulatory Commission to investigate reports that the U.S. Postal Service is considering an exclusive agreement with JPMorgan Chase to provide banking services through the postal branch network. In a letter to the commission, ICBA called for a transparent process, noting that JPMorgan Chase has a record of discriminatory consumer practices that could threaten local communities. Specifically, the agency should follow federal regulations and issue a request for proposal before proceeding, ICBA wrote. ICBA noted that while any arrangement with JPMorgan Chase would threaten local communities by drawing deposits away from them, the nation’s 52,000 community bank locations have greater penetration in unbanked populations than the postal branch network.

Additional Information

News Release | NR 2020-111 August 26, 2020 Agencies Issue Three Final Rules Joint Release Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Office of the Comptroller of the Currency   The federal bank regulatory agencies today finalized three rules, which are either identical or substantially similar to interim final rules currently in effect that were issued earlier this year. They include: A final rule that temporarily modifies the community bank leverage ratio, as required by the CARES Act; A final rule that makes more gradual, as intended, the automatic restrictions on distributions if a banking organization’s capital levels decline below certain levels; and A final rule that allows institutions that adopt the current expected credit losses or “CECL” accounting standard in 2020 to mitigate the estimated effects of CECL on regulatory capital for two years.   The final rule modifying the community bank leverage ratio adopts without change two interim final rules issued in April. The final rule temporarily lowers the community bank leverage ratio threshold and provides a gradual transition back to the prior level. Specifically, the threshold would be 8 percent for the remainder of this year, 8.5 percent for 2021, and 9 percent beginning January 1, 2022. This final rule is effective as of October 1, 2020.   Similarly, the final rule on automatic restrictions of distributions adopts without change two interim final rules, one of which was Board-only, issued in March. The final rule makes more gradual, as intended, the automatic restrictions on capital distributions, such as share repurchases, dividend payments, and bonus payments. This final rule is effective as of January 1, 2021.   Lastly, the CECL final rule is substantially similar to the interim final rule issued in March. The final rule gives eligible institutions the option to mitigate the estimated capital effects of CECL for two years, followed by a three-year transition period. Taken together, these measures offer institutions a transition period of up to five years. In a change from the interim rule, the final rule expands the pool of eligible institutions to include any institution adopting CECL in 2020. The CECL final rule is effective immediately upon publication in the Federal Register.   Related Links Final Rule on the CBLR Transition Adjustments (PDF) Final Rule on the Definition of Eligible Retained Income in the Capital Rule (PDF) Final Rule on the Revised CECL Transition in the Capital Rule (PDF)  ********** The Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, National Credit Union Administration, and the Conference of State Bank Supervisors will host an interagency webinar on Paycheck Protection Program (PPP) loan forgiveness, Thursday, August 27, 2020, at 11:00 a.m. ET. The webinar is open to all SBA lenders who participated in the SBA PPP lending program.    During the webinar, Small Business Administration (SBA) officials will: Provide an overview of PPP loan forgiveness policy and guidance; Demonstrate how to access and use the SBA PPP Loan Forgiveness Platform; and Review best practices for using the SBA PPP Loan Forgiveness Platform.   There will be a brief Q&A session. Participants are encouraged to submit questions in advance via email at asktheregulators@stls.frb.org. Registration is now open at https://www.webcaster4.com/Webcast/Page/583/36742. To accommodate the participation of as many PPP lenders as possible, we ask each institution register no more than two representatives to attend the live session. We strongly encourage participants to use the webinar audio on their computer for the best experience. Webinar materials will be archived for future viewing. ********** Bulletin | OCC 2020-77 August 21, 2020 Bank Secrecy Act/Anti-Money Laundering : Joint Statement on Bank Secrecy Act Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons rescinds OCC Bulletin 2001-9   Summary The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Financial Crimes Enforcement Network today issued a joint statement to address certain questions raised by financial institutions related to Bank Secrecy Act (BSA) and anti-money laundering (AML) regulatory requirements for customers whom banks may consider to be politically exposed persons.   Rescissions This bulletin and joint statement rescind OCC Bulletin 2001-9, “Bank Secrecy Act/Anti-Money Laundering: Guidance on Foreign Official Corruption,” and its attachment, “Guidance on Enhanced Scrutiny for Transactions That May Involve the Proceeds of Foreign Official Corruption.”   Note for Community Banks This bulletin applies to community banks.   Highlights The statement explains that the term “politically exposed person” (PEP) is commonly used to refer to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates.  explains that the BSA/AML regulations do not define the term “PEP,” which should not be confused with the term “senior foreign political figure” as defined under the BSA private banking regulation,2 and explains that the agencies do not interpret the term “PEP” to include U.S. public officials. clarifies that the customer due diligence rule does not create a regulatory requirement and that there is no supervisory expectation for banks to have unique, additional due diligence steps for customers who are considered politically exposed persons. The rule does not create such a regulatory requirement or supervisory expectation for U.S. federal, state, or local public officials. clarifies how banks can apply a risk-based approach to customer due diligence in developing risk profiles for their customers, including politically exposed persons, that is consistent with requirements contained in the Financial Crimes Enforcement Network’s 2016 customer due diligence final rule.3 addresses potential risk factors, levels and types of due diligence, and other BSA/AML regulatory requirements applicable to politically exposed persons’ relationships.   Further Information Please contact James Vivenzio, Acting Director for BSA/AML Policy, at (202) 649-5470.