May 30, 2018
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I t's official. The Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) was signed into law by President Trump on May 24 th , finalizing a major achievement for the nation's community banks. By working together and pressing tirelessly for needed change, we will be able to better serve our customers and communities.
 
This landmark law is the culmination of comprehensive efforts by ICBA, state associations including ACB and community bankers to advance the Plan for Prosperity policies. Years of advocacy included hundreds of meetings with policymakers on Capitol Hill and at the White House, tens of thousands of community banker messages to lawmakers, congressional testimony, joint state association letters, petitions, articles, op-eds, and more.
 
But as you know, our quest for common-sense regulations is not over. While this new law will make a positive difference for community banks, there is plenty more work ahead of us. We will continue looking for ways to create and promote an environment where community banks flourish, and we won't take "no" for an answer.
 
Congratulations, community bankers, for this significant achievement. And thank you for showing every one of us what is possible when we make our collective voices heard. We're proud to represent community bankers like you, who do whatever is necessary to make our communities stronger and more vibrant every day.
 
Community Bank Net Income Increases to $6.1 Billion
in First Quarter 2018 
  • Industry Net Income Increases 27.5 Percent from a Year Earlier Due to Higher Net Operating Revenue and a Lower Effective Tax Rate
  • Community Bank Net Income Increases 17.7 Percent from First Quarter 2017
  • Net Interest Income Rises 8.5 Percent from a Year Ago
  • Noninterest Income Increases 7.9 Percent from a Year Earlier
  • Loan Balances Rise 4.9 Percent over 12 Months
"The banking industry reported another positive quarter. However, the interest-rate environment and competitive lending conditions continue to pose challenges for many institutions. The industry must manage risks carefully to continue to grow on a long-run, sustainable path."  
-- FDIC Chairman Martin J. Gruenberg
Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $56 billion in the first quarter of 2018, up $12.1 billion (27.5 percent) from a year ago. The improvement in earnings was attributable to higher net operating revenue and a lower effective tax rate. Financial results for the first quarter of 2018 are included in the FDIC's latest Quarterly Banking Profile released today.
Of the 5,606 insured institutions reporting first quarter financial results, more than 70 percent reported year-over-year growth in quarterly earnings. The percent of unprofitable banks in the first quarter declined to 3.9 percent from 4.3 percent a year ago.  
Uncertainty around how bank deposits will reach to a rising interest rate environment was among several key risk themes identified by the OCC in its Semiannual Risk Perspective report released today. The agency noted that banks have acquired historically high levels of non-maturity deposits during the low interest rate environment that has persisted over the past decade, and that competitive pressures could further drive up costs of deposits as interest rates increase.
 
While the OCC acknowledged that the health of the financial system remains strong - citing sound asset quality, capital reaching near-historic highs and improving earnings as positive indicators - credit risk remains a top concern. The report noted that banks and nonbanks have continued the recent trend of easing underwriting standards as they compete for quality loans, and that concentrations -particularly in commercial real estate portfolios - continue to grow.
 
Consistent with the previous semiannual risk report, the OCC also remains concerned about operational risks, particularly as banks transition to more technology-oriented systems and processes and as the cyber threat landscape continues to evolve. The OCC highlighted the importance of having effective cyber controls in place and a strong vendor risk management framework to ensure banks conduct due diligence when engaging with third-party service providers.
 
Compliance risk also continued to be a key supervisory priority. The OCC encouraged banks adopting new technologies to focus on ensuring that their Bank Secrecy Act compliance programs are up to date, noting that examiners have continued to identify a number of BSA program deficiencies among OCC-supervised institutions. Other compliance challenges include the Financial Crimes Enforcement Network's new beneficial ownership rule, changes to the Military Lending Act, the TILA-RESPA integrated disclosures and the Home Mortgage Disclosure Act, the OCC said.
McWilliams Confirmed as FDIC Chairman          
 
By a bipartisan vote of 69 to 24, the Senate today confirmed Jelena McWilliams as chairman of the FDIC. McWilliams was most recently EVP and general counsel at Cincinnati-based regional bank Fifth Third, which she joined early in 2017.
 
McWilliams was previously chief counsel and deputy staff director at the Senate Banking Committee under former Chairman Richard Shelby (R-Ala.), and she also served as counsel to the Senate Small Business Committee. Earlier in her career, McWilliams was an attorney in private practice and at the Federal Reserve Board of Governors. In her new role, she will replace Chairman Martin Gruenberg, who has led the agency in acting and confirmed capacities since 2011.
CSBS to Provide Most Sweeping Cybersecurity Training Program in State Regulators' History 

To combat growing cyber threats to the financial system, the CSBS announced a comprehensive cybersecurity program to train state bank and nonbank examiners. The program, approved by the CSBS Board of Directors earlier this month, represents an aggressive effort to respond to a national threat.
 
"Cyberattacks are becoming more frequent and sophisticated. State regulators are acting to ensure the institutions they supervise are protected and prepared," said CSBS President and CEO John Ryan. "This training will provide state examiners with knowledge and tools to better assess security controls protecting an institution's systems and infrastructure."
 
The training will cover the latest best practices in IT and cybersecurity risk management. During training sessions conducted over the course of the next year, state examiners will study:
  • How hackers attack financial institutions
  • Cybersecurity best practices and common defense techniques
  • Cybersecurity prevention practices, including how to reduce the impact of cyber attacks
  • Investigation techniques
  • The examiner's role in cyber defense
  • What to inspect, review and ask about during an IT-cyber examination
  • How to review vulnerability scans
The program will be funded with proceeds from the National Mortgage Settlement, a 2012 settlement between state and federal regulators and large mortgage servicers concerning foreclosure practices.
House Trying Again on Farm Bill    
                    
The House is planning to take up its version of the farm bill for a second vote next month, House Majority Whip Steve Scalise (R-La.) said. As reported by Roll Call, Scalise said the vote would come on June 22 after the chamber takes up immigration legislation that helped derail the farm bill.

The Agriculture and Nutrition Act of 2018 (H.R. 2) failed to pass due to lack of support from Freedom Caucus Republicans seeking to include immigration reforms and Democrats, who opposed the bill's food stamp provisions. The bill could come up earlier in June if immigration has been dealt with. The Senate Agriculture Committee is also expected to mark up its own version of the farm bill, possibly June 6.