October 02, 2017 - Issue No. 1739
As a follow-up to our recent communication regarding the Tennessee Comptroller requesting an opinion from Attorney General Herbert Slatery on the constitutionality of credit unions accepting public deposits, the request was the result of inquiries from local governments. Local governments, both large and small, have said it is difficult to find a bank to accept their deposits.
The Comptroller’s Office posed the constitutionality question to General Slatery because Article 2, Section 9 of the Constitution prohibits local governments from becoming a “stockholder with others in any company, association or corporation…” The Comptroller’s office has stated that this is for fact finding purposes only so that they may answer the inquiries posed to them from local governments.
The best case scenario for the banking industry is that General Slatery finds that it is unconstitutional for local governments to deposit funds in credit unions. This would put us in a unique situation compared to many other state bankers associations that have battled this issue with credit unions over the years, because the Tennessee credit union industry would first have to pass a constitutional amendment before passing legislation to allow local government to deposit funds in credit unions.
However, if General Slatery finds that it is constitutional, the credit unions could use this to bring legislation that would allow them to accept public deposits, something that is currently not allowed by Tennessee law. As stated in previous communications, opposing this would be a top priority of TBA’s government relations team.
If you have any questions, please contact me or Amy Heaslet.
Sen. Bob Corker (R-Tenn.) announced last Tuesday that he will not seek re-election in 2018 so that he can concentrate fully on challenges facing the current Congress. The two-term senator is a senior member of the Senate Banking Committee who has been active in debates over housing finance reform and the future of GSEs Fannie Mae and Freddie Mac.
The race for Corker’s seat will likely include multiple candidates from both parties. On the Republican side, candidates could include Congressman Marsha Blackburn, former Congressman Stephen Fincher, Governor Bill Haslam, and Memphis businessman Jeff Webb. Democrats considering a run include Chattanooga Mayor Andy Berke and state senator Jeff Yarbro.
The federal banking agencies last Wednesday issued a proposed rule that would simplify the complex Basel III regulatory capital calculations for all but the very largest banks. The proposal would simplify the treatment of assets subject to common equity tier 1 capital threshold deductions and limitations on minority interest and replace the definition of high-volatility commercial real estate exposures with a more straightforward measure.
The proposal would eliminate the individual 10 percent and aggregate 15 percent common equity tier 1 capital deduction threshold on mortgage-servicing assets, temporary difference deferred tax assets, and certain investments in other financial institutions. They would be replaced with a new 25 percent deduction threshold on the individual categories with no aggregate threshold. The risk weights for nondeducted amounts of MSAs and deferred tax assets would remain 250 percent.
The proposed rule also would replace the complex definition of HVCRE exposures with a definition for high-volatility acquisition, development or construction loans, or HVADC, that would apply to credit facilities that primarily finance or refinance ADC activities and that would receive a 130 percent risk weight, unlike the 150 percent risk weight for HVCRE.
The Trump administration and congressional leaders last Wednesday released a joint framework for tax reform that will provide guidance to the tax committees of Congress as they prepare legislation intended to advance the tax reform agenda. The framework provided limited details, relying more on high-level guidance to the committees, with exhaustive negotiations expected to continue.
For businesses, the framework lowers the corporate rate to 20 percent, with a 25 percent rate for pass-through businesses. It allows expensing of depreciable assets other than structures for at least five years, a partial limitation—with no detail provided—on the deductibility of net interest expense for C corporations, protection of the R&D and low-income housing tax credits, and a move to a territorial international taxation system, including a one-time deemed repatriation of previously untaxed earnings.
For individual taxpayers, the number of brackets is reduced from seven to three (12 percent, 25 percent, 35 percent), with a possible additional top rate. The framework doubles the standard deduction, eliminates exemptions, expands child credits, repeals alternative minimum tax, eliminates most deductions except for mortgage interest and charitable gifts and repeals the estate tax. Read the framework. Read the one-page summary.
This full-day program, scheduled for October 26 in Nashville, will be a very a interactive and proactive program with a "comprehensive approach" to the analysis of financial statement.
- Analyze the four financial statements: income statement, statement of retained earnings, balance sheet, and statement of cash flows
- Explore income statement issues, including revenue recognition, inventory costing, and depreciation
- Cover balance sheet accounts, such as accounts receivable, allowance for doubtful accounts, accounts payable, and the equity section
- Review the levels of financial statement reporting, including company-prepared, compiled, reviewed, and audit
CSBS last week, in a rare move, asked member banks to contact their senators and urge them to reject a proposed exam fee for state-chartered banks that was included in two bills recently passed by the House—the Financial CHOICE Act and the FY 2018 Appropriations bill.
The Financial CHOICE Act, which passed the House in May, would subject the federal financial regulators to the Congressional appropriations process—the FDIC, Federal Reserve, OCC, CFPB NCUA and FHFA. As part of this framework, Congress would appropriate funds for the FDIC and the Fed to carry out their supervisory responsibilities, and these agencies would be required to recover the cost of supervision by charging the industry new examination fees.
The Financial CHOICE Act provisions subjecting the federal financial regulators to the Congressional appropriations process were also included in the FY 2018 Appropriations bill that the House passed on Sept. 14. However, during House floor consideration, the credit union industry successfully pushed for an amendment that exempted the NCUA from the appropriations process and removed any corresponding exam fee on credit unions. Read the CSBS letter.
To contact Sens. Corker and Alexander, call Jonathan McKernan (Corker’s office) at 202-224-3344 and Paul McKernan (Alexander’s office) at 202-224-4944.
The Bank Security and Risk Management Conference is designed to give both the new and the experienced security officer a critical resource for receiving timely and continuing security education. It offers established and emerging industry-standard security practices; enhances the security professional's credibility with peers and their board of directors; allows you to continue your personal and professional development; and reduces your personal and corporate liability. Focusing on the hot topics of bank security and risk management, this conference includes instruction, discussion, and experiential learning opportunities for all security professionals.
The Conference takes place November 2 and 3 at the Nashville Airport Marriott Hotel. The hotel deadline is October 11.
Join us as TBA hosts the Bank Directors Retreat and Independent Bankers Division Convention back-to-back at the Westin Nashville Hotel. With many Tennessee bankers already choosing to participate in both programs, we are having the events on consecutive days to make the most of your time out of the office.
The Bank Directors Retreat, in conjunction with the TDFI, boasts a strong line up. We will open the event with an evening reception at the Country Music Hall of Fame and Museum in the Rotunda. Sessions include:
- Economic Update – Chris Low
- Current Exam and Regulatory Trends – Steve Eisen and Mark Miller
- The Intersection of Banking and Technology – Al Dominick
- "Assuming" You Have it Right? How to Develop Assumptions with a Strategic Focus – Frank L. Farone
The Independent Bankers Division Convention will begin the afternoon following the Bank Directors Retreat. Attendees of the Retreat are encouraged to join us for our opening speaker, Philip K. Smith, president, Gerrish Smith Tuck, PC, as he discusses "How to Improve the Value of Your Bank." Reception at The Westin to follow. Topics for the convention include:
- Profiting from a Rising Rate Environment – Frank Farone
- Generational Communication – Ronald Harris
- How to Hack a Bank: A Live Demonstration of the Need for Offense Oriented Cyber Security – Wesley McGrew
Trezevant-based F & M Bancshares Inc. is acquiring Bolivar-based Merchants & Planters Bancshares Inc. Merchants & Planters Bank, with $87.1 million in assets as of June 30, will merge into F & M's Centennial Bank ($370.1 million). The deal is expected to close either before the end of the year or in the first quarter of 2018. F & M Bancshares will expand in Hardeman County by four branches.
TBA welcomes new associate member The IT Company in the category of information technology. Please thank this company for their support of the Tennessee banking industry through membership. When evaluating vendor partners, review the list of all TBA associate members in our online directory.
The 2017/2018 Bankers Directory is now available in the TBA store. The Bankers Directory is a compact, handy reference that puts information about all of Tennessee's commercial banks and trust companies at your fingertips. The directory contains complete financial data for Tennessee institutions taken from the 2016 year-end FDIC Call Reports.
- TBA holds its Executive Management Conference in Newport, R.I.
- Stacey Langford visits members in East Tennessee.
- The second Women in Banking Conference is held in Nashville, with 130 attendees.
See where TBA goes while "on the road" by following @TNBankers.
In this Issue
- Follow Up on Credit Unions and Public Deposits
- Senator Bob Corker Not Running for Re-Election
- Agencies Issue Regulatory Capital Simplification Proposal
- White House, Congressional Leaders Release Tax Reform Framework
- Join Us for Advanced Financial Statement Analysis Seminar
- CSBS Urges Bankers to Push Back Against Bank Exam Fee
- Bank Security and Risk Management Conference Scheduled for Nov. 2 & 3
- Register today for these back-to-back conventions and save
- Centennial Bank to Acquire Merchants & Planters, Bolivar
- Welcome New TBA Associate Member
- Bankers Directory Available for Purchase
- TBA On the Road
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