One Vision, One Mission. Community Banks.

Wednesday, January 8, 2025

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Community Banks Elevate Industry in 2024


In 2024 ICBA along with ACB and our community bankers focused much of our attention on elevating our positions on key issues at a time of intense political debate.


After going to the mat in 2023 to procure a community bank exemption from the FDIC’s special assessment, last year we made essential headway on several policy fronts heading into a new Congress and administration while providing many valuable resources to ICBA and ACB members.


Our joint efforts led the way to elevate public scrutiny of credit unions to new heights, and as a result policymakers have begun to more forcefully investigate the credit union sector amid a record-setting year of acquisitions of community banks.


Of course, working together we have achieved much more than pushing for a level playing field with credit unions. Last year we:

  • Secured injunctions and delays of regulators’ overreaching 1071 and misguided Community Reinvestment Act rules via litigation.
  • Continued elevating concerns with the CFPB’s 1033 rule while procuring an exemption for community banks under $850 million in assets.
  • Teed up opposition to Federal Home Loan Bank lending and liquidity restrictions heading into a change in agency leadership in 2025.
  • Made a down payment on regulatory relief in the coming Congress and administration with House committee passage of several relief measures.
  • Helped the House advance legislation that would restrict the ability of the federal government to introduce a U.S. central bank digital currency.
  • Endorsed an FDIC proposed rule to enhance oversight of industrial loan companies.
  • Worked with policymakers and the U.S. Postal Service to address the explosive growth of check fraud, including by pushing back against a Consumer Financial Protection Bureau proposal that would make the problem worse.
  • Procured virtual meetings that will ensure community bank representation under the current Economic Growth and Regulatory Paperwork Reduction Act review.
  • Advocated reducing community bank deposit insurance assessments with the Deposit Insurance Fund reserve ratio on track to reach the statutory minimum ahead of schedule.
  • Staved off merchant efforts to enact legislation to create credit card routing mandates.
  • Achieved important changes to the Securities and Exchange Commission’s climate disclosure rule that will provide relief for smaller reporting companies and emerging growth companies.
  • Continued pushing back against CFPB rules on overdraft servicesnon-sufficient-funds feescredit card late fees, and the agency’s mischaracterization of key banking services as “junk fees,” which has helped to elevate these rules for review by the new Congress and administration.


Congratulations for all you have accomplished this year. And thank you for your efforts and engagement. Let’s continue working to create and promote an environment where community banks flourish while powering the potential of every customer and community we serve.

Source: ICBA; ACB

Arkansans take lead roles on developing new farm bill


The 119th Congress -- with the Senate and House of Representatives both controlled by Republicans -- have until Sept. 30 to approve a new farm bill authorizing nutrition, agriculture and rural development programs two years after the initial deadline to replace the 2018 farm bill.

 

The 118th Congress failed to pass a new farm bill as a result of partisan gridlock on Capitol Hill. Senate Democrats and House Republicans -- who controlled their respective chambers over the previous two years -- put forward different farm bill packages and could not reach common ground.

 

Two Arkansas Republicans are positioned to administer influence on the next farm bill. Sen. John Boozman begins this Congress as chair of the Senate Agriculture, Nutrition and Forestry Committee and Rep. Rick Crawford will continue serving on the House Agriculture Committee.

 

"I think all of us working together, we can overcome some of the hurdles that we've had in the past (and) provide relief for our farmers," said Boozman of Rogers. "If not, we're going to lose a lot of farmers. It's simply that dire."

 

The farm bill is a multiyear legislative package authorizing various programs including commodity crop support, the Supplemental Nutrition Assistance Program and conservation stewardship efforts.

 

The nonpartisan Congressional Research Service projects the 10-year baseline for the next farm bill will eclipse $1.3 trillion. Spending with the nutrition title makes up 80.6% of this estimated amount.

 

Congress last approved a farm bill in December 2018 with plans to approve new legislative text before the end of September 2023. Federal lawmakers, however, struggled to reach a   compromise amid differences on the package's provisions.

Source: Arkansas Democrat - Gazette

Banks support maintaining Fed independence


Although some bankers support limited measures to change the Federal Reserve, they predominately reject calls to require the central bank to consult with the president on monetary policy, according to a recent survey from ICBA Preferred Service Provider IntraFi.

 

According to the survey, 5% of respondents would support an effort to force the Fed to consult with the president on interest rate decisions and 7% support giving the president the power to demote or replace a Fed chair. Download the report.

Source: ICBA


An article from ACB Associate Member




Requirements and Expectations of Bank Directors


"So, while there are changing responsibilities and fiduciary obligations, the paramount job of a director continues to be in overall risk management and mitigation".


In this article from the Arkansas Community Banker Philip Smith and Charles Plunkett discuss the potential "broadening of the scope of a director's legal responsibilities to assess and manage risk".


Click here to learn more .


Source: Gerrish Smith Tuck; Arkansas Community Banker

Agencies adjust CRA asset thresholds


Federal regulators announced the 2025 updated asset-size thresholds used to define "small banks" and "intermediate small banks" under their current Community Reinvestment Act regulations.

 

Effective Jan. 1:

  • “Small bank” means an institution that had assets of less than $1.609 billion, as of Dec. 31 of either of the prior two calendar years.
  • “Intermediate small bank” means a small institution with assets of at least $402 million as of Dec. 31 of both of the prior two calendar years and less than $1.609 billion as of Dec. 31 of either of the prior two calendar years.

Source: Federal Banking Agencies

2024 was an active year for credit union deals for banks


The holiday season did not stop credit union-bank deal activity.

 

The final days of 2024 brought two credit union-bank deal announcements and one deal termination. 

 

Even with the nixing of that deal, 2024 was a boom year for transactions. Credit unions purchased more banks in 2024 than ever before and doubled the amount of assets sold compared to the previous record in 2022. The activity contrasted with the still-recovering bank-to-bank M&A market, which continues to trail 10-year averages. The slow bank M&A market helped open the door for acquisitive credit unions to use their cash advantage to buy small community banks with attractive footprints, a trend that has existed for years but flourished in 2024.


Credit unions' ability to buy banks has frustrated some within the banking community, who cite credit unions' non-taxed advantage, and some within the credit union space, who fear the loss of credit unions' tax-exempt status. Despite these pushbacks, the deals have continued to grow in frequency and size and are expected to continue in 2025.


Source: S&P Global Market Intelligence

NIMs poised for 2025 expansion


US banks appear poised to expand their net interest margins and reduce their deposit costs in 2025 as the rate-cutting cycle is expected to continue.

 

Net interest margins (NIMs) of US banks began to expand in the second and third quarters as the Federal Reserve cut rates for the first time in four years. Banks should experience NIM expansion from both sides of the balance sheet in the fourth quarter and especially in 2025, said Kris Lazzaretti, president of data solutions at the payments and data firm, Deluxe.

 

"We start to see some benefits accruing from increased loan and security yields, met at the same time with lower interest-bearing deposit costs," Lazzaretti said in an interview. "We think that both of those will start to move in more favorable directions, which will yield higher net interest income across the industry."

Source: S&P Global Market Intelligence

Wholesale borrowing by banks drops


Banks' wholesale borrowing fell in the third quarter as deposit flows strengthened and the sector looks ahead to funding cost reductions.

 

Wholesale funds as a percentage of total liabilities fell 52 basis points sequentially and 26 basis points from the year prior to 15.74%, according to data from S&P Global Market Intelligence. Industrywide wholesale funding levels rebounded after massive pandemic-era deposit inflows dried up, but so far have settled in below pre-pandemic norms.

 

Brokered deposits, one of the largest categories of wholesale funds, have declined for three consecutive quarters as banks express confidence in their deposit strategies and net interest income outlooks.

 

"Consistent with intra-quarter management commentary, we anticipate [interest-bearing] and overall funding costs to begin declining sequentially" in the fourth quarter, Piper Sandler analysts said in a Dec. 16 note. "This long-awaited relief in funding costs should also result in less negative migration in deposit mixes and hopefully help further stabilize [non-interest-bearing] levels."


Source: S&P Global Market Intelligence

Agencies release call report materials


Federal regulators released materials for submitting fourth-quarter call reports, which are due by Thursday, Jan. 30. The revisions to the call report related to the reporting of loans to nondepository financial institutions and structured financial products guaranteed by government agencies or sponsored agencies are effective this quarter.

Source: Federal Banking Agencies

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With the exception of official announcements, the Arkansas Community Bankers Association Board of Directors, Officers and staff disclaim any responsibility for opinions expressed and statements made in articles published in Arkansas Community Bankers NewsWatch 2024. Please note that by using some of the links in this publication, you will be leaving the Arkansas Community Bankers NewsWatch 2024. As a service and for informational purposes only, ACB may provide listings of and/or links to third party web pages/publications maintained by the U.S. Government, internet retailers, organizations and others. ACB does not monitor and is not responsible for the content or administration of these outside websites or pages.  No part of this publication may be reproduced without express written permission. © 1990 - 2025 by the Arkansas Community Bankers Association. All rights reserved.

We are thrilled to announce our series of 2025 conferences that are sure to provide valuable insights, networking opportunities, and the latest industry trends. Mark your calendars for these must-attend events.


These conferences are designed to help you stay ahead in the ever-evolving banking landscape. Don’t miss out on the opportunity to learn from industry experts, connect with peers, and enhance your professional growth.

 

Stay tuned for more details and registration information. We look forward to seeing you there!

2025 ACB BSA/AML Conference

March 6

 2025 ACB CFO Event

May 27

2025 ACB IT Conference June 24

2025 ACB Compliance Conference

September 10-11

2025 ACB Bank Management & Directors Networking Conference October 21 and 22