March 15, 2023
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ACB Press Release on Community Bank Strength and Stability

The community banks of Arkansas are proving their strength and stability in the face of large, tech-based banks that chased risky, nontraditional banking assets like crypto and new tech startups. Arkansas’ community banks, with vastly more stable and diverse assets, remain the backbone of the financial system in Arkansas.

"Community banks are the heart and soul of our local economies," said Gary Head, President of the Arkansas Community Bankers Association and Chairman and CEO of Arkansas based Signature Bank. "They are committed to investing in our communities, supporting small businesses and families, and providing the personalized service that is so critical to their success."

In fact, over the last four years, Arkansas banks have had a higher return on assets, higher net interest margin, more available capital, lower noncurrent loans, and more capital set aside for loan losses than the US average. Simply put, Arkansas’ banks are the best capitalized, best positioned banks, by almost every banking metric, in the US. Period. Arkansans have absolutely no reason to be concerned about their money.

The two bank closures making headlines; California’s Silicon Valley Bank (SVB) and Signature Bank, New York, NY (no affiliation to Signature Bank of Arkansas). SVB’s asset size ballooned from $60 billion in 2020 to $200 billion today, and a vast majority of its assets were in new, technology start-up companies, which, are not only typically riskier, but new start-up companies have more exposure to increases in interest rates. As these startups began withdrawing more funds, the bank, to make good on those withdraws, had to sell its bond portfolio at a steep loss. Clients fearing the viability of SVB, withdrew even more money, and the “run” was on. SVB’s share price fell by 60% last Thursday and by Friday trading was halted and the FDIC had taken over. Signature Bank, New York, NY was a large $110 billion asset cryptocurrency bank. Their customers, being spooked by the collapse of SVB, withdrew $10 Billion in deposits in just a couple of days, with regulators quickly taking control.

Every depositor of Signature Bank, New York, NY and SVB “will be made whole, with no losses to the taxpayer”, the Treasury Department and other bank regulators said in a joint statement.

In contrast, community banks have long been known for their commitment to serving their local communities, providing personalized service and a focus on relationships that larger institutions cannot match. Community banks know their customers! This approach has helped Arkansas' community banks weather economic storms for over one hundred years. And while rising interest rates may pose some risk to the overall economy, Arkansas depositors should rest assured that Arkansas’ banks are strong,
capitalized, and ready to do business.
Source: ACB
ICBA on "the voice of reason"

Reading and watching the news from the past few days has made it clear: the voice of community banking, the voice of reason and historic stability and resiliency, needs to be heard.
ICBA has prioritized making sure the voice of this great industry reaches concerned consumers and small businesses across our nation. To address their worries, answer their questions, provide peace of mind and educate them about the community banking difference, we are tackling this responsibility head on.
First, we have readied the below talking points for you and your community bank team to use when communicating with your customers.

  • As a community bank, [BANK NAME] remains well capitalized and well positioned to continue to serve our customers and community. We were chartered XXX years ago and expect to serve this community for generations to come.
  • As a community bank customer, you have access to our experienced team, and we stand ready to assist you at all times with any of your questions or concerns.
  • As a community bank, we take pride in our relationship-based business model focused on building long-term trust with our customers. After all, we live in your community too, and your success is our success.
  • Nobody has ever lost a dime of FDIC-insured deposits up to $250,000. For those customers who have questions about whether additional insurance coverage is needed, we are ready and prepared to assist you in identifying whether additional insurance coverage is necessary and ensuring your deposit needs are met.

If you have questions about your coverage, or would like to learn more about FDIC insurance and how it works, we encourage you to access the following resources or give us a call directly at [phone number]:

As always, we will continue to tell our story and make sure community banks are well-represented with policymakers and regulators and accurately characterized in the media. To ensure consumers are well-educated on the community banking business model, the ICBA National Campaign is primed and ready to differentiate community banks from other financial institutions. You will receive much more on that new and exciting effort soon as we ready materials for this week’s launch. But for now, rest assured in knowing that your best interests are ICBA’s best interests, and that we exist to serve community banks and only community banks.

Source: ICBA
Bank capital requirements to be tailored

Federal Reserve Chair Jerome Powell told congressional committees that bank capital requirements will be tailored depending on institutions' sizes, and the Federal Reserve Board will eventually solicit comments on a public proposal.

Powell testified before the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee.
"I think it's always a balance," he told the Senate committee. "We know that higher capital makes banks safer and sounder. We also know that you will, at the margin, provide less credit the more capital you have to have. But, I think it's never exactly clear that you're at perfect equilibrium. And it's a fair question, I think, to look at that."

In addition, Powell addressed the proposed rules related to the Community Reinvestment Act, or CRA, which the Fed issued in 2022 along with the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. He told the Senate committee they are in the process of revising the CRA rules and agreed when Chairman Sherrod Brown, D-Ohio, asked if they will be finalized "as quickly as possible," but added that "it'll be some months."

FDIC Chairman Martin Gruenberg said last month that the agencies aim to issue final guidance under the CRA during the first half of 2023.

Republicans also asked Powell about the Fed's climate scenario analysis pilot.

Powell told the House committee there is a role for bank supervision and "making sure that banks understand and can manage their risks over time from climate. I think my colleagues and I all understand that it's a tightly circumscribed role that we're playing and that we're not looking to move into an area where we're actually becoming a climate policymaker."

"Over time that border needs to be very carefully guarded," he added.
 Source: S&P Global Market Intelligence
Concerns raised with CFPB’s 1071 rule

Several members of Congress expressed concerns with the community bank impact of the Consumer Financial Protection Bureau’s pending rule implementing Section 1071 small-business reporting requirements.
During a House Financial Services Subcommittee on Financial Institutions hearing on CFPB reform, Rep. Roger Williams (R-Texas) said the 1071 rule would harm relationship banking. Rep. Young Kim (R-Calif.) said the rule would harm the minority- and women-owned small businesses it is designed to help.
The CFPB has said it plans to issue a 1071 final rule by March 31. The CFPB agreed to the deadline as part of a lawsuit designed to compel the bureau to finalize the rulemaking.
ICBA continues advocating relief from the bureau’s 1071 plan, in which the bureau is proposing to nearly double the number of reporting data points required by Congress. In an American Banker op-ed last year, ICBA President and CEO Rebeca Romero Rainey said the CFPB should exercise its authority to tailor its rulemaking to avoid restricting access to credit.
Source: ICBA
Banks warned about crypto liquidity

At a time when the crypto industry is drawing flak from several regulators, three federal agencies issued a warning to the banking organizations about the liquidity risks associated with crypto-assets and crypto-asset sector participants.

The Feb. 23 joint statement was released by the Fed Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency and comes following the recent events in the crypto-asset sector that have led to concerns over the potentially heightened liquidity risks.
Source: S&P Global Market Intelligence
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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 2023.