Financial Institutions

Monday, 22 May 2017

Preparing for CECL: What you should be doing now

Written by By: Heidi Cieslik, CPA, and Heather Funsch, CPA

Last year, the Financial Accounting Standards Board (FASB) finalized its long-awaited current expected credit loss (CECL) model for credit impairment. Described by the American Bankers Association as “the biggest change to bank accounting ever,” CECL replaces the current incurred loss model with a forward-looking approach. Although the new standard doesn’t take effect for several years, financial institutions and other affected organizations should be preparing for it now. Perhaps the most critical step is to evaluate the ability of your information technology (IT) systems and data collection processes to generate the information needed to calculate the more complex and predictive estimate...

The 1996 Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) requires federal financial institution agencies, including the Board of Governors of the Federal Reserve System, the OCC, the FDIC and NCUA (by choice) to conduct a review of their rules at least every 10 years to identify outdated or unnecessary regulations. This 2016 Report focused on the effect of regulations on smaller institutions, such as community banks and savings associations. To collect input and complete the review, RFCs were published in the Federal Register and public outreach meetings and town halls were hosted. Altogether, the agencies received more than 250 comment letters from financial institutions, trade associations, and consumer and community groups, in addition to in-person comments at outreach meetings...

Tuesday, 02 May 2017

Are de novos on the rise?

Written by Rehmann team

Recent FDIC research on new bank formation since 2000 highlights both the economic benefits of de novo banks and their vulnerability to economic shocks. For example, of the 1,000 new banks formed between 2000 and 2008, just 63% were still operating as of September 2015, but they held $214 billion in total loans and leases. The failure rate of newly established banks was more than twice that of small, established banks. Additionally, economists at the Federal Reserve report that economic conditions alone — including a long period of zero interest rates — significantly contributed to the post-crisis decline in new charters:     De novo formation has always been cyclical...

Wednesday, 03 May 2017

Outdated legacy core systems pose real risks

Written by Rehmann team

Enterprise Content Management (ECM) systems are critical not only to a financial institution’s operation and growth but also its very survival. They facilitate the delivery of products and services to consumers through multiple channels, and handle the security and privacy of enterprise-wide information. They need to be able to anticipate and respond to rapid-fire demands for change from within the bank and from the external marketplace. However, most core systems, created in the 1980s and 1990s, were designed to be utilitarian, based on technology available at the time...

Wednesday, 03 May 2017

SEC proposes review of Guide 3

Written by Rehmann team

An old guide is getting a fresh look. The Securities and Exchange Commission (SEC) voted in March to invite comment on the quantitative and qualitative disclosures and tabular format required by Guide 3, Statistical Disclosure by Bank Holding Companies. The Guide, first published in 1976, applies to the description of business portions of bank holding company registration statements, and is used to help investors make informed investment and voting decisions. The SEC is open to modernizing the nature, timing, scope and applicability to today’s banking industry...

Wednesday, 03 May 2017

Phone debit cards

Written by Rehmann team

With ATM withdrawals at U.S. financial institutions topping $5.8 billion annually, several large, national institutions are introducing yet another new way for consumers to access their cash...

Wednesday, 03 May 2017

Credit risk trends

Written by Rehmann team

The FDIC’s recent Credit Risk Trends and Supervisory Expectation Highlights identifies trends in credit risk and emphasizes that following principles of sound risk-management is as important as ever to avoid future loan underwriting and administration problems that adversely affect the bottom line. Loans comprise the majority of most instititions’ assets, and not only drive revenue, profitability and capital formation, but also help stimulate economic activity. When the economy is strong and loan customers see sunny skies ahead, too often financial institutions have set aside stringent risk management and underwriting practices at their peril – and suffered the consequences down the road.  We are in a period when the economy is getting stronger, and it is reflected in loan portfolio balances...

Tuesday, 28 March 2017

CECL and your bank’s investment portfolio

Written by Heather Funsch, CPA, Rehmann and David G. Barnes, Herber Fuger Wendin

“Times and conditions change so rapidly that we must keep our aim constantly focused on the future.” – Walt Disney As most bankers have likely heard, the current expected credit loss model (CECL) is a new Financial Accounting Standards Board (FASB) accounting rule. It is effective in 2020 for public business entities that meet the definition of an SEC filer, the first quarter of 2021 for other public business entities, and calendar year-end 2021 for all other entities. The standard changes how banks account for credit losses on their loans/leases and on debt securities in their investment portfolios...

Tuesday, 31 January 2017

Economic reports help with forecasting

Written by Rehmann Team

Forecasting models produce results that are only as good as the underlying data. This makes it vitally important for financial institution management to have a comprehensive understanding of current and projected economic conditions that can influence their business … and their bottom line. While there are many financial firms, large institutions, investment houses and economists who regularly publish their research results and opinions, below is a list of some resources executives may want to consider when populating data in their forecasting models: Federal Deposit Insurance Corporation (FDIC) State Profiles FDIC State Profiles have been reformatted as a quarterly data sheet summation of banking and economic conditions in each state U.S...

Tuesday, 31 January 2017

Banks earn high CRA ratings

Written by The Rehmann Team

The Community Reinvestment Act (CRA) requires supervisory agencies to assess banks’ performance in helping meet the credit needs of its community. The evaluations look at several dimensions to assign an overall CRA rating using a four-tiered rating system, including the bank’s capacity, constraints and business strategies, as well as demographic and economic data about the community where the bank operates and the bank’s competitors and peers. More than 16,000 banks with $100 million to $1 billion in assets were rated in 2016:   Large banks — those with total assets of $250 million or more or that are affiliates of holding companies with assets of $1 billion or more — are evaluated in three areas: Lending Home mortgages, small businesses, small farms, community development, and, in some cases, consumer loans are analyzed for total number and dollar amount of loans, geographic and demographic distribution of loans, characteristics of borrowers, how many and what dollar amount of loans benefit low- and moderate-income individuals and neighborhoods, and the bank’s use of flexible lending practices to meet community needs. Investment Examiners look at the bank’s assessment area, as well as the broader statewide or regional area to evaluate how much the bank has invested, the complexity of the investments, how well the investments respond to community needs and whether the investments are different than those provided by other investors...

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