The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
Introducing the new ICBA Chairman
John Buhrmaster, a fourth generation community banker from Upstate New York, became ICBA chairman at the convention. He is president of 1st National Bank of Scotia. Introducing himself from the general session stage, Buhrmaster said:
"From 1978 to 1986 - my entire high school and college years - our bank was under a cease and desist order from the Comptroller of the Currency. At one time we were told we were one of the most likely banks in the country to fail. In fact, multiple times, the OCC brought big bank buyers to Scotia just to look at our bank. Yet we didn't fail. Of the more than 1,300 banks with orders against them, only two survived with local ownership. We were one of the two."
Buhrmaster continued: "In 1923 our bank was founded to make peoples' lives better. In 1978 that was still true. So they fought and fought and finally won a long battle to stay open. It was a costly and exhausting fight but my father will tell you, to this day, it was worth it. The community rallied behind them. Our directors, customers and staff put their money, sweat and faith behind the effort. Our bank was founded not only as a community bank; it was saved by the very community it served. Our community saved us.
"Not only did they preserve the bank, they also preserved several businesses that continue to this day to provide vital services to our community. Most of you will find this hard to believe, but all those loans that the regulators told us were bad and had to be charged off at that time, well, not all of them were that bad."
Buhrmaster said not only was his father a fighter, but his mother was too. She was a volunteer at a hospital. She spoke up against the county's initiative to close it. She lost that battle but ran for public office and won. "She helped turn that hospital into a drug treatment facility that over the years has helped thousands of people make their lives better," Buhrmaster said.
Comments from the out-going chairman
Bill Loving, president and CEO of Pendleton Community Bank, Franklin, W. VA., concluded his chairmanship at the Honolulu convention. Loving said one of the highlights of his year was traveling to Tokyo to participate in a seminar on international finance. "Our business model is unique," Loving said after learning more about banking around the world. "It is precious; it is worth fighting for."
Throughout the previous 12 months, Loving and the ICBA pressed the too-big-to-fail issue. Loving told the general session audience: "I am confident there are two four-letter words that have been added to the too-big-tofail repertoire: 'ICBA' and 'Fine.' We will continue to fight until the day when the systemic risk of these institutions is eliminated."
Former ICBA chair on key issue
One convention attendee was Rusty Cloutier, president and CEO of MidSouth Bank, N.A., Lafayette, La.; he's a past-ICBA chairman (2003-2004). Visiting between sessions, Cloutier said one of his biggest concerns is a proposed change to accounting rules which would require lenders to reserve against all loans, even before borrowers show any signs of trouble.
"They want me to tell them which of my loans is going to go bad," Cloutier lamented. "Well, tell me how much snow is going to fall in the next five years, or what the price of oil is going to be in five years."
Cloutier said the approach is going to cause banks to over-reserve; earnings from a regulatory perspective will decline. The 1RS, however, requires banks to figure earnings using different rules. He said the situation is particularly threatening to subchapter S banks. He said the 1RS may consider the bank to have one level of profitability but regulators may say the profitability is lower and prevent the bank from distributing to shareholders sufficient dividends to cover the tax liability. "This will kill the sub S banks," Cloutier said.
How to talk to a 20-year-old
Jason Dorsey, chief strategy officer for the Center for Generational Kinetics, told bankers that people in the Millennial generation approach life much differently than Baby Boomers did when they were in their 20s and 30s. He noted that Gen Y, or Millennial (age 19 to 37), are likely to hit key life milestones about eight years later than Baby Boomers did. These milestones include first day at a real job, college graduation, wedding date, purchase of a home, and having a child.
Dorsey said it is important for bankers to understand Millennial because they make up the emerging workforce and customer base. He said Millennial like to think of themselves as unique. "If you are marketing to this generation, use a tag line such as 'As unique as you are'," Dorsey suggested. "Words such as unique, special, one-of-a-kind are words we respond to."
Dorsey explained that Millennial love to look at screens and they have trouble communicating without them. He suggested that if a Baby Boom generation banker needs to interview a Millennial, a good tactic is to sit next to the person rather than across the desk. The banker should hold an iPad or some other screen device, clicking through a PowerPoint-like presentation. With both banker and Millennial looking at the screen, they will be able to have a useful conversation, Dorsey said.
A few numbers from the FDIC
FDIC Chairman Martin Gruenberg provided a little statistical context to his description of the banking environment during his presentation at the convention. He reported;
* Bank failures peaked in 2010 at 157; last year there were 24.
* The number of banks on the FDIC problem bank list peaked at 888 in March 2011 ; at the end of fourth quarter 2013 there were 467.
* At the low-point of the financial crisis, the Deposit Insurance Fund was $20 billion in the red. At the end of the fourth quarter 2013, it had a balance of $47 billion, giving it a coverage ratio of 0.79 percent. *