By Steve Rice, IBANYS Director of Government Relations, Policy & Services Development     

2012 Legislative Session In Its Final Hours

As this update is written, the NYS Legislature is in its second-to-last day of the 2012 session. Things are changing moment-to-moment, so we will forego a definitive legislative update until the issues the session is adjourned. Lawmakers in both chambers are predicting a late evening tonight (Wednesday) at the Capitol as the Senate and Assembly plow through hundreds of bills. They plan to return Thursday and hope to finish all their business by 5 p.m. There are no current expectations of a session on Friday. In these closing hours, several bills of interest to IBANYS  remain unresolved -- some we support and others we oppose.   

A.10567-A (Robinson, Kearns)/S.6777-B, Griffo) - introduced at the request of the Department of Financial Services is generally directed at conforming New York's Banking Law as it relates to branching to the Dodd-Frank Act. The current effect of Section 224(3) seems to be to subject automated teller machines of out-of-state state banks to home office protection. Enacted in its current form, the effect of the definition of "branch" would be to exclude such automated teller machines from home office protection. IBANYS suggested amending by changing the second sentence of subdivision 13 of Section 222 as added by  Section 6 of A10567 to read: "Except for purposes of subdivision 3 of section two hundred twenty-four of this chapter, the term shall not include an automated teller machine or other electronic facility."   

A10395/S7571 -- legislation proposed by the Office of Court Administration -- would impose new burdens on plaintiffs in foreclosure actions. The legislation has passed the Assembly. It does not appear to be relevant to smaller community banks which are involved in relatively few foreclosure actions. IBANYS is seeking to exempt from the legislation institutions which either a) have assets of less than $8 billion, or b) have fewer than 25 active foreclosure actions annually.   

A8145-C (Jeffries)/S. 4567-C (Griffo) would greatly expand membership opportunities in State-chartered credit unions to anyone in "a geographic area," and provide many of the same investment powers and incidental powers as possessed by federal credit unions. IBANYS is opposed to this legislation.   

A1362 Jeffries/S4406 Robach, which would significantly expand the State's Community Reinvestment Act, requiring the assessment of the banks' record of meeting credit needs to include a separate discussion of each assessment factor which would be applicable to branches, rather than system-wide.  

A9296 Robinson/S6692 Griffo -- Banking Development District  legislation which would impose certain additional criteria regarding "affordable products and services" (including financial education) on banks seeking to qualify for renewal of their state deposits.  This would significantly increase the required paperwork burden on participating banks. IBANYS opposed the bill, and it appears the legislation will not be acted upon this session. Our efforts to offer alternative and less onerous provisions were resisted by the Assembly.   

 S.4927 (Griffo)/A.8147 (Magee) would increase the overall cap on funding available (from the current $250 million to $350 million), and the individual bank cap on how much may be on deposit (from $10 million to $20 million)under theState Community Deposit Program. IBANYS supported the bill. The Senate has passed its version. The sentiment in the Assembly is that since only about $90 million total funding has been used, there is no need to increase the overall cap to $350 million. IBANYS asked the Senate to recall its bill, and  amend to only increase the per bank cap from $10 million to $20 million, while leaving the overall cap as is at $250 million.

Meanwhile, a recent legislative victory involved the CDARS legislation (S.5135 Martins/A.8971 Magnarelli), to allow New York State, its municipalities, agencies and public authorities to arrange for redeposit of monies through a deposit placement program. It passed the Assembly June 6 and the Senate on June 12. Although the credit unions pushed hard to amend this legislation to include them, subject to approval by the National Credit Union Administration--a tactic they have used successfully  in other states--IBANYS strongly advocated for passage without such an amendment and the final legislation did not include credit unions.

Also, despite pressure from the credit unions, A.5932 (Kavanagh, et al)/S34 (Squadron) - which IBANYS opposed and which would amend the NYS Banking Law to include low-income credit unions in the State Banking Development District Program - remains in committee and it does not appear any legislative action will take place on the bill this year.   

With another 24-to-36 hours remaining, IBANYS remains focused and will monitor developments until the final gavel. We will provide a comprehensive update once the Legislature departs. 

By Jeff Gerhart, Chairman of ICBA

A wise Minnesota community banker was quoted as saying, "We don't train bankers, we grow them." And while not all community banks are family-owned banks, there is a lesson for all of us in that comment.

The lesson is this: As community bankers, we each have the responsibility to teach the next generation about community banking. We have that opportunity to pass on what we've learned from those who have gone before us.

As a fourth-generation banker, I learned from both my father, Bud Gerhart, and my grandfather, Buzz Gerhart. I also continue to learn from the folks I work with and from the customers I serve. I learn something each and every day.

Today, I have the opportunity to pass what I've learned on to our next generation, and as you can imagine the road goes both directions. We're never too old to teach and never too old to learn.  

My son, Patrick, and my daughter, Kyle, are both involved in the Bank of Newman Grove as shareholders and directors. Because of their advice, we added online banking to our list of banking services some years back at their encouragement. It has been well received by our customers-young and old alike.  

So, it is my turn to pass on to our fifth generation what I've been taught and have learned over the years.

It doesn't matter if your community bank is family-owned or closely held or publically traded. What matters is your willingness to be a mentor to that next generation, to those folks in your bank who will follow in your footsteps. If you run a bank in Lafayette, La., Wichita, Kan., or Bangor, Maine, you can "pass it on," as the saying goes.

Learning and teaching never go out of style. It will be your legacy that you leave behind. Be sure you do your very best to make your legacy a great one.

As community bankers we are used to helping our customers find the best path to their financial success. Community bankers are great teachers, and we have the opportunity each and every day to pass on what we have learned.

So take the time to pass on what you've learned. Take the time to make sure that your legacy is a good one. Take the time. Sometimes we may forget, but as community bankers we make a living out of helping people, we're natural helpers and we're natural teachers. We make a difference in our banks and in our communities.

I have a license-plate holder that says it all: "Community Banks, Build Better Communities." Yes, indeed, community bankers do build better communities, and we have the opportunity to leave a great legacy for the next generation to follow.

Jeffrey L. Gerhart is chairman of the Bank of Newman Grove, Neb.

Our Western New York Regional Meeting and golf outing is coming up fast! We'll have a great breakfast meeting with fabulous speakers, and time to network with your banking peers, then head outside at the fabulous Lancaster Country Club for an afternoon round of golf.  

The fun kicks off on Thursday, July 12, 2012 at the Lancaster Country Club, just east of Buffalo.   

We'll be sending much more information in the coming days about this great FREE program (golf not free.) In the meantime, clear your schedule!  

By Leslie Scism and Liz Rappaport, The Wall Street Journal, June 12, 2012 - http://online.wsj.com/article/SB10001424052702303901504577462911622527098.html 

New York's top financial regulator has ordered insurers that sell homeowners policies to struggling borrowers to submit lower prices for review as part of a probe into alleged overcharging by the companies.

Department of Financial Services Superintendent Benjamin M. Lawsky has set a July 6 deadline for the proposed new premium rates for New York homeowners to be filed by the dominant insurers in the "force-placed" insurance business. The insurers are specialty units of Assurant Inc.  and QBE Insurance Group Ltd.  

An Assurant spokeswoman said its unit is cooperating with the New York regulators and "we are prepared to revise our lender-placed offerings to reflect mortgage market conditions and meet the needs of New York homeowners, lenders and investors." QBE couldn't be immediately reached for comment.

The order follows hearings in May in which Mr. Lawsky accused the insurers and banks of an "intricate web of relationships" that can push distressed families into foreclosure and hurts mortgage-bond investors.

Homeowners with mortgages are generally required to carry homeowner policies to protect their property, which serve as collateral for the loans.

Banks can "force" these policies on customers who allow their insurance to lapse by mistake or because they have stopped paying their mortgages and escrow funds have run short to cover the premiums.

At the hearings, Mr. Lawsky said the business has been highly profitable for the banks and insurers. He said his office found that insurers were paying out less than 25 cents in claims for each $1 of premium collected, compared with the approximately 55 cents they had estimated in their last rate submissions. Assurant and QBE have been using the same rates since 1994, according to the state.

State officials said rates for force-placed insurance can be three times to as much as 10 times the cost of normal homeowner's insurance. New York homeowners have been overcharged by many millions of dollars, Mr. Lawsky said.

Insurers maintain force-placed insurance prices are typically about two times higher than regular homeowners' policies because the houses they cover carry higher-than-average risk. Many properties become abandoned and subject to vandalism.

John Nadel, a stock analyst with Sterne Agee who follows Assurant, said the impact on the company would depend on the size of rate reductions and whether the regulatory push to curtail profit margins spreads nationwide. In May, he lowered his 2013 profit estimate and downgraded the stock to "underperform."

Mr. Lawsky said the force-placed insurance market lacks the sort of competition that would keep premiums down. In New York, the two insurers have 90% of the market. "Our hearings suggest a lack of competition, high prices, and low loss ratios, all of which hurt homeowners," he said.

As a result of the foreclosure crisis, the size of the force-placed insurance market has grown from $1.5 billion in 2004 to $5.5 billion in 2010.