
INSIGHTS FOR FINANCIAL INSTITUTIONS	December 8, 2015

CONNECT

Director of Financial Institutions
Gary Smith

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FAST Act Taps Banks for Highways, But With Some Relief for Community Banks

On Dec. 4, President Obama signed into law the Fixing America's Surface Transportation Act (FAST Act). This is the long-term highway funding bill Congress has been negotiating that authorizes spending from the highway trust fund through September 30, 2020.

While the FAST Act extends a variety of highway-related taxes, it also contains provisions of interest to banks. These include:

Modified Fed Dividend for "Larger Banks"

Effective January 1, 2016, the dividend paid on Federal Reserve Bank stock required to be held by national banks and Fed member banks will be limited to the lesser of the yield on the 10-year Treasury note or 6 percent for those banks with assets greater than $10 billion. Currently, the 10-year Treasury note yield approximates 2.30 percent. Importantly, banks with assets of $10 billion or less will continue to receive Fed stock dividends of 6 percent. The $10 billion asset threshold will be indexed for inflation.

Limitation on Fed Surplus

To the extent the aggregate capital surplus funds of the Federal Reserve Banks exceed $10 billion, the excess will be transferred to the Treasury's general fund. According to media reports, the Fed's surplus currently sits at about $29 billion. Consequently, this measure should result in the transfer of approximately $19 billion to the general fund.

18-month Exam Cycle for "Smaller Banks"

More banks will qualify for an 18-month examination cycle due to changes made to the Federal Deposit Insurance Act. The current asset thresholds to qualify as a "small institution" are doubled. This should provide some cost savings for well-capitalized banks with less than $1 billion of assets.

The FAST Act contains several other provisions advocated by banking trade groups. For more information concerning this legislation and how it affects your bank, please contact your local Eide Bailly financial institutions professional.

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