Pub. 9 2018 Issue 2

Summer 2018 15 West Virginia Banker About the authors: Sandra Murphy and Amy Tawney are attorneys in the Charleston, West Virginia office of Bowles Rice LLP. Should you require more information, please feel free to contact the authors directly. Ms. Murphy is the leader of the firm’s Banking and Financial Services team. She concentrates her practice on banking, commercial and financial services and securities law. She can be reached at 304-347-1131 or by e-mail at smurphy@bowlesrice.com. Ms. Tawney focuses her practice on banking law, mergers and acquisitions, securities law and regulatory matters. She can be reached at 304-347-1123 or by e-mail at atawney@bowlesrice.com. 500 closed-end mortgages and 500 open-end lines of credit for each of the two preceding years) from new HMDA disclo- sures added by the Dodd-Frank Act. However, banks that have received a “needs to improve” CRA rating during each of the last 2 most recent exams, or a “substantial non-compliance” rating on the one most recent exam, must still comply with the additional HMDA disclosures. Rural Appraisal Relief: The Act eliminates certain residen- tial mortgages (less than $400,000) from appraisal require- ment in rural areas provided that the lender shows that three appraisers were not available within 5 days beyond a reasona- ble time frame (determined by the bank) for an appraisal. TILA Waiting Period: The Act removes the 3-day waiting period requirement in TILA/RESPA mortgage disclosures if the consumer receives a second offer of credit from the same lender with a lower rate. Reciprocal Deposits: Under the Act, certain reciprocal deposits will be exempt from FDIC restrictions on acceptance of brokered deposits. Short Form Call Reports: The Act increases the eligibility for banks to file Short Form Call Reports in the first and third quarters from a minimum asset size of $1 billion to $5 billion according to the Fed Small Bank Holding Company Policy. The Act increases eligibility for use of the Federal Reserve Small Bank Holding Company Policy Statement from banks with assets of $1 billion to banks with assets of $3 billion. Exam Cycle: The Act increases the number of banks that will qualify for an 18-month exam cycle, as eligibility goes from minimum asset threshold of $1 billion $3 billion. Opening Account Online: The Act clarifies that scanned drivers’ licenses may be used to meet identity verification requirements for opening new accounts and engaging in transactions online. High Volatility Commercial Real Estate Loan Capital Treatment: The Act revises the definitions pertaining to high volatility commercial real estate (HVCRE) loans, which require larger capital allocations, to allow commercial borrowers to satisfy the 15% equity requirement through the contribution of land and property at its appreciated value, as opposed to its cost basis. Municipal Bonds: The Act provides that investment grade municipal securities will be treated as high-quality liquid assets for purposes of calculating the liquid coverage ratio at larger banks. The Act also includes some consumer protection provisions and some new protections for veterans, seniors and members of the military. Although the purpose of the Act was to free community banks from the regulatory burdens imposed by the Dodd- Frank Act, large regional banks will also see relief from feder- al oversight. In particular, the Act raises the asset threshold above which banks are considered systemically important fi- nancial institutions and therefore subject to stricter oversight from the Federal Reserve from $50 billion to $250 billion. Banks with assets less than $100 billion will be freed of current oversight requirements, and banks with assets between $100 billion and $250 billion will no longer be subject to the stricter oversight after 18 months. These banks will continue to be subject to periodic stress tests and any enhanced supervision adopted by the Federal Reserve. The next step is for regulators to amend the final regulations, some of which will require comment periods. In addition, sev- eral regulatory proposals that support the Act are still pending. The Act should allow community banks to reduce their regulatory costs and to expand the mortgage products that they offer to customers, a much-needed result in the rural communities served by banks in West Virginia. However, the full impact of the Act will not be fully known for several years, and the industry must remain vigilant and vocal as the new regulatory environment unfolds.  Federal banking agencies are required to establish a community bank leverage ratio of tangible equity to average consolidated assets of not less than 8% and not more than 10%.