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The Examiner

"From what we get, we can make a living; what we give, however, makes a life."
― Tennis player and anti-AIDS campaigner Arthur Ashe was born on this day in 1943

Community Bank Sentiment Still Negative: Concerns About Future Profitability and Regulatory Burden

Community bankers continue to be concerned about the health of the economy and how that will impact future profitability, franchise value and regulatory oversight as the economic fallout from the Covid-19 pandemic continues, the most recent Community Bank Sentiment Index (CBSI) reveals. CSBS publicly released the second quarter results this week.

While the second quarter CBSI results stayed roughly the same as the first quarter at 90 versus 91, that was largely due to their improved outlook on business conditions and monetary policy components. Banker sentiment in the other five economic components surveyed – regulatory burden, capital expenditures, operations expansion, profitability and franchise value – dropped in the same period. Notably, community bankers expressed concern about potential heavier regulatory burdens, with 47% of bankers expecting the regulatory burden to be heavier compared to 31% last quarter. 

“Community banks acted quickly to help their communities survive the economic fallout of the pandemic but have serious concerns about the challenges ahead,” said CSBS President and CEO John Ryan. “Policymakers should take note of these concerns, as community banks have a close-up view of our economic health.”

Key findings from the second quarter 2020 results include: 
•    54% of bankers believe business conditions will be the same (22%) or better (32%), up from 47% in the first quarter 2020 index  
•    64% of banks expect future profits to decline, an increase from 53%  
•    65% of bankers believe the economic impact of the Federal Reserve’s monetary policies will be the same or better, up from 38%   
•    26% of bankers expect their franchise value to be better, down from 41%  

The CBSI captures on a quarterly basis what community bankers nationwide think about the future on the seven key areas listed above. Participant answers are analyzed and compiled into a single number; an index reading of 100 indicates a neutral sentiment. Anything above 100 indicates a positive sentiment, and anything below 100 indicates a negative sentiment.

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Sometimes Holding Steady is a Good Thing

By CSBS Senior Executive Vice President Michael L. Stevens

The second quarter Community Bank Sentiment Index (CBSI) remained steady at 90. This is one point less than was reported at the end of March. During the data collection in March, the sentiment was crashing significantly as the economy began to close down in response to the pandemic. As we look for positive signs wherever we can, the CBSI remaining stable after all we have been through seems okay.

CBSI Index and Level of Uncertainty

As we evaluate the changes in the index drivers, we see improvement in the sentiment relative to business conditions and monetary policy. While still negative, they show significant improvement from March. Perhaps as time has passed and the economy is beginning to open, bankers at least know where their customers stand and can begin to repair the damage. Interest rates are low and the Fed has tried to do what they can to make sure there is plenty of liquidity in the market.

Each of the questions includes an “I don’t know” choice in the responses. We use this to measure the “uncertainty” among community bankers. While we saw improvement in the outlook for business conditions and monetary policy, those two questions also got the highest responses for uncertainty. With some markets having to slow or reverse the re-opening process, we could certainly see that uncertainty rise. Monetary policy has always had a relatively high uncertainty in our survey. While the Fed has been very clear on its intention to keep rates low for an extended period, bankers know the low rates can be helpful for recovery but very hard on their income statements in the long run.

CBSI Trends from Q2 2019 to Q2 2020

While we have noted concern in the previous quarters about a slightly declining trend for the outlook in profitability, the sentiment has dropped significantly in the last quarters. We see a similar slide in the outlook for franchise value. While bankers may have an idea of the damage that needs to be fixed, they know it is going to be costly and take a long time. 

These are life altering times, as bankers, business owners and consumers are forced to do things they have never done before and never thought possible. Peoples’ life plans are having to be altered. It is our response to “plan B” that defines us.

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Pandemic Spurs Need to Extend Appraisal Waivers in North Dakota

North Dakota state leaders this week sent a letter to the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) asking for an extension to the state’s temporary appraisal licensing requirement waiver due in part to the impact of the Covid-19 pandemic. 

Last summer, the ASC approved a 12-month waiver that expires on Aug. 7, 2020. The increased regulatory thresholds and waiver have provided much-needed flexibility for North Dakota citizens, the letter said. A survey showed that approximately 64% of responding banks said they had used the waiver option, with more than 55% reporting they used it on at least five occasions, the letter said.

The waiver was requested due to an appraiser scarcity that has resulted in appraisal delays. Because of the waiver, banks in North Dakota can waive appraiser credentialing requirements for federally related transactions under $1 million for commercial real estate transactions. The waiver expired for certain residential real estate transactions when the federal agencies increased appraisal exemption threshold limits. 

The temporary waiver required North Dakota leaders to develop a plan to identify potential solutions to the appraisal shortage. The letter detailed progress in that direction but noted that the pandemic has created a stress on the economy and slowed efforts to address the appraisal shortage.

Although solutions are being sought to correct the scarcity of appraisers, no lasting effect has been realized to date, the letter said, adding that the pandemic has “effectively halted all work on the issue for most of 2020.” A waiver extension would provide flexibility for borrowers during the economic recovery, it further explained.

The letter was signed by North Dakota Governor Doug Burgum and co-signed by Commissioner of Financial Institutions Lise Kruse as well as the presidents of the North Dakota Bankers Association, Credit Union Association of the Dakotas and Independent Community Banks of North Dakota. 

North Dakota Rep. Kelly Armstrong also sent a letter to the ASC supporting the extension. “I am confident the proposed waiver extension will accelerate appraisal completions and encourage solutions for the shortage of appraisers,” the Congressman’s letter said.

The North Dakota Indian Affairs Commission sent a separate letter in support of an extension.

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Simply Stated 24: The Future of Consumer Complaints


Lindsay Schmidt
Director, SES Business Services

Kyle Thomas
Vice President, SES Business Services


For a financial services business and for a regulator, a license provides clarity. The business knows who is supervising their activity, has someone to talk to when they want to be sure they are complying with laws, and provides confidence they are permitted to operate in a state. The state regulator who issues the license is able to see into the operations of financial services that are impacting their communities, making it easier to keep businesses in compliance and benefit their local economies.

But there’s a third party in this relationship that is critically important to business and regulator alike: the consumer. Sometimes, a consumer has a question or problem with a financial services business, and they need to reach out to their regulator. They want to know: Is what’s happening here legal? Do I have other options? How do I resolve my issue?

That’s where consumer complaints come in. For most of regulatory history, a Consumer Complaint would be a pretty linear relationship. A consumer would fill out a form or call their regulator, the regulator would ask questions of the business, and then the regulator would report back to the consumer their findings and what, if anything, is to be done.

But just as technology has changed how a business gets its license, and just as technology is just now changing how businesses get examined, we are very close to seeing a new way consumer complaints are handled. This new system will be faster, more organized, and easier for regulators and businesses alike. For the sake of consumers, it will provide regulators a better view into the entire history of a business, compliance and complaints alike. And, if everything goes as planned, this system could radically simplify how consumers get their voices heard.

On this episode, I talk to the masterminds behind this new system to learn more.

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Participate in the Seventh Annual National Survey of Community Banks!

Community banks, don't miss this chance to make your voice heard! CSBS is currently collecting responses for the 7th Annual National Survey of Community Banks, which equips both policymakers and researchers with a deeper understanding of the opportunities and challenges faced by smaller financial institutions.

This year, the survey also includes several questions tailored to the COVID-19 pandemic and asks questions about the future of our community banks and the communities they serve. We hope community bankers will share their voices, and look forward to gleaning valuable insights about the future of community banking and the impact of community banks during this crisis.

Please click here to complete the survey.

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Jim Payne Appointed New NMLS Ombudsman, Effective July 1

Jim Payne, NMLS Ombudsman
Jim Payne, NMLS Ombudsman

CSBS announced Jim Payne, director of examinations and assistant deputy commissioner for the Consumer and Mortgage Lending Division of the Kansas Office of the State Bank Commissioner, will serve as the new NMLS ombudsman, starting July 1.  

The NMLS ombudsman provides state regulators and industry a neutral environment for discussing NMLS issues and policies governing the system. As NMLS ombudsman, Payne will lead constructive dialogue between these NMLS users with the goal of achieving a more modern and efficient financial services regulatory landscape.  

“I am energized about assuming the role of NMLS ombudsman at this time,” said Payne. “As we lay the foundation for a modernized NMLS, in which data standardization across state agencies will drive a new licensing model, improving licensing supervision and assisting industry with their concerns about NMLS. And, SES is particularly important.” 

Prior to his role as NMLS ombudsman, Payne served as co-chair of the NMLS Modernization Steering Committee where he collaborated with other state regulators to provide insight and direction for ongoing NMLS enhancements and future development of the system. Payne also served as the CSBS District IV representative on the NMLS Policy Committee. 

In addition to facilitating open dialogue between state regulators and industry, Payne will be entrusted with discussing confidential matters NMLS users may raise and working to identify solutions. Payne will also be responsible for directing NMLS user matters to the appropriate NMLS staff or other offices as appropriate.         

More than 226,000 state-licensed entities across the mortgage, debt, consumer finance and money services businesses industries rely on NMLS to manage their licensing requirements. Over 424,000 federally registered institutions and mortgage loan originators also depend on the system.      

Payne begins his role as NMLS ombudsman following Scott Corscadden, Bureau of Loans supervisor for the Alabama State Banking Department, who had served as NMLS ombudsman since June 2016.    

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