Monthly Archives:' October 2014

Federal Agencies Approve Risk Retention Rule

Six federal agencies (The Board of Governors, HUD, FDIC, FHFA, OCC, and SEC) approved a final rule requiring sponsors of securitization transactions to retain risk in those transactions. The final rule implements the risk retention requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The final rule largely retains the risk retention framework contained in the proposal issued by the agencies in August 2013 and generally requires sponsors of asset-backed securities (ABS) to retain not less than five percent of the credit risk of the assets collateralizing the ABS issuance. The rule also sets forth prohibitions on transferring or hedging the credit risk that the sponsor is required to retain.

As required by the Dodd-Frank Act, the final rule defines a “qualified residential mortgage” (QRM) and exempts securitizations of QRMs from the risk retention requirement. The final rule aligns the QRM definition with that of a qualified mortgage as defined by the Consumer Financial Protection Bureau. The final rule also requires the agencies to review the definition of QRM no later than four years after the effective date of the rule with respect to the securitization of residential mortgages and every five years thereafter, and allows each agency to request a review of the definition at any time. The final rule also does not require any retention for securitizations of commercial loans, commercial mortgages, or automobile loans if they meet specific standards for high quality underwriting.

The final rule will be effective one year after publication in the Federal Register for residential mortgage-backed securitizations and two years after publication for all other securitization types.

Credit Risk Retention Final Rule – PDF (PDF Help)

Crowdfunding Rules Approved in Texas

The Texas State Securities Board approved rules to make crowdfunding ventures more “equitable” for small investors in Texas by a 4-0 vote on Wednesday, October, 22, 2014. With the vote, the board approved restrictions designed to enable unaccredited investors to invest as much as $5,000 a year in startups without requiring proof of high-income levels — in exchange for equity. The equity crowdfunding rules are scheduled to go into effect in late November and enable approved online portals to list startups seeking investors, a board spokesman said.

As we noted in previous posts, several Texas companies and individuals have used crowdfunding to raise thousand of dollars. The new rule should expand the practice considerably. The state crowdfunding rules do not set an investment limit on accredited investors.

Since approval of the vote, The Texas State Securities Board has added a section to its website dealing with the new equity crowdfunding rules.The state body said Tuesday that the section includes the final text of the rules,information for Texas crowdfunding portals and information for issuers using the intrastate crowdfunding exemption. Also, the section includes forms for crowdfunding portal registration, withdrawal of registration, and the crowdfunding exemption notice.

In 2012, the Jumpstart Our Business Startups Act (JOBS Act) included crowdfunding rule changes in an attempt to spark innovation and revitalize the national economy during the recession. Individual states are requesting exemptions to the proposed federal rules and establishing their own guidelines.

See More: §115.19. Texas Crowdfunding Portal Registration and Activities

CFPB Amends Regulation P

On October 20, the CFPB finalized its amendment to Regulation P, which requires, among other things, that financial institutions provide an annual disclosure of their privacy policies to their customers. The Gramm-Leach-Bliley Act (GLBA) and Regulation P mandate that financial institutions provide their customers with initial and annual notices regarding their privacy policies. If financial institutions share certain customer information with particular types of third parties, the institutions are also required to provide notice to their customers and an opportunity to opt out of the sharing. The GLBA was enacted into law in 1999. The statute, among other things, is intended to provide a comprehensive framework for regulating the privacy practices of an extremely broad range of entities. 

The finalized amendment creates an alternative delivery method for this annual disclosure, which financial institutions will be able to use under certain circumstances. Under the new rule, bank and nonbank institutions under the CFPB’s jurisdiction will now be allowed to post privacy notices online, rather than deliver an annual paper copy. Institutions that choose to post notices online must meet certain conditions, including: providing notice to consumers if the institution shares any data to third parties, in addition to providing an opportunity to opt out of such sharing; and using the 2009 model disclosure form developed by federal regulatory agencies. The institutions that choose to rely on the new delivery method must ensure that customers are aware of the notices posted online;  provide paper copies within ten days of a customer’s request; and make customers aware that the privacy notice(s) are available online—and that a paper copy will be provided at the customer’s request—by inserting a “clear and conspicuous statement at least once per year on an account statement, coupon book, or a notice or disclosure.”

The CFPB anticipates that the rule will: provide consumers with constant access to privacy notices; limit the amount of an institution’s data sharing with third parties; educate consumers on various types of privacy policies; and reduce the cost for companies to provide privacy notices.

Community Banking in the 21st Century

The second annual Community Banking Research and Policy Conference hosted by the Federal Reserve System and the Conference of State Bank Supervisors (CSBS) was held Sept. 23-24, 2014 at the Federal Reserve Bank of St. Louis. The research and discussions centered around three main focal points: new banks and emerging technologies; the effect of government policy on bank lending and risk taking; and the effect of government policy on community bank viability.

The report, Community Banking in the 21st Century: Opportunities, Challenges and Perspectives, summarizes the results of a survey and town hall meetings conducted by CSBS and state regulators that details conditions facing today’s community bankers.

CFPB Amending 2013 Mortgage Rules

The Consumer Financial Protection Bureau (CFPB) is amending certain mortgage rules issued in 2013 that took effect in January 2014. The final rule provides an alternative small servicer definition for nonprofit entities that meet certain requirements and amends the existing exemption from the ability-to-repay rule for nonprofit entities that meet certain requirements. The final rule also provides a cure mechanism for the points and fees limit that applies to qualified mortgages.

Defining nonprofit small servicers: Certain small servicers are exempt from some of the Bureau’s new mortgage servicing rules, so long as they—together with their affiliates—service 5,000 or fewer mortgage loans and meet other requirements. But the Bureau learned that some nonprofit organizations may service loans, for a fee, from other associated nonprofit lenders. Because of their unique structure, these organizations may not be able to consolidate their servicing activities and still meet the current requirements for the small servicer exemption. The changes finalized today provide an alternative definition of a small servicer applicable to certain 501(c)(3) nonprofit organizations so that they can consolidate their servicing activities while maintaining their exemption from some of the servicing rules.

Nonprofit Ability-to-Repay exemption amendment: Certain 501(c)(3) nonprofit organizations that lend to low- and moderate-income consumers were already exempt from the Ability-to-Repay rule if the organization makes no more than 200 mortgages a year, among other limitations. The adjustments finalized today include an amendment to this provision so that certain nonprofit groups, such as Habitat for Humanity, can continue to extend certain interest-free, forgivable loans, also known as “soft seconds,” without regard to the 200-mortgage loan limit.

Refunding excess points and fees: Under the Ability-to-Repay rule, certain loans called Qualified Mortgages are subject to certain requirements that protect consumers. The points and fees charged to a consumer on a Qualified Mortgage generally cannot exceed 3 percent of the loan principal at the time the loan is made. Under the amendments finalized today, if a lender discovers after the loan has closed that it has exceeded the 3 percent cap, there are limited circumstances where lenders can pay a refund of the excess amount with interest to the consumer, to have the loan still meet the legal requirements of a Qualified Mortgage. The refund must occur within 210 days after the loan is made. The creditor must also maintain and follow policies and procedures for reviewing points and fees and providing refunds to consumers. The provision also allows secondary market participants to provide these refunds. The change is designed to encourage lenders to provide access to credit to consumers seeking loans that are at or near the points and fees limit. This provision will expire on January 10, 2021.

The final rule did not address a possible cure for the debt-to-income ratio limit that applies to certain qualified mortgages and to the credit extension limit that applies to small creditor exemptions and special provisions in certain of the regulations adopted by the Bureau in the 2013 Title XIV Mortgage Rules.

CDFI Receives 263 Applications from CDEs

The Community Development Financial Institutions (CDFI) Fund today announced that it received 263 applications from community development entities (CDEs) requesting a combined $19.9 billion in allocation authority under the 2014 round of the New Markets Tax Credit (NMTC) program. The 2014 notice of allocation authority makes up to $5 billion in tax credit allocation authority available for the current round, pending Congressional authorization. The 2014 round applicants are headquartered in 44 states, the District of Columbia, Guam and Puerto Rico.

Through the first 11 rounds of the NMTC program, the CDFI Fund has made 836 awards totaling $40 billion in tax credit allocation authority. This includes $3 billion in Recovery Act awards and $1 billion for Gulf Opportunity Zones.

Treasury Guarantees Additional $200 Million in Bond Funding

The Treasury Department announced that it has guaranteed an additional $200 million through the Community Development Financial Institutions (CDFI) Bond Guarantee program.  Building upon its August announcement that $325 million in bonds had been guaranteed to support economic development opportunities across the country, the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) added an additional four bonds totaling $200 million, bringing the total guaranteed to date to $525 million. Under the program, CDFIs will issue federally backed bonds and use the proceeds to provide long-term, fixed-rate capital for projects in low-income communities.

The FY 2014 program participants include institutions with a strong presence in the community development finance industry that share an equal commitment to financing a wide range of job-creating and community-building projects. Four Eligible CDFIs received bond loans from the Community Reinvestment Fund, as Qualified Issuer. They are: Capital Impact Partners; IFF; Low Income Investment Fund; and the Reinvestment Fund.

Kennedy Sutherland to Speak at Merger & Acquisition Conference

Kennedy Sutehrland LLP’s managing partner, Patrick J. Kennedy, will present at the 3rd Annual Strategic Opportunities – Merger & Acquisition Conference at the JW Marriott New Orelans Hotel on November 12-14, 2014. This year’s conference features an array of prominent bank leaders and advisers from throughout the region. Leaders of successful banking organizations will explain the approaches their banks are taking to build shareholder value. Banker panelists and industry experts will also provide current surveys of M&A activity and pricing trends as well “best practice” guidance on managing strategic and regulatory challenges while optimizing operational efficiency.

Register online

WEDNESDAY, NOVEMBER 12, 2014
2:00 – 5:15 PRE-CONFERENCE WORKSHOP (Registration is limited to 75. Register early to reserve your seat)

2:30 – 2:45 STRATEGIES FOR MANAGING INDEPENDENCE

Remaining independent by design, not chance — tapping internal resources to support capital and shareholder liquidity
Joseph M. Ford, Conference Chairman, Senior Partner, Fenimore, Kay, Harrison & Ford, Austin

2:45 – 3:45 STRATEGIES FOR BRANCHING AND ORGANIC GROWTH

The fine art of playing the hand you have been dealt

James D. Goudge, Chairman of the Board & CEO, Broadway Bancshares, San Antonio
Mike Calvin, Principal, Level 5, Houston
David R. “Jude” Melville, President & CEO, Business First Bancshares, Baton Rouge
Mark L. Russell, CEO, Great Plains Bancshares, Elk City

3:45 – 4:30 SUBCHAPTER S ISSUES
Is Sub S still the best choice for your bank? How to capture the Sub S premium for your shareholders upon sale
Patrick J. Kennedy, Jr., Managing Partner, Kennedy Sutherland, San Antonio

4:30 – 5:15 PRESERVING INDEPENDENCE THROUGH SUCCESSION PLANNING
Techniques for planning succession of ownership and management
Ken Derks, Managing Consultant, Equias Alliance, Plano
J. Scott Petty, Partner, Chartwell Partners, Dallas

5:30 – 7:00 WELCOME COCKTAIL RECEPTION

THURSDAY, NOVEMBER 13, 2014

8:00 – 8:30 REGISTRATION AND BREAKFAST

8:30 – 8:45 YOUR STRATEGIC OPPORTUNITIES ARE WHERE YOU FIND THEM
Learning from your peers and leading advisers — where andhow to look.
Joseph M. Ford, Conference Chairman

8:45 – 10:00 M&A 1.01 FOR BANK LEADERS
Key deal management skills for buyers and sellers.
Curtis Carpenter, Managing Director, Sheshunoff & Co. Investment Banking, Austin
Chet A. Fenimore, Managing Partner, Fenimore, Kay, Harrison & Ford, Austin
Dennis R. James, Director of Mergers & Acquisitions, Bank of the Ozarks, Little Rock
Steve Wagner, Senior Manager, Crowe Horwath, Dallas

10:15 – 11:00 CONSOLIDATION STARTS AT HOME
Finding expansion opportunity in neighboring banks.
Moderator: Tom Mecredy, Senior Vice President, Vining Sparks, Austin
C.T. “Tommy” Head, President & CEO, Goldthwaite Bancshares, Goldthwaite
James E. Lindemann, Chairman & CEO, Industry Bancshares, Central Texas
Jeffrey A. Wilkinson, President & CEO, Pioneer Bancshares, Austin

11:00 – 12:00 ONE ACQUISITION AT A TIME
CEO perspectives on evaluating and implementing a successful M&A strategy.
Moderator: C.K. Lee, Managing Director, Commerce Street Capital, Dallas
Tyson Todd “Ty” Abston, Chairman & CEO, Guaranty Bancshares, Mount Pleasant
J. Patrick “Pat” Hickman, Chairman & CEO, Happy Bancshares, Texas Panhandle
George Martinez, Chairman of the Board, Allegiance Bancshares, Houston

12:15 – 1:15 LUNCHEON
Keynote Speaker: John W. Allison, Chairman of the Board, Home Bancshares, Conway, Arkansas

1:30 – 2:00 M&A MARKET TRENDS AND PRICING
Opportunities for 2015.
Chris Murray, Principal, Sandler O’Neill + Partners, New York

2:00 – 3:00 ACCESSING GROWTH CAPITAL AND M&A FINANCING FROM PUBLIC AND PRIVATE MARKETS
Is there an IPO in your future? What you need to know.
Moderator: Chet Fenimore, Fenimore, Kay, Harrison & Ford, Austin
John D’Angelo, President & CEO, Investar Bancshares, Baton Rouge
Brian James, Principal, BankCap Partners, Dallas
Craig McMahen, Managing Director, Keefe, Bruyette & Woods, Austin

3:15 – 4:00 THE CHANGING M&A LANDSCAPE
How today’s regulators and today’s deals are different.
Cynthia A. Dopjera, Assurance Shareholder, Harper & Pearson Company, Houston
Robert Ulrey, Managing Director, Stephens & Co, Little Rock
Patrick J. Kennedy, Managing Partner, Kennedy Sutherland, San Anotnio

4:00 – 5:00 SECRETS OF MANAGING SUCCESSFUL POST-ACQUISITION INTEGRATION
Culture, technology and people.
Moderator: R. Clark Locke, Managing Director, Hovde Group, Austin
Randy Dennis, DD&F Consulting, Little Rock
Dennis R. James, Director of Mergers & Acquisitions, Bank of Ozarks, Little Rock
James E. Lindemann, Chairman & CEO, Industry Bancshares, Central Texas

5:00 – 5:30 THE ANATOMY OF SOUND BANK VALUATION
Which numbers really matter and why.
Karen Kline, ASA, Managing Director Valuations, Sheshunoff & Co Investment Banking, Austin

5:30 – 7:00 COCKTAIL RECEPTION

FRIDAY, NOVEMBER 14, 2014

7:30 – 8:00 BREAKFAST BUFFET

8:00 – 9:00 GENERAL COUNSELS’ REPORT
The current legal and regulatory landscape for ALL community banks.
Moderator: Tom Perish, Partner, Andrews Kurth, Houston
B. Scott Daugherty, President/General Counsel, Compliance Alliance, Austin
Rusty N. LaForge, EVP & General Counsel, Southwest Bancorp, Oklahoma City
Charlotte Rasche, Senior EVP & General Counsel, Prosperity Bancshares, Houston

9:00 – 9:45 BALANCE SHEET PLANNING
Impact of new capital regulations, restructuring opportunities in acquisitions and asset valuation strategies.
Rick Childs, Partner, Crowe Horwath, Indianapolis
Stephen C. Raffaele, CEO & President, MSC Asset Management, Dallas
Debbie Scanlon, Partner, BKD

9:45 – 10:45 REGIONAL ACQUIRERS ROUNDTABLE
What are the bigger banks looking for?
Moderator: Kade Machen, Managing Director, Sterne Agee, Austin
Geoffrey “Geoff” D. Greenwade, President & CEO, Green Bank, N.A., Houston
George A. Makris, Chairman & CEO, Simmons First National Corp., Little Rock
James D. “Dan” Rollins, President & CEO, BancorpSouth Bank, Tupelo

10:45 – 11:30 THE ANNUAL TAKEAWAY ROUNDTABLE
Audience and panelists share their parting takeaways and predictions for another year.

BANKER PANELISTS INCLUDE:
Tyson Todd “Ty” Abston, CEO, Guaranty Bancshares
John W. Allison, Chairman, Home Bancshares
John D’Angelo, CEO, Investar Bancshares
Geoffrey “Geoff” D. Greenwade, CEO, Green Bank, N.A.
James D. Goudge, CEO, Broadway Bancshares
C.T. “Tommy” Head, CEO, Goldthwaite Bancshares
J. Patrick “Pat” Hickman, CEO, Happy Bancshares
Dennis R. James, Director of M&A, Bank of the Ozarks
Rusty N. LaForge, EVP/General Counsel, Southwest Bancorp
James Lindemann, CEO, Industry Bancshares
George Martinez, Chairman, Allegiance Bancshares
George A. Makris, CEO, Simmons First National Corporation
David R. “Jude” Melville, CEO, Business First Bancshares
Charlotte Rasche, EVP/General Counsel, Prosperity Bancshares
James D. “Dan” Rollins, CEO, BancorpSouth Bank
Mark L. Russell, CEO, Great Plains Bancshares
Jeffrey A. Wilkinson, CEO, Pioneer Bancshares