2019 Journal of Community Bank Case Studies

2019 COMMUNITY BANK CASE STUDY COMPETITION

Burden Questions). Implementing multiple software systems created expenses in licensing and time necessary to train employees. Part III: Review of Relevant EGRRCPA Provisions Kentucky Bank provided a Provisions Chart (Figure 2) that details the anticipated financial statement impact of five of the provisional changes within EGRRCPA. The provisions with potential financial impact on the bank are: simplified capital rules, small bank holding company threshold, qualified mortgage, HMDA and exam cycle. The bank does not plan to take advantage of the simplified capital rules or the small bank holding company threshold in the near term, but provided dollar amounts for hypothetical situations that could be possibilities in the future. Because the bank exceeds the 500-mortgage threshold, the HMDA provision will cost the bank an additional $30,000 through software upgrades, process redesign and employee training. Changes to allow qualified mortgages to include portfolio loans and increasing the eighteen-month exam cycle for banks between $1 billion and $3 billion both allow Kentucky Bank to better serve customers. Of the five provisions, the change in the definition of a qualified mortgage provides the most significant financial statement impact. Sanford Shatz concludes that lenders must recognize at least eight criteria to determine a borrower’s ability to repay: current or reasonably expected income or assets; current employment status; monthly payments on the covered transaction; monthly payments on

Of the five provisions, the change in the definition of a qualified mortgage provides the most significant financial statement impact.

policies and regulations” (CSBS Regulatory Burden Questions). Compliance has become a responsibility of the entire bank, not just one department or team. Audits and examinations are also performed to ensure that the correct measures are being taken. Kentucky Bank has its own internal audit department to review its documents and procedures. Along with regular internal audits, the bank uses a third-party auditor conduct to 2-3 onsite examinations per year (CSBS Regulatory Burden Questions). In addition to employee training and compliance examinations, most banks also had to implement new software as well to remain compliant with the post-recession regulation. “From a software perspective, we use at least three different pieces of monitoring software to ensure we remain fully compliant with AML/ BSA, HMDA, and CRA. In addition to those software bundles, we also utilize three different loan and deposit origination software systems to ensure our disclosure documents are consistent, compliant and accurate” (CSBS Regulatory

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