2019 Journal of Community Bank Case Studies

2019 COMMUNITY BANK CASE STUDY COMPETITION

chartered bank investment to safely function with FDIC insurance (Gordon). According to James Gordon, CFO of FirstBank, two years prior to the passage of the EGRRCPA, FirstBank was approached by a FinTech fund that was searching for banks willing to invest and use its technology as a “sounding block” for the finalizing and refining of its product. At that time, the Volcker Rule prevented any investment in the FinTech fund, as it is classified as a private equity endeavor. With the new Volcker rule exemption, FirstBank would be allowed to invest in these private equity FinTech funds, use the newest and most up- to-date technology, and compete with larger financial institutions that are currently able to invest in such technologies directly. When asked if EGRRCPA’s Volcker Rule provision could help FirstBank serve new customers within its markets, Gordon stated that community investment will always benefit

a community bank. Gordon continued to explain that the Volcker rule exemption would allow FirstBank the opportunity to invest in community projects funded by various investment vehicles. Investment funds which are created to provide capital to emerging growth, such as small business or housing, are generally barred from investment by banks under the existing Volcker Rule. The exemption allows FirstBank to remain the relevant and competitive community advocate that it strives to be. Exhibit 10 illustrates the economic impact of this exemption. D. Other Considerations As with most government acts and regulations, a lag between the congressional passage and the actual implementation of the EGRRCPA exists. Several unapparent provisions of EGRRCPA could prove beneficial for FirstBank in the coming quarters after reviews and interpretations become final. The increase in the threshold for appraisal requirements in rural areas from $250,000 to $400,000 may prove beneficial. Due to the rural setting of many of FirstBank’s markets, areas that tend to lack relevant appraisals, this revised $400,000 benchmark would decrease the number of required appraisals for many loans in these communities. The appraisal requirement changes are expected to have an $85 million impact on the balance sheet as well as a $1.3 million increase in net income by year-end 2019 (Durham). Regulatory relief for community banking is a rare and always appreciated occurrence in the banking industry. Relief that directly benefits

The exemption allows FirstBank to remain the relevant and competitive community advocate that it strives to be.

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