2019 Journal of Community Bank Case Studies

University of Tennessee at Martin

THIRD PLACE:

the community bank from daunting and overbearing regulation is important to banks, such as FirstBank. Tennessee Department of Financial Institution’s Commissioner Greg Gonzales believes legislation and regulation within the banking industry is most beneficial when it is tailored to each institutions’ services and capacity, so that there is a balance between the regulation’s benefit and its economic burden. This balance is incorporated in the EGRRCPA and empowers the examiners and bankers to conduct business that provides safety to the market as well as better serve the community in which they operate. Looking Forward A. Additional Regulatory Relief Needed Although the legislative branch, through the passage of the EGRRCPA, is now “swinging the pendulum” back to a more level playing field, more relief needs to be found, so that the smaller community banks cannot only compete with the larger national banks, but also devote more of their time and efforts to their customers. Many aspects within the EGRRCPA were directed towards banks with less than $3 billion in assets, thus excluding FirstBank. Tim Johnson, CRO, believes relief is needed from many aspects of the Dodd-Frank Act and more relief should be tailored to the community banks holding $3 billion to $10 billion in assets. Some of the more burdensome regulations that have not been addressed for banks with $3 billion to $10 billion in assets by the EGRRCPA include the Bank Secrecy Act, Home Mortgage Disclosure Act, and deposit

Regulatory relief for community banking is a rare and always appreciated occurrence in the banking industry.

compliance regulations. As previously stated, both the BSA and the HMDA require extensive documentation, monitoring, and reporting. BSA and HMDA total an estimated $9.2 million per year in compliance costs for FirstBank (Durham). If even slight relief was given to banks in BSA and HMDA compliance, FirstBank would be able to focus that percentage of capital no longer needed to comply with BSA and HMDA toward the community. FirstBank allocates approximately $2 million per year in deposit compliance based on industry average (Durham). Community banks like FirstBank want to focus their efforts on building relationships with the community instead of spending their time adhering to onerous regulations. A portion of the $2 million devoted to regulatory compliance could be reinvested in the community and used to build the customer relationships FirstBank desires.

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