TUESDAY3pt SEPTEMBER stroke, 100% size 7, f2021or top VOL. of newspaper 186 No. =171 8.9931 inches AMERICANBANKER.COM Follow us on Twitter @AmerBanker CIBC nabs Costco 5 partnership in Canada The Toronto-based bank will take over the High priority account from Capital One, which is ending its deal with the membership-only retail Texas Capital is hiring more bankers to fuel growth in 2.5pt stroke = 6.75 inches chain. Page 7 commercial and industrial lending. Its total C&I have declined by 14% since mid-2019. JPMorgan settles French tax- See story on page 6 6 fraud case for $30 million JPMorgan Chase settled a longstanding Commercial loans held for investment at June 30* French criminal investigation over allegations it helped clients commit tax fraud 2pt stroke = 5.75 inches for 25 million euros ($29.6 million). Page 7 $12B

$10B White House favors Emory’s $10.2B $10.6B 7 Kristin Johnson for CFTC seat $8B $9.2B $9.1B The Biden administration plans to select $8.3B $6B1.5pt stroke = 4.6667 inches Kristin Johnson, a law professor who previously worked on Wall Street, for a $4B Democratic seat on the Commodity Futures $2B Trading Commission, according to a person familiar with the matter. Page 8 $0 1pt stroke = 3 inches 2017 2018 2019 2020 2021 Apple to let media apps 8 avoid 30% transaction fee Source: The company (*excludes energy loans) after global scrutiny Apple will allow developers of some apps to link from their software to external websites for payments by users, addressing dailybriefing 2021 bank reputation survey: a longstanding App Store complaint and 3 Goodwill humming settling an investigation by Japan’s Fair The banking industry is now enjoying a Trade Commission. Page 8 Community banks to Congress: “strong” reputation overall, after building on 1 Tax -bank mergers gains made at the height of the pandemic. Awaiting its own merger, Hoping to slow the pace of deals, the Here’s who stood out and why. Page 3 9 Virginia community bank Independent Community Bankers of invests in mortgage firm America is urging lawmakers to impose a tax Texas Capital’s expansion plan With its sale to Blue Ridge Bankshares set on credit unions that acquire small banks. 4 greeted with skepticism to close within months, FVC Bankcorp is One credit union CEO called the proposal a The Dallas bank unveiled an initiative that moving to diversify by taking a 29% stake in “gimmick.” Page 2 involves doubling its client-facing headcount Atlantic Coast Mortgage. Page 9 across the Lone Star State and expanding FTC fines Capital One its investment banking division. But its White House review of 2 CEO Richard Fairbank over stock price plunged amid concerns about 10 bank M&A must consider stock awards how long it will take to deliver returns for nonbanks’ emergence “As the CEO of one of America’s largest investors. (See chart above.) Page 6 If Biden appointees are going to apply more banks, Richard Fairbank repeatedly broke antitrust scrutiny to bank mergers, they need the law,” the acting director of the FTC’s to factor into their analysis the competitive Bureau of Competition said. Page 3 threat that banks face from fintechs and other less-regulated players, Greg Baer writes. Page 9 TUESDAY SEPTEMBER 7, 2021 AMERICANBANKER.COM PAGE 2

said Alan Keller, senior vice president of recently struck a deal to acquire Security CREDIT UNIONS legislative policy for the ICBA. Federal Savings Bank in Jasper, Alabama. “There is precedent, and our proposal An excise tax would not have derailed this is not unconventional,” he said. “We see a deal, nor would it have benefited the local Community correlation between our proposal and these community had it been paid, said Steve excise taxes on tax-exempt organizations Swofford, president and CEO of the credit banks to that exceed their tax exemption.” union. The Federal Credit Union Act states “We are exempt from federal taxes only” that credit unions are established for and pay taxes to our local communities, Congress: Tax “promoting thrift among members and Swofford said. “Were such a fee to be creating a source of credit for provident charged, I don’t believe it would deter such credit union- or productive purposes.” The purchase of deals, but could impact the price a credit banks deviates from this goal, Keller said. union was willing to pay, and what bank “We believe that the purchase of tax- stockholders would receive.” bank mergers paying banks that serve nonmembers using Most of the banks that are being offered tax-exempt funds is beyond the scope of for sale, including the $40 million-asset By Ken McCarthy and Jim Dobbs this public mission,” Keller said. Security Federal Savings, are Subchapter September 02, 2021 The American Bankers Association has S banks and do not pay federal taxes at The Independent Community Bankers of not proposed a tax on credit unions for the corporate level, according to Swofford, America wants credit unions to pay a price their bank purchases, but it also wants who dismissed the ICBA’s the proposal as for their purchases of community banks. to see such deals curtailed, according to “a public relations gimmick in the bankers’ The trade group has called on the group’s spokesman Ian McKendry. continuing 100-year war against the policymakers to implement an “exit fee” Because credit unions are not subject to credit unions and their well-deserved tax on bank acquisitions by credit unions to the Community Reinvestment Act, the new exemption.” “capture the value of the tax revenue that institution is no longer obligated to invest Alabama Credit Union’s deal to buy is lost once the business activity of the in and serve low- and moderate-income Security Federal is one of 10 transactions acquired bank becomes tax-exempt.” members in the community, McKendry announced this year in which a credit union At issue is whether credit unions have said. is buying a bank, including five in August. an unfair advantage in purchasing banks. “That’s a lose-lose proposition for There were seven such deals announced Because credit unions are not taxed, communities where these transactions take last year and a record 16 in 2019. bank lobbyists say they are able to pay a place, and we will work with Congress on Laurie Stewart, president and CEO of premium in mergers and acquisitions that any approach that addresses this bad public the $923 million-asset Sound Financial bank buyers can’t match. The ICBA claims policy,” McKendry said. ”If credit unions Bancorp in , amplified the banking a tax on credit union-bank mergers would want to buy a bank, they should pay taxes industry’s opposition to credit unions’ level the playing field. like a bank and should have to demonstrate buyouts of banks. She noted that nonprofit, The Independent Community Bankers of that they serve their local communities.” tax-exempt credit unions have a mission America in recent years has railed against Alabama Credit Union, a $1.3 billion- to work with underserved populations — those transactions while asking Congress to asset organization based in Tuscaloosa, as opposed to mirroring for-profit banks. hold hearings, and asking the Government Accountability Office to study the long- term impact of credit union purchases of Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 banks. Phone 212-803-8200 AmericanBanker.com The proposed fee would essentially 3pt stroke, 100% size for top of newspaper = 8.9931 inches be a tax collected by the Department of Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440

Treasury or the Internal Revenue Service, 2.5pt stroke = 6.75 inches said ICBA spokesperson Nicole Swann. Managing Editor Dean Anason 770.621.9935 Reporters/Producers Proceeds would go to the general Treasury 2pt stroke = 5.75 inches fund to reduce the deficit and would not be Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 earmarked for any specific purpose. Miriam Cross 571.403.3834 1.5ptWashington stroke = 4.6667 inches Bureau Chief Joe Adler 571.403.3832 The tax would be equal to 10% of the Jim Dobbs 605.310.7780 gross value of the acquired bank’s assets 1ptExecutive stroke = 3 inches Editor, Technology or liabilities as shown on its most recent Penny Crosman 212.803.8673 John Heltman 571.403.3847, Allissa Kline 716.243.2679 balance sheet, whichever is greater, the Hannah Lang 571.403.3855 ICBA proposed. Community Banking Editor Paul Davis 336.852.9496 John Reosti 571.403.3864, Gary Siegel 212.803.1560 The proposal follows the example of Contributing Editor Daniel Wolfe 212.803.8397 the excise tax placed on the investment Kevin Wack 626.486.2341 income of private colleges and universities,

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When credit unions take out banks, they “It all comes back to politics,” Marinac Fairbank is a rarity in financial circles become essentially indistinguishable said. “The credit unions have a powerful since he’s both the founder and the chief from commercial banks by expanding lobby, and there are a lot of lawmakers executive officer of one of the country’s into business and commercial real estate who’d rather not be in opposition to that largest banks. The 70-year-old’s net worth has lending — yet they retain special tax lobby. So I’ll be skeptical until proven soared alongside Capital One’s stock, and he status that gives them a taxpayer-funded otherwise. I just don’t see ICBA getting this became a billionaire in 2018, according to the competitive advantage, she said. done, based on history.” Bloomberg Billionaires Index. “It’s simply terrible public policy,” “For many years, Mr. Fairbank has Stewart said in an interview. “If buying a been advised on his personal disclosure bank fits your business model, then you LAW AND REGULATION responsibilities by a well-respected have a bank business model and taxes international law firm,” Capital One said should come with that.” in an emailed statement. “As soon as his The ICBA is making a good attempt to FTC fines counsel identified the firm’s error, Mr. project the purchase of banks by credit Fairbank promptly self-reported to the FTC unions as a loss of revenue to taxpayers, but Capital One and submitted a corrective HSR filing. His the strategy ignores the roots of the issue, personal law firm has agreed to pay the full said Michael Fryzel, an attorney and former amount of the fine as a result of its mistake.” chairman of the National Credit Union CEO Richard Administration. “The ICBA needs to talk to their member Fairbank over CONSUMER BANKING banks and find out why they are selling,” he said. “Could it be they are just taking advantage of a good business deal? Certainly stock awards 2021 bank directors of numerous community banks have become multimillionaires overnight.” By Bloomberg News reputation According to Alabama Credit Union’s September 02, 2021 Swofford, many small community banks The Federal Trade Commission fined are no longer viable, primarily due to Capital One Financial Chief Executive survey: competition from national and regional Richard Fairbank for failing to properly report banks, and are looking for an exit strategy stock awards to federal antitrust authorities. Goodwill that will pay the stockholders cash. “Credit Fairbank received 100,000 Capital One unions are the only option to do that,” he shares as part of his pay package in 2018 said. and didn’t wait for authorities to investigate humming Another Alabama-based institution, the before finalizing the acquisition of the $631-million-asset Five Star Credit Union shares, the FTC said. While Fairbank agreed By Joel Berg in Dothan, is one of a handful of credit to pay a $637,950 civil penalty to settle the September 01, 2021 unions that have acquired more than one charges, Capital One said his personal law Last year could have been a reputational bank. Bob Steensma, president and CEO firm has agreed to pay the full amount of disaster for Truist Financial. When the of Five Star, said its deals have helped it the fine because the filing error was “due to COVID-19 pandemic struck in early 2020, offer services in markets that banks have administrative errors by the firm.” the company was just starting to blend the fled, particularly in rural areas. “In some of The FTC alleged that the moves violated franchises of BB&T and SunTrust into one the communities we serve, Five Star is the the Hart-Scott-Rodino Act, which requires after their coupling in 2019. only banking institution within 10 or more companies and individuals to report large Mergers often reveal organizational miles,” he said. transactions to the FTC and the Justice weaknesses, and the pandemic brought Over the past decade, banks have pushed Department so they can investigate the deals major new challenges for all businesses. So back hard against credit union expansion before they’re completed. Fairbank had much so that most U.S. industries suffered and diversification, with little to show for received two previous warnings for failing a decline in their reputation over the past it, according to Chris Marinac, director of to properly comply with the law, in 1999 and year, according to RepTrak, a Boston-based research at Janney Montgomery Scott. He 2004, the FTC said. reputation research company. does not see a notable shift on the horizon. “As the CEO of one of America’s largest But Truist successfully managed a slew The trend could even expand to involve banks, Richard Fairbank repeatedly broke of potential disruptions. Organization larger institutions such as Navy Federal the law,” Holly Vedova, acting director of and leadership emerged as key strengths, Credit Union buying banks, Marinac said. the FTC’s Bureau of Competition, said in a helping drive up its reputation score in a To date, deals have mostly involved small statement Thursday. “There is no exemption meaningful way among both customers and credit unions buying small banks. The for Wall Street bankers and powerful CEOs noncustomers, based on the results of the ICBA’s current proposal is unlikely to rein when it comes to complying with our annual American Banker/RepTrak Survey of in this activity, he said. country’s antitrust laws.” Bank Reputations.

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The banking industry overall not only “It’s lived every day.” Areas of weakness include governance, retained the reputational strides made in which RepTrak defines as being open, the first half of 2020 amid the onset of the Still rising, but more slowly than last ethical and transparent. This has grown in pandemic, but also continued to build year importance for large banks, accounting for on that, according to the survey, which After a year of COVID-19 lockdowns and more than a fifth of their reputation scores measures consumer perceptions of 40 of the mask mandates, the reputation of many among both customers and noncustomers country’s largest banks. Truist was among industries suffered. Retailing, for instance, in the 2021 survey. the biggest gainers. Its reputation among fell from its No. 1 spot in 2020 down to Governance also is a top reputation driver customers moved into “excellent” territory, No. 8 this year, with a score of 70.8 out of for regional and nontraditional banks. one of 10 banks now scoring at that level, up a possible 100, according to RepTrak. The Besides governance, the survey takes from five banks last year. sector’s score last year was 75.6. into account six other reputation factors, Truist executives attribute the Banks were among the few sectors that including innovation, citizenship and performance to an intentional effort. made gains, alongside diversified financials executive leadership. Each year there tend Throughout the merger, the company, now and pharmaceuticals/biotech/life sciences. to be shifts in which factors are the biggest with $522 billion of assets and based in The latter enjoyed a bounce as vaccines drivers of bank reputations, and this year the Charlotte, North Carolina, has focused on helped curb the pandemic in the first half of factors that mattered most to customers and creating a “delightful migration experience” 2021. noncustomers were products and services, for its customers, said Dontá Wilson, its In the Survey of Bank Reputations this followed by governance. chief digital and client experience officer. spring, the banking industry as a whole For customers, leadership rounded out The first steps included creating a client scored a 70.3, which is up just enough to the top three, and for noncustomers, it was integration and insights team that took all be rated as “strong.” It also cracked into the innovation. customer interactions into account, whether top 10 among the 16 industries that RepTrak digital or in the branch, Wilson said. The rates. Framing the conversation team examined every change that would The higher a reputation score is, the more The survey also measured consumer affect customers, identified potential pain willing people are to do business with a perceptions of the pandemic response points and collaborated with others across company, invest in it and give it the benefit from banks, which proved to be a highlight. the company to devise solutions. of the doubt in a crisis, based on RepTrak’s Banks came through with loans from the “We mapped out over a thousand different research. And in the case of banks this year, Small Business Administration’s Paycheck treatment plans,” Wilson said. goodwill got an even higher boost than the Protection Program, and generally helped The team then tested various scenarios reputation score itself, which is unusual, customers and employees alike navigate the with actual customers, solicited feedback said Sven Klingemann, a director at RepTrak financial hardships of COVID-19. and made modifications where necessary. (formerly called the Reputation Institute). Discover had something of a head start. The work included figuring out a way to avoid The benefit extended to consumer The $110 billion-asset bank operated by changes to customer account numbers, one perceptions of risks that traditionally weigh the credit card giant modeled some of its of the most fraught aspects of any merger. on bank reputations, ranging from data pandemic relief measures after what it Truist also is planning a digital-first breaches to deceptive sales practices. Both typically rolls out for a local disaster, only migration, Wilson said. Many post-merger customers and noncustomers gave those they were offered nationwide, said Roger conversions take place in a big bang over things less weight this year than in past Hochschild, Discover’s president and CEO. a single weekend. Truist is taking a phased years. The bank earned an “excellent” reputation approach. The shift in perspective might be due score among customers for the second year Before changing signs on its branches to actions banks took to help financially in a row, one of only four to do so in back-to- and converting its core systems, it is rolling struggling consumers during the pandemic, back years. out a new mobile experience for customers. Klingemann said. The measures that Discover implemented This allows Truist to gather feedback and Nonetheless, the banking industry’s included skip-a-payment plans, waived fine-tune its processes while removing some 1.6-point overall reputation gain in 2021 fees for tapping into certificates of deposit of the risk from the rest of the conversion, was smaller than last year’s 5.4-point gain, and emergency credit line increases, said Wilson said. If any systems do go down, and the survey findings offer some insight Hochschild, who applauded regulators for customers will still have mobile access. about how and where banks can continue to quickly approving new programs. “It was The focus on customers starts with improve. a good moment for the Truist Chairman and Chief Executive Kelly The need to do better is particularly acute industry in terms of how quickly we were King, Wilson said. King — who enjoys a for large banks, which made progress, but able to react,” he said. strong reputation himself, according to continue to lag regional and nontraditional As they helped customers, banks were RepTrak — has been a vocal champion of a banks among both customers and concerned about their own fortunes. culture where customer care is paramount, noncustomers. They set aside extra money for bad loans consistently reinforcing the message in “There’s not a lot of ‘I love you’ in there,” and prepared for a rocky year. But as the meetings and earnings calls, he said. Klingemann said of the sentiment toward pandemic wore on, bad loans failed to “It’s not just words on paper,” Wilson said. the large banks. materialize in large numbers and bank

For up to date and complete coverage go to AmericanBanker.com TUESDAY SEPTEMBER 7, 2021 AMERICANBANKER.COM PAGE 5 profits held up. to RepTrak, 30% of customers said they were “Customers were able to get through to Nearly three-quarters of all banks familiar with their bank’s CEO this year, up us, and I think frequently it was a situation insured by the Federal Deposit Insurance from 25% in 2020 and 15% in 2019. where they were calling multiple providers,” Corp. reported a year-over-year increase For noncustomers, familiarity stayed Hochschild said. As a result, customers in net income in the first quarter of 2021. roughly the same this year as it had been could compare their experiences. The average return on assets was 1.38% last year, at around 15%. But even so, the Looking ahead, RepTrak’s Klingemann for the first quarter, up a percentage point noncustomers who were familiar with urged caution for traditional banks, saying from the same period a year ago and up 28 specific bank CEOs tended to give them they might want to pause before they basis points from the final quarter of 2020, higher ratings than they had received in the undertake another round of branch closings. according to the FDIC. previous year. The pandemic kicked a lot of financial But rising income brings its own Large-bank CEOs improved the most transactions to online and mobile channels. reputational risks, particularly during a — 11.7 points — raising their collective But as COVID-19 ebbs, a significant chunk period of crisis. It’s important to present the reputation score from “weak” to “average.” of customers said in the survey that they information in a way that is less likely to be Regional bank CEOs were the only ones plan to resume their usual branch usage, perceived negatively, Klingemann said. to earn a “strong” reputation score from particularly at regional banks. Just over 50% Consumers care about how much a bank noncustomers. of regional bank customers said they are earns, but even more so about what its profits Regional banks enjoyed a similar edge in more likely to use in-person services in the allow it to do, he said. So focusing on what their COVID-related communications, even future, compared with around 40% for large banks stand for, how they are navigating the though a year into the pandemic, attention banks, according to RepTrak. post-COVID environment and what they spans waned. Perhaps it became more of a are doing to contribute positively to society struggle to get noticed by bank customers Where to focus now matters. because they were less inclined to worry While reputation scores offer a glimpse Discover focused on getting details out about what their bank was doing in a crisis into what worked in the past, they also shine about its numerous relief efforts, including that many believed to be winding down. a light on what banks can do going forward the creation of a $5 million grant program Among regional bank customers, 41% to polish their reputations. to support Black-owned restaurants, which said they were aware of their bank’s COVID RepTrak divides reputational drivers into were disproportionately harmed by the communications and actions in 2021, down three broad baskets: areas of strength that pandemic. “2020 was a unique time in terms from 44% in 2020. But that was much higher companies can build on; neutral factors of what I would say was a call to action than the 23% recorded for customers of that can be lifted into positive territory; around social awareness,” Hochschild said. nontraditional banks and the 15% recorded and weaknesses where companies have an Discover also unveiled plans in March to for those at large banks this year. opportunity to get better. establish a call center in Chatham, Illinois, a The messages that did break through Among the strengths for all banks are majority-Black neighborhood on the South the noise landed with more impact, products and services. Banks are getting Side of Chicago. At full capacity, the center Klingemann said. All types of banks scored credit for standing behind high-quality is expected to employ nearly 1,000 people, an “excellent” reputation among customers products that meet customer needs. including customer care representatives who actually recalled their bank’s COVID However, banks in general are seen starting at $17.25 per hour. communications. as weak when it comes to innovation, “That’s something we did because we felt “We hear you less. But when we hear in particular being first to market with that every company should be doing its part to you, we rate you better than how we desirable new products and services. bring opportunity to those neighborhoods,” used to on how you responded to the Innovation is increasingly important to Hochschild said. “Frequently, they are Black crisis,” Klingemann said, summing up the bank reputations, though. “Customers are and Brown neighborhoods that have been consumer perception, which held true for looking for a partner that is continually underserved and have not seen the same both customers and noncustomers. upping their game in terms of the value that types of opportunities that other areas have.” For Discover, communication was as is provided,” said Hochschild. much about reaching out to customers as it Discover consistently ranks in the top five What’s providing outsize impact was making sure customers could reach the for innovation in the annual survey. For many banks over the last year, bank when they had problems, Hochschild Truist also is hoping to make an impression CEOs like King and Hochschild emerged said. It hired thousands of call-center reps when it comes to innovation. The bank plans as key spokespeople confronting the during the pandemic, he said, noting that this year to open a 100,000-square-foot twin challenges of the pandemic and the the bank operates solely online. innovation and technology center, Wilson movement for racial justice. As a result, the Hochschild suggested that Discover’s said, adding that the center is purposely reputation of the CEO came to weigh more call-center experience and bandwidth may located at Truist’s headquarters. heavily in perceptions of bank reputations have been an advantage over traditional “We want it to be part of the core DNA of as a whole, according to RepTrak. banks, which closed branches during the who Truist is,” he said. With the higher profile of CEOs in overall pandemic and had to staff up call centers to Nontraditional banks, meanwhile, have communications, more customers came to handle the surge in inquiries from customers the most work to do in the workplace know who their bank’s leader is. According who would normally have gone to branches. category, which measures perceptions

For up to date and complete coverage go to AmericanBanker.com TUESDAY SEPTEMBER 7, 2021 AMERICANBANKER.COM PAGE 6 of how well employees are treated. The overhaul will “suppress” the bank’s financial pandemic was a stress test of sorts for GROWTH STRATEGIES performance in the short term but will create the mantra, shared by many companies “significant” value over the long haul. today, that taking better care of employees Texas Capital’s stock price dropped by results in employees taking better care of Texas more than 10% by late Thursday afternoon, as customers. investors may have been disappointed with Discover, however, stood out from other Capital’s the plan’s timeline. nontraditional banks and saw an increase in The company, which currently has a its workplace score, according to the survey. return on assets of about 0.65%, according Like many other companies, Discover expansion to a current consensus estimate, is aiming to hurriedly set up employees to work from improve that measure of profitability to 1.1% home in March 2020. At the same time, plan greeted by 2025, which would bring Texas Capital in it ramped up efforts at connectivity and line with its peers. engagement, said Hochschild, noting that The four-year timeline is longer than he wrote weekly letters to all employees and with investors were anticipating, according to made random calls to individual employees John Rodis, a research analyst at Janney. “It’s on a regular basis. skepticism almost a total do-over,” he said. “That’s just The company also devoted more attention too long.” to employee well-being and mental health, By Jon Prior Texas Capital executives have been for example, by encouraging people to use September 02, 2021 confident in their abilities, Rodis said. But he their paid time off, Hochschild said. One year after scuttling a $3 billion merger questioned whether the bank has the size and “We learned some lessons during the with a local rival, Texas Capital Bancshares scope necessary to compete in investment crisis that we want to make permanent,” he has unveiled a highly anticipated expansion banking with large firms based outside of said. plan, but analysts are already complaining Texas. about the pace of the overhaul. “They’re going to have to go out and hire Survey methodology The proposed makeover is a key step early the people, and I have no idea how successful Company selection: in the tenure of CEO Rob Holmes, a former that’s going to be,” Rodis said. “There’s a lot of • Companies drawn from the Federal JPMorgan Chase executive who joined the $36 risk involved.” Reserve’s list of large commercial billion-asset company in January. Longtime The bank’s new CEO said that one major banks, with final selections by American Chief Executive Keith Cargill stepped down focus will be convincing potential corporate Banker based on total assets and last year following the termination of a merger and business clients that Texas Capital is the deposits. with nearby Independent Bank Group. first bank they should call. The recent trend • Only those with significant retail brands On Wednesday, Holmes laid out plans to in commercial and industrial lending has were considered. grow commercial and industrial lending, pointed in the opposite direction. Ratings: build a new investment banking unit, Texas Capital had roughly $9 billion in • Ratings were collected via online increase spending on technology, create a C&I loans, not including energy loans, on its questionnaire in April 2021. new focus on financing affordable housing balance sheet at the second quarter, which • At least 100 customers and 100 and offer higher pay and better benefits in was down 1.2% from a year earlier and was noncustomers rated each company, an effort to attract talent. All told, the Dallas- 14% lower from the same point in 2019. with more than 13,000 respondents based bank plans to double the number of “Our commercial and industrial segment overall. client-facing employees across Texas by 2025. has not grown into its expectations,” Holmes • Each respondent was very or somewhat “The executive leadership team and I are said. familiar with the companies they rated. not here to run an average bank,” Holmes He also said the bank could be open to said during a presentation to investors on making an acquisition to keep up with a Wednesday. swarm of merger activity in the Lone Star Holmes was not shy about what he State. Texas Capital’s deal for McKinney, characterized as a need to improve on how Texas-based Independent was abandoned the old regime ran Texas Capital, which “due to the unprecedented impact of the competes against larger out-of-state banks COVID-19 pandemic,” then-Chairman Larry in markets such as Dallas, Houston, San Helm said at the time. Antonio and Austin. Texas Capital has been looking at places At one point, he said the bank’s past where risk has built up — and has been model of operating disparate businesses exiting certain deals and restructuring others. independently from one another with Holmes said the issues were “isolated to a uncoordinated technology upgrades “led to a series of poorly conceived transactions in the series of hobbies.” energy and sponsored-back leverage lending Holmes said that the costs of the portfolios.”

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To further aid the expansion, Texas Capital length of the contract or its financial terms. announced that it has hired Daniel Hoverman CIBC will also acquire from Capital One a TAX from Regions Financial as an executive vice portfolio of more than $3 billion in existing president. card balances. Hoverman will lead the company’s For CIBC, which offers travel-related credit JPMorgan investment banking division as well as a cards with Air Canada, the deal offers a way newly launched broker-dealer unit that to attract consumers who are more interested settles French executives say will offer corporate clients in earning rewards for their spending on advice on mergers and acquisitions and help groceries and other household essentials. with raising capital by the end of this year. The bank said that the deal reflects a strategic tax-fraud Rodis, the Janney analyst, expressed focus on growing its Canadian consumer surprise that Texas Capital is trying to open a franchise. case for $30 broker-dealer shop. Texas Capital executives “This relationship enables us to diversify said the move can help to generate more fee our credit card portfolio in everyday rewards, revenue for the bank. grow our market share in payments and million They pointed to Hoverman as an example provides a meaningful opportunity to deepen of the kind of talent they are hoping to entice relationships by meeting the financial needs By Bloomberg News away from larger rivals. Texas Capital, which of Costco members,” Laura Dottori-Attanasio, September 02, 2021 was once known for poaching revenue- CIBC’s group head of personal and business JPMorgan Chase settled a longstanding generating bankers from competitors, banking, said in a press release. French criminal investigation over allegations reported $86.3 million in salaries and benefits Costco’s move in Canada follows a similar it helped clients commit tax fraud for 25 in the second quarter, down 13.8% from one switch of credit card issuers in the United million euros ($29.6 million). year ago. States six years ago. In 2015, the Issaquah, The case relates to allegations of tax “We will compete on talent,” Holmes said. Washington-based retail chain moved to end fraud seen to benefit former managers at “This is a slight departure for us. Though its long-running relationship with American the investment firm Wendel, top financial we have indeed been the beneficiary of Express, instead signing a deal with Citigroup. prosecutor Jean-François Bohnert said at a great talent, there has not always been the That agreement got off to a rocky start in 2016 Thursday court hearing in Paris. The bank’s appropriate level of commitment to investing as Costco customers flooded the retailer with involvement revolves mainly over financing in our people.” complaints about the transition. provided by its Paris branch to the managers CIBC said Thursday that Canadian in 2007 to restructure their holdings in consumers who have Costco cards issued Wendel. CONSUMER BANKING by Capital One will be able to use them until Paris judge Stéphane Nöel approved the they receive their new cards. The cards, which settlement after a short presentation of the can be used at other retailers in addition to main facts of the case and of the deal. CIBC nabs Costco, will continue to run on Mastercard’s Thierry Marembert, a lawyer for JPMorgan, network. said the bank had “a very limited role” in the Costco “Through enhanced offerings such as alleged fraud and wants to move on. leading digital capabilities, robust features The settlement comes just a few months and stronger rewards, our members will after Chief Executive Jamie Dimon said Paris credit card have more ways to get the most out of their had become JPMorgan’s main trading center membership,” Pierre Riel, a senior vice in the European Union. The bank aims to have partnership in president at Costco Canada, said in the press 800 staff in its Paris office by the end of 2022. release. JPMorgan “believes in France, believes in its Capital One, of McLean, Virginia, commercial development here,” Marembert Canada classified the Costco book as “held for said. “It’s important for the bank to have sale” during the second quarter, according peaceful relationships.” By Kevin Wack to analysts at Keefe, Bruyette & Woods. “The Under the terms of Thursday’s settlement September 02, 2021 announcement does not come as a surprise,” deal, JPMorgan didn’t plead guilty. Unless Canadian Imperial Bank of Commerce will they wrote in a research note. the bank withdraws within the next 10 days, become the issuer of credit cards at Costco’s the agreement will become final. Marembert stores in Canada as the membership-only said JPMorgan will decline its right to retract retail chain ends a previous deal with Capital itself from the deal. One Financial. Prosecutor François-Xavier Dulin said the CIBC said Thursday that it has reached a 25 million-euro fine is more than 130 times long-term agreement with Costco Wholesale larger than the maximum penalty the bank that is expected to start early next year. The could have faced in court, in line with French Toronto-based bank did not disclose the laws at the time.

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While JPMorgan’s fine is a fraction of the $582 trillion global derivatives market. The websites for payments by users, addressing amount seen in previous settlements, the Biden administration has promised a new era a longstanding App Store complaint and resolution is part of an effort by prosecutors of tougher Wall Street oversight and stricter settling an investigation by Japan’s Fair Trade at Bohnert’s Parquet National Financier to rules, and has also faced pressure to fill key Commission. hammer out more U.S.-style settlements. jobs with candidates that reflect the nation’s The Cupertino, California-based Last year, France collected 2.1 billion diversity. Johnson would be the first Black technology giant said the change will go euros from Airbus in a coordinated bribery woman appointed by Biden to serve as a top into effect globally early next year for so- settlement with American and British official at a financial regulator. called reader apps spanning magazines, counterparts. The PNF also secured a 500 The White House declined to comment. newspapers, books, audio, music and video. million-euro settlement with Google in Johnson and representatives for the CFTC To date, Apple has forced such applications to 2019 and a 300 million-euro deal with HSBC did not immediately respond to requests for use its in-app purchase system, which gives Holdings two years earlier. comment. Apple up to a 30% commission on downloads In the Wendel case, JPMorgan had initially Johnson has recently called for stricter and in-app subscriptions. By pointing users been ordered to face trial in 2016, but after oversight of cryptocurrency trading to the web to sign up, creators of those apps a procedural challenge the bank eventually platforms, which the CFTC helps oversee. can sidestep that fee. managed to strike down the indictment last Earlier in her career, Johnson worked as an The announcement comes as part of a year. analyst at Goldman Sachs Group and as settlement with Japan’s regulator, which is The French case continues, however, for assistant general counsel at JPMorgan Chase. now closing its investigation into the App other suspects entangled in the probe, such She taught at Tulane University Law School Store. “We have great respect for the Japan as former Wendel Chairman Ernest-Antoine before joining Emory this year. She graduated Fair Trade Commission and appreciate the Seilliere and ex-CEO Jean-Bernard Lafonta. from Georgetown University and University work we’ve done together, which will help Both deny the allegations and Wendel isn’t of Michigan Law School. developers of reader apps make it easier accused of any wrongdoing in the case. After a flurry of regulations at the end of for users to set up and manage their apps the Trump administration, the CFTC hasn’t and services, while protecting their privacy made any major policy changes in part and maintaining their trust,” Phil Schiller, BIDEN ADMINISTRATION because the agency had been deadlocked who oversees Apple’s App Store, said in a with two Republicans and two Democrats. statement. Biden is planning to name Rostin Behnam, Developers like Netflix and Spotify White House currently a Democratic commissioner, to Technology have long complained that Apple lead the regulator, Bloomberg News reported doesn’t allow them to link to their website for favors Emory’s last month. users to sign up for their services. Apple has previously rejected or removed third-party applications that attempted to steer users to Kristin PAYMENT FEES their websites so they wouldn’t have to pay the commissions. Importantly, games, which Johnson for are the most lucrative class of mobile apps, do Apple to let not fall under this classification and Apple’s decision won’t resolve its legal dispute with CFTC seat media apps Epic Games over in-app purchases in global hit Fortnite. The judge overseeing the trial By Bloomberg News between Apple and Epic suggested that Apple September 02, 2021 avoid 30% make a change similar to this one. The Biden administration plans to “Because developers of reader apps do not select Kristin Johnson, a law professor who transaction offer in-app digital goods and services for previously worked on Wall Street, for a purchase, Apple agreed with the JFTC to let Democratic seat on the Commodity Futures developers of these apps share a single link to Trading Commission, according to a person fee after their website to help users set up and manage familiar with the matter. their account,” Apple said in the statement. Johnson, who teaches at Emory University global Apple is not allowing alternative payment School of Law, would fill one of two systems within apps themselves, saying it will vacancies at the agency. An announcement “help developers of reader apps protect users by the White House may still be weeks away, scrutiny when they link them to an external website to according to the person who requested make purchases.” anonymity because the choice has not been By Bloomberg News Last month, as part of a preliminary made public. September 01, 2021 settlement of a class-action lawsuit with U.S. The pick would bolster Democrats’ control Apple will allow developers of some App Store developers, Apple loosened its of the CFTC, which oversees much of the apps to link from their software to external rules to let software makers advertise outside

For up to date and complete coverage go to AmericanBanker.com TUESDAY SEPTEMBER 7, 2021 AMERICANBANKER.COM PAGE 9 payment methods to consumers via email. mix,” Pijor, who had not responded to a do not change in any way the underlying Many developers have been asking for these request for comment by publication time, antitrust laws, as interpreted in voluminous changes for years and lawmakers globally are said in the press release. case law, and those laws apply to banks in increasing their scrutiny as well. Founded in 2011, Atlantic Coast operates the same way as any other company. For 12 branches in Virginia, Washington, D.C., the Justice Department, those laws are the Maryland and South Carolina. Clayton Act and the Sherman Act. Most COMMUNITY BANKS FVC’s deal with Atlantic Coast comes four relevant is Section 7 of the Clayton Act, which months after the $9.3 billion-asset Veritex prohibits any merger whose effect would be Holdings in Dallas acquired a 49% stake “to substantially lessen competition or to Awaiting its in Thrive Mortgage, a residential lender in tend to create a monopoly” and Section 2 of Georgetown, Texas. the Sherman Act, which makes it illegal to own merger, While refinance transactions are expected “monopolize.” to drop sharply in 2022, new-home purchases Case law provides that in determining how are expected to continue at record levels, much competition there is, a court should Virginia approaching $1.8 trillion, according to the examine the relevant product market and the Mortgage Bankers Association’s most recent relevant geographic market. With respect to community forecast. the latter, the Supreme Court has explained that in drawing market boundaries, courts should realistically reflect “[c]ompetition bank invests BANKTHINK where, in fact, it exists,” considering “the commercial realities” of the industry. in mortgage With respect to bank mergers, additional White House laws also apply, and they are administered by the relevant federal banking agencies. Thus, firm review of review by the Justice Department under the traditional antitrust law is complemented By John Reosti by banking agency review under the Bank September 01, 2021 bank M&A Merger Act and the Bank Holding Company A Fairfax, Virginia, community bank that Act, which also take into consideration a is merging with a larger regional competitor must consider merger’s potential effects on competition has sweetened the deal by taking a minority through statutory provisions mirroring the stake in a local mortgage lender. substance of the federal antitrust laws. In The $2 billion-asset FVC Bankcorp nonbanks’ addition to performing their own competitive disclosed the investment in Atlantic analysis, the banking agencies also consider Coast Mortgage in an 8-K report filed late emergence the financial and managerial resources and Tuesday with the Securities and Exchange future prospects of the existing and proposed Commission. It did not say what it paid for By Greg Baer institutions and other factors. the 29% share. September 03, 2021 The result has been a system of dual review FVC already provides Atlantic Coast with a On July 9, the Department of Justice and by which the banking agencies and the Justice mortgage warehouse lending facility. A closer Federal Trade Commission announced Department collaborate on their respective relationship will help the bank — which that they would review their general merger competitive analyses. As described by the focuses largely on commercial real estate analysis pursuant to a wide-ranging executive department in its 1995 policy statement, “To lending — broaden its mortgage product set, order issued by President Biden seeking speed this competitive review and reduce Chairman and CEO David Pijor said Tuesday to promote greater competition in the U.S. regulatory burden on the banking industry, in a press release. economy. the banking agencies and the Department In July, FVC agreed to a merger of equals The fact sheet accompanying that order have developed screens . . . to identify with Blue Ridge Bankshares in Charlottesville, urged the Justice Department and banking proposed mergers that clearly do not have Virginia. The deal, valued at $307 million, is agencies to “update guidelines on banking significant adverse effects on competition.” expected to close in the fourth quarter of 2021 mergers to provide more robust scrutiny The screens adopted 26 years ago are or the first quarter of 2022. of mergers.” While scrutiny is always intended to indicate when a bank merger On June 30, FVC held mortgage loans appropriate, the larger question is the raises concern, and the Department of Justice totaling $156.6 million, accounting for 11% of analytical framework that should guide that is now set to review them. (Actually, the its $1.42 billion loan portfolio. scrutiny. department was set to do so in September “This partnership will allow us to provide The existing guidelines were issued back 2020, when it sought public comment competitive residential mortgage products to in 1995 and explain the Justice Department’s on exactly such a review, and received our customers, while increasing our financial framework for assessing whether a proposed voluminous comments.) opportunities and expanding our revenue merger violates the law. Those guidelines In the last 26 years, a lot has happened —

For up to date and complete coverage go to AmericanBanker.com TUESDAY SEPTEMBER 7, 2021 AMERICANBANKER.COM PAGE 10 for example, the commercialization of the the Obama administration, the Justice internet and the birth of mobile banking. Department and FTC engaged in a wholesale Banks now compete for consumers with review of their merger guidance and raised the nonbank lenders — including financial empirically based thresholds that triggered technology competitors — that did not a presumption of competitive harm. When exist in 1995. The nation’s largest mortgage issued, those new guidelines were applied company today is Rocket Mortgage, and to every industry except one: banking. Banks nonbanks originate a majority of mortgage remained subject to the older, lower and loans. therefore more easily triggered thresholds. Fintech and other lenders have also moved Thus, what exists today is a merger policy online to compete in small-business and that, with no rational basis, treats banking other commercial lending, and a wide variety industry mergers more restrictively than of so-called credit funds and other pools every other industry. of money compete for middle-market and In short, the Department of Justice has other specified commercial loans, serving a a lot of work to do if it wishes to modernize nationwide audience. As the assistant attorney the bank merger guidelines. And if it wants to general for the antitrust division summarized make them stricter — and still comply with with considerable understatement in 2020, the law — it needs to build a time machine. “Innovative emerging technologies are disrupting traditional banking models and Greg Baer is president and CEO of the Bank introducing new competitive elements to the Policy Institute. q financial sector.” Thus, remarkably from a 2021 viewpoint, © 2021 Arizent and American Banker. the screens articulated in the 1995 guidelines All rights reserved. assess competition by looking primarily at only two factors: banks with branches in the relevant geographic market, and the total deposits held in those branches, with thresholds for acceptable levels of market concentration defined on the basis of deposit shares. Of course, that necessarily means that the analysis considers the potential competitive significance of banks (as only banks can take deposits) but not all the other competitors just described. As an analogy, think of a competition review of a merger of two community bookstores without taking into account Amazon and Kindle, among others. That’s so 1995! The story is the same even with respect to deposit gathering itself, challenger banks that partner with community banks are exempt from Durbin interchange pricing caps and have the option to offer deposits nationwide. They, too, are ignored under the antiquated 1995 guidance, perhaps unless the challenger bank happens to be headquartered in the relevant geographic market. Thus, the 1995 guidelines exist in a parallel world where one cannot use one’s phone to shop for deposit rates and sign up for an account online. In sum, the 1995 guidelines as applied in 2021 ignore where competition, in fact, exists, and ignore the commercial realities of the banking industry. It gets even stranger. In 2010, under

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