WEDNESDAY JANUARY 15, 2020 VOL. 185 No. 10 AMERICANBANKER.COM Follow us on Twitter @AmerBanker Wells Fargo CEO Charlie 5 Scharf kicks off tenure Year-over-year 3Q loan with more legal costs Wells Fargo & Co. may have a new leader, but portfolio changes the work of reinvigorating the firm after years of troubles is far from over. Page 5 See story on page 2 Expensify launches 6 corporate card that donates Construction 3.6% to homeless charity The new Karma Points card donates 10% of Multifamily 3.1% revenue to charitable funds established by the company that help people living on the CRE 2% street. Page 5 C&I 1.7% Visa’s $5 billion Plaid 7 deal takes a possible Consumer 1.5% rival off the table In the battle to control consumer data, Visa Mortgages -0.8% has made a major score by agreeing to acquire Plaid, a technology company that it could have Agriculture -1% seen grow into a competitor. Page 6 -1%0%1%2%3%4% Auto loan delinquencies 8 hit eight-year high Source: FDIC (banks with less than $20B in assets) The percentage of consumers who are past due on home equity loans, RV and other personal loans also rose in the third quarter, data released by the American Bankers FHA wants banks back. Association showed. Page 6 dailybriefing 3 Updating servicing could be the answer. Citizens names new CEO of Loan payoffs likely to Despite changes by the Federal Housing 9 private wealth subsidiary 1 accelerate in 2020 Administration, bankers remain reluctant The Providence, R.I., bank said that Rick Lower rates and more nonbank competition to join the program for fear of legal liability. Suarez would succeed Rob Clarfeld as head will make it harder for banks to keep loans But that could change if it revamps servicing of Clarfeld | Citizens Private Wealth. Page 7 on their books as business borrowers have processes, experts say. Page 3 plenty of opportunities to refinance Open banking’s three elsewhere. (See chart above.) Page 2 Activist investor pressures 10 biggest pitfalls 4 Virginia bank to sell Financial institutions need to be aware Manafort’s banker seeks Driver Management wants shareholders of of the platform model, strategic and rep- 2 to move his trial from Community Bankers Trust to push the Rich- utational hazards that come with granting New York to Chicago mond company to find a buyer. Page 4 access to their networks, Jacob Kosoff of Stephen Calk and the bank where he for- Regions Bank and two co-authors write in merly served as CEO are both arguing that BankThink. Page 7 his bribery trial should be held in Illinois. Prosecutors oppose the move. Page 2 WEDNESDAY JANUARY 15, 2020 AMERICANBANKER.COM PAGE 2 but many of them are more nervous about loan applications. COMMUNITY BANKING an eventual shift in the economy than most “The China trade issues need to come to probably say publicly.” a final resolution soon to take this stress off Business owners also remain concerned our farmers,” Lonnie Clark, president of the Loan payoffs about a protracted trade war with China, $48 million-asset State Bank of Chandler geopolitical tensions in the Middle East, un- in Chandler, Minn., said in response to the likely to certainty tied to the looming presidential survey. election and, simply, a sense that the cycle is bound to turn, industry observers said. accelerate in A Stephens survey of 100 bankers in De- CRIME AND MISCONDUCT cember found that nearly a fifth expect 2020 lending to decelerate due to increased pay- downs. Another 22% pointed to borrowers’ Manafort’s By Jim Dobbs macroeconomic and political worries. January 13, 2020 On the consumer side, bankers and econ- banker seeks Intense competition and lower interest omists said confidence remains strong and rates could spur more refinancing and re- credit is still being used to finance purchas- sult in higher payoff levels for consumer and es. But with rates low, banks will see elevated to move his commercial loans in 2020. levels of refinancing and possibly more com- A number of bankers have been warn- petition when homebuying season revs up trial from ing about decelerating loan growth in areas this spring. such as energy and agriculture. Accelerated Should the job market remain solid, more payoffs will only put more pressure on loan consumers could pay down credit card bal- New York to balances and underwriting in coming ances and use cash for more purchases, said months. Scott Brown, chief economist at Raymond Chicago “Payoffs are elevated and loan growth is James. challenging,” said Kevin Cummings, chair- “Just like a business, if a person gets to a By Kevin Wack man and CEO of Investors Bancorp in Short point where cash levels are fairly high, it can January 13, 2020 Hills, N.J. “Competition is tough and banks make sense to carry less debt,” Brown said. The former bank CEO who faces a bribery have to be selective to protect credit quality More banks are bracing for a cycle shift by charge in connection with multimillion-dol- and maintain margins.” tightening underwriting standards in certain lar loans to President Trump’s disgraced While the $26.7 billion-asset Investors sectors, economists said. campaign chair is seeking to move his trial continues to benefit from a strong economy A December survey of bankers across the from New York to Chicago, and so is the bank and steady loan demand from growth-mind- Midwest by Creighton University’s econom- at the center of the case. ed commercial clients, nonbank competition ics department found that two-thirds of par- Stephen Calk was chairman and chief has heated up, Cummings said. Those lend- ticipants increased collateral requirements executive of The Federal Savings Bank un- ers are willing to refinance loans at lower for farm loans last year. Roughly a third til he was indicted in May. He still holds a rates and longer durations. had rejected a higher percentage of farm 67% ownership stake in the Chicago-based Expect more banks, especially those that have lower-than-expected loan growth and high payoff levels, to get pressed by analysts Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 during their fourth-quarter earnings calls. Phone 212-803-8200 AmericanBanker.com Pricing by nonbanks tends to fall below what makes financial sense for banks, leading Editor in Chief Rob Blackwell 571.403.3834 Copy Editor Neil Cassidy 212.803.8440 to loan runoffs, industry observers said. Managing Editor Dean Anason 770.621.9935 “No question, especially following the Reporters/Producers Executive Editor Bonnie McGeer 212.803.8430 drop in rates, [pricing] is going to be an issue Laura Alix 860.836.5431, Kate Berry 562.434.5432 Washington Bureau Chief Joe Adler 571.403.3832 for more banks,” said James Bradshaw, an Jim Dobbs 605.310.7780 Senior Editor Alan Kline 571.403.3846 analyst at Bridge City Capital. John Heltman 571.403.3847 Some commercial clients are paying down Editor at Large Penny Crosman 212.803.8673 Will Hernandez 212.803.8731 in anticipation of an inevitable downturn. BankThink Editor Rachel Witkowski 571.403.3857 Hannah Lang 571.403.3855 Others have taken advantage of the ongoing Community Banking Editor Paul Davis 336.852.9496 Ken McCarthy 724.996.2188, Andy Peters 404.500.5770 recovery by selling their businesses — and Technology Editor Suleman Din 212.803.8738 paying off loans as part of the process. Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 “A lot of banks’ commercial clients are Digital Managing Editor Jackie Stewart 571.403.3852 more cost-conscious now than a year or so Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 ago,” Bradshaw said. “Nothing is inevitable, For up to date and complete coverage go to AmericanBanker.com WEDNESDAY JANUARY 15, 2020 AMERICANBANKER.COM PAGE 3 bank’s holding company, federal prosecutors Prosecutors have portrayed Federal and credit unions will be sued by the Justice have said. Savings Bank as a victim of Calk’s corrupt Department under the False Claims Act if the Calk, who lives in Northfield, Ill., said in a scheme. But on at least one occasion, the loans later go bad. court filing Thursday that a large majority of bank has portrayed itself as a victim of fraud- Despite the changes HUD and the FHA the conduct at issue in the case took place in ulent conduct by Manafort, who is currently made, however, “banks remain very cau- the Northern District of Illinois. He also ar- in prison after being convicted of a slew of tious about the FHA market because of the gued that a trial in Chicago would be far less financial crimes. risks related to the origination side,” said disruptive to the bank’s operations than one The loans, which totaled more than $15 Bose George, a managing director at Keefe, held in Manhattan. million, defaulted after Manafort was indict- Bruyette & Woods. Federal Savings Bank echoed the latter ed in October 2017. The bank has written off “From the bank’s perspective, they want argument, with the bank’s chief operating more than $12 million as a loss, according to to wait for a while because they don’t know officer stating in court papers that at least the Calk indictment. what the next administration will do. Things 13 current bank employees are potential U.S. District Judge Lorna Schofield has could change unless something is actu- trial witnesses, and that nine of them live and scheduled a status conference in Calk’s case ally kind of codified, and that hasn’t hap- work in Chicago.