Banking association officer talks about federal regulation, local banking at chamber event

While the Supreme Court's decision to uphold key provisions of the federal health care reform law has dominated the news lately, Craig Overfelt, senior vice president of the Missouri Bankers Association, told business leaders at the Cape Girardeau Area Chamber of Commerce's First Friday Coffee that new banking industry regulations are not getting the attention they deserve.

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the same year as the Patient Protection and Affordable Care Act.

"It has not gotten near the attention the law referred to as ObamaCare has received, but let me tell you, on the banking side, this is the most sweeping financial services reform law ever passed in the United States," Overfelt said.

The legislation is 2,300 pages long, requires 398 new regulations and 70 financial market studies, he said.

"As of Jan. 2, 229 deadlines for new rules to be in place had come and gone, of those, there are now regulations finalized for 140 of them," he said.

Only 119 regulations of the 398 have been finalized so far, so there is much more to come from Washington, D.C., Overfelt said.

"Not all of these regulations will affect your local community banks, a number of them are directed at the securities industry and Wall Street," Overfelt said.

Bankers he's met with across the state in recent months have told Overfelt these new regulations are increasing the banks' costs, but more importantly are increasing costs for bank customers, he said.

The financial crisis that began in 2008 was the result of subprime loans that allowed almost anyone to get a home loan, Overfelt said.

"Literally, if you walked in the door and you were living and breathing, no one checked anything and loans were being made left and right," he said.

Dodd-Frank was Congress' attempt to prevent this from happening again.

"One thing they forgot about was that local banks didn't make any of these loans. They still looked their customers in the eye, determined whether or not they would be able to handle a home. In our opinion at the Missouri Bankers Association, the laws that were passed to try to correct this have gone too far. They've overreached," Overfelt said.

The mid- to late '90s saw the right balance of people who needed loans getting loans, he said, but it got too easy to get a loan in the early 2000s and regulations now make it too difficult to get a loan approved.

A Missouri banker near Lake of the Ozarks told Overfelt it now takes 17 hours to process a real estate loan, four to five times longer than it did before the new regulations went into effect.

Overfelt said that Southeast Missouri banks are strong, compared to others in the state and nation. According to the Missouri Division of Finance, which regulates the 36 state-chartered banks in Southeast Missouri, these banks have total assets of roughly $9 billion.

"One of the key measurement terms on bank profitability is return on average assets," Overfelt said. "For the Southeast Missouri area, it's 1.3 percent, that compares to a statewide average of 0.98 and a national average of 0.76."

None of the banks in Southeast Missouri had a net loss in the first quarter. The net write-offs compared to total loans for those banks was 0.24 percent, lower than the state average of 0.66 percent. Past due loans amounted to 1.96 percent, also lower than the state average of 3.42 percent.

"We've known this for a long time, that Southeast Missouri banks are extremely strong, but taking a look at the statistics really puts the exclamation point on it," he said.

U.S. Sen. Claire McCaskill was also in attendance at the First Friday Coffee, greeting business leaders before the presentation. She's seeking re-election in the Senate and was in Cape Girardeau on a stop on her statewide RV bus tour.

mmiller@semissourian.com

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