Dodd-Frank Act Application to Community Banks

1. Dodd-Frank ActApplication to Community Banks

2. Items that WILL apply to Community Banks • De Novo Interstate Branching (Sec 613) • Permits national and insured state banks to engage in de novo interstate branching if, under the laws of the state where the new branch is to be established, a state bank chartered in that state would be permitted to establish a branch. • Effective now, no longer have to “buy in” to Georgia. • Deposit Insurance Reforms • Sec. 331 – New assessment base = Average Consolidated Assets – Average Tangible equity • Projected cost savings to community banks. • May encourage larger banks to go after more deposits. • Sec. 334 – Increases Minimum Reserve Ratio from 1.15% of estimated insured deposits to 1.35% • Sec. 335 – Permanent increase in FDIC insurance from $100,000 to $250,000 (currently set to expire on December 31, 2013). • Sec. 343 – Permanent Unlimited Insurance for Noninterest Bearing Transaction Accounts • Affiliate Transactions and Lending Limits • Sec. 608, 609 and 615 – expands “covered transaction” definition and provides additional restrictions on transactions with affiliates. • Sec. 610, 611 and 614 – expands “extension of credit” to include credit exposure arising from derivative transactions and repurchase agreements for lending limits.

3. Interest Business Checking • Sec. 627 – repeals prohibition on paying interest on demand transaction accounts. • Effective in one year. • Death of the OTS • Powers Transferred • Federal Thrifts – OCC • State Thrifts – FDIC • Thrift Holding Companies – FRB • Existing charters, orders, agreements, regulations, etc. remain in place. • Volcker Rule (Sec. 619) • Restricts banking entities ability to engage in proprietary trading • Implemented after an extended period of mandated study and rulemaking

4. Items that WILL NOT apply to Community Banks • Capital Requirements – Collins Amendment(Sec. 171) • No Tier 1 Treatment for Trust Preferred Securities • For institutions with consolidated assets of less than $15B on December 31, 2009, the Collins Amendment will not apply to securities issued before May 19, 2010, but will apply to trust preferred issued after May 19, 2010. • Does not apply at all to bank holding companies subject to the Small Bank Holding Company Policy Statement. • Bureau of Consumer Financial Protection • Community Banks (under $10B in assets) are required to comply with the Consumer Financial Protect Act and the new agency’s rules, but they will be enforced by the primary bank regulator, not the new agency. • New agency has primary enforcement authority over banks and credit unions with total assets of more than $10B.

5. Benefits of Small Bank Holding Company Treatment • Small Bank Holding Company Policy Statement applies to: • Consolidated assets of less than $500 million • Not engaged in significant off-balance sheet activities • Does not have a material amount of securities registered with the SEC; and • Not excluded by the Federal Reserve Board for Supervisory Purposes • Benefits of Small Bank Holding Company Treatment • Collins Amendment does not apply at all – Trust Preferred will have Tier 1 Treatment • Consolidated Leverage and Risk-Based Capital Requirements do not apply • Subsidiary Bank Capital Measured on Stand-alone basis • Non-Tier 1 funding sources can be downstreamed into bank as Tier 1 Capital