Indirect Lending-Are You In or Out? / Tax Reform and the Banking Industry

By: Sharon J. Lorman
Jeffrey P. Marsico
Richard B. Trauger, Jr.

Guest: Charles Guarino, Senior Vice President, Director of Marketing, and Chief Lending Executive, Five Star Bank

Podcast Show Notes:

Our This Month In Banking (TMIB) podcast features discussion with colleagues and other industry thought leaders on interesting banking news that happened this month. TMIB will be available on the last Wednesday of every month here, and on Apple and Droid podcast apps for your listening enjoyment. Join us on your commute or at your desk.

Topic 1: Indirect Lending – Are You In or Out?
Start time 1:32
We have observed a number of banks exiting indirect lending. For example, citing long-term profitability expectations, TCF Financial Corp., a $23 billion asset financial institution headquartered in Wayzata, Minnesota, announced that it would discontinue all indirect auto loan originations on Dec. 1, 2017. In addition, Beneficial Bancorp, Inc., a $5.8 billion asset financial institution headquartered in Philadelphia, decided to exit the indirect lending business in the first quarter of 2017. Contrary to exiting indirect lending, Financial Institutions, Inc. a $4.0 billion financial institution headquartered in Warsaw, NY, has an $858 million portfolio of consumer indirect lending as of September 30, 2017, representing approximately 33% of the loan portfolio and 17.5% growth since September 30, 2016.
Our guest for this topic is Charles Guarino. Mr. Guarino has been Senior Vice President and Director of Marketing at Five Star Bank (a wholly owned subsidiary of Financial Institutions, Inc.) since October 2012 and Chief Retail Lending Executive since July 2016. Mr. Guarino served as a Senior Vice President and Director of Marketing at Financial Institutions, Inc. He served as a Vice President of Five Star Bank since September 2009. Mr. Guarino is responsible for administering the automated lending system and the retail loan pricing models as well as managing risk as related to the Bank’s retail loan portfolios. What’s the future of indirect lending for community banks?

Topic 2: Tax Reform and the Banking Industry
Start time 25:10
On January 11, 2018, the ABA Banking Journal reported that banks of all sizes continue to announce post-tax reform initiatives to share savings with customers, employees and communities. The American Bankers Association is documenting these efforts at aba.com/EnergizingTheEconomy. As of January 24, 2018, there were over 70 banks on the list. Furthermore, while the tax reform is positive for most banks, many will have to record big charges in the fourth quarter since the lower tax rate significantly lowers the value of deferred tax assets (DTAs), forcing write-downs. What effect will tax reform legislation have on your bank?
Music to investors’ ears: Banks will use tax cut to boost dividends
Banks Continue Post-Tax Reform Bonuses, Wage Hikes
JPMorgan Chase Makes Long-Term U.S. Investment in Employees, Branch Expansion and Local Economic Growth

Watch for episode 26 of This Month in Banking to be released on Wednesday, February 28, 2018 and a new episode on the last Wednesday of every month.

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