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Carter: Regulations expensive for banks
Worth H. Carter Jr. holds a copy of a magazine honoring his bank for work to develop new software Wednesday during the bank's annual shareholders meeting.
Thursday, June 24, 2010
By GINNY WRAY - Bulletin Staff Writer
Bankers are spending more and more time on federal regulations, and it will only get worse with Congress' passage of the financial regulatory reform legislation, according to Worth H. Carter Jr.
Carter, the president and chairman of Carter Bank & Trust, told about 75 people attending the bank's annual shareholders meeting that until the reform legislation has final approval by Congress, it is not possible to determine its effect on stockholders.
However, he said he expects the measure to "significantly increase costs."�
"The question is how bad is it going to be," he said, predicting that congressmen then will blame others on the bill's contents after President Barack Obama signs it, possibly by July 4.
Carter said he spends three-quarters of his time dealing with regulations. In the past two years, Congress has passed 50 regulatory changes, and the cost of complying with them is enormous, he said.
For instance, he described Regulation GG, which will require all banks to screen - or "police," as Carter called it - their commercial accounts to determine if their proceeds come from Internet gambling.
Ten years ago, the bank's board probably dealt with 10 regulatory policies a year, but at its meeting later Wednesday the board was to consider 50, Carter said. Some are 50 pages long, he added.
The financial regulatory reform bill, which has cleared the House and Senate and is in a conference committee, will add 30 more regulations, he said.
"They disguise spending," he said, pointing to the consumer finance protection agency to be created by the bill. Its initial funding is $500 million a year, Carter said.
The agency will develop banking products and tell the financial institutions how to offer them, their prices and other aspects, he said.
"Washington is taking over a lot of industries," he said, including health care and recipients of bailout funds. Yet it has made a net profit on TARP funds loaned to banks, he added.
Carter said the near-collapse of the nation's financial system in 2008 stemmed from actions by Wall Street banks and unregulated lenders, not community banks such as Carter Bank & Trust. But when Congress has moved to fix the problems, it has used a "broad brush. ... We are treated like everybody else" even though Carter Bank never made a subprime loan or offered golden parachute employment contracts, Carter said.
"Banking is not the industry to be in today. There's no difference between Wall Street and Main Street. We are on Main Street," Carter said.
Carter Bank's conservative management style has resulted in fiscal 2009 being the bank's best year, according to Carter and the bank's annual report.
In fiscal 2009, Carter Bank's total assets rose to $3.4 billion from $2.8 billion the year before. The figures included a $365 million increase in investments.
The bank increased net loans by $186 million, deposits rose by $583 million, total interest income increased $8.1 million while interest expense fell $4.9 million over the prior year, according to the annual report.
Carter pointed out that the bank's excess reserves were $210.2 million in 2009 and $471 million as of Tuesday.
At the same time, its FDIC assessment rose to $5.3 million from $1.2 million in 2008 and $271,000 in 2007, the report states. By the end of December 2010, the bank will have prepaid more than $15 million for the FDIC, Carter said.
The bank has $1.8 billion in loans but only 1.2 percent of them were past due, Carter said, calling that "off the charts as being favorable."�
In the future, Carter said marketing will be done for the new core software system; debit cards will continue to be introduced; online banking will be tested; and 25 offices that it bought but never opened will be staffed and begin operating at a pace of three each quarter over the next two years.
The shareholders meeting was held at the Bank Services of Virginia Operations Center on College Drive in Martinsville.