Pub. 1 2020 Issue 3

www.cbak.com 12 In Touch (OCC) issued a Joint Statement on March 19 stating that the agencies will favorably consider retail banking services and retail lending activities in a financial institution’s assessment area(s) that are responsive to the needs of low- and moderate-income (LMI) individuals, small businesses, and small farms affected by COVID-19 and that are consistent with safe and sound banking practices. The agencies emphasize that prudent efforts to modify the terms on new or existing loans for affected LMI customers, small businesses, and small farms will receive CRA consideration and not be subject to examiner criticism. Impact of Accommodating Distressed Customers There will be long-term consequences for any decision you make to alter a contract. For instance, if you allow a customer to skip a payment completely and do not change the maturity date, you will have a balloon at maturity. And since interest continues to accrue for that extra month(s), the principal/ interest calculation will likely not be quite correct. So even if you do extend a maturity date, you may have a balloon simply because of the principal and interest calculation. Having that discussion with your customer now seems preferable to fighting about it in a few years. The only real solution to assure that the loan amortizes correctly is to do the analysis to determine what payment amount will be required to avoid a balloon. And even then, things may still go awry at maturity. Future Developments As with many things today, this whole issue continues to evolve. The agencies had planned to present a webinar on this interagency statement on March 27, but have postponed it as of this writing. Keep on the lookout for further word from the agencies on when this will be available. There is also a Frequently Asked Questions (FAQ) document available at https://www.fdic.gov/coronavirus/ faq-fi.pdf, to provide some clarification regarding the interagency statement. Conclusion We hope that this article helps you to address these issues. We encourage you to consider what your situation will be post-crisis, as it will likely have lasting impacts on your bank. Try to assure that the lasting impacts are positive, as we all learn from the experience how to handle future disruptions (should they occur) with even more professionalism.  For more information, contact Bill Elliott, Director of Compliance Education, at bille@ younginc.com or 330-422-3450, or William Showalter at wshowalter@younginc. com or 330-422-3473. Young & Associates, Inc. has provided consulting, training, and practical products for financial institutions for over 41 years. We strive to provide the most up-to-date solutions for our clients’ needs, while remaining true to our founding principles and goals – to make managing the bank easier, reduce the regulatory burden, improve the bank’s bottom line, and increase shareholder value. Bill Elliot Continued from page 11