Welcome to this month’s Community Banking News Update, your go-to roundup of the biggest stories shaping community banks and credit unions — plus why they matter. Last month, we focused on leadership changes at the federal level. (Missed it? Catch up here.)
This month, new fissures are developing: the CFPB is in turmoil with firings and a legal battle, and the administration has disbanded key advisory councils for community banks and credit unions. Meanwhile, the OCC has a new nominee, core providers are making strategic moves, and the RTP network has hit a major milestone with over 1 billion transactions. What do these developments mean for community banking institutions? Read on to find out.
In 2024, the U.S. banking sector experienced a 5.6% increase in net income, totaling $268.2 billion, primarily due to reduced interest expenses, higher non-interest income, and fewer losses from securities sales. However, community banks, defined as institutions with assets under $10 billion, faced a 2.4% decline in net income, amounting to $25.9 billion, largely because of increased expenses and realized losses on securities sales. The disparity highlights the differing impacts of the current economic environment on large versus small banks.
The financial challenges faced by community banks in 2024 underscore the need for strategic adjustments to navigate rising expenses and market volatility. Unlike larger institutions that benefit from diversified income streams and economies of scale, community banks often operate with tighter margins and limited resources. To remain competitive, community financial institutions may want to explore cost-reduction strategies, strengthen risk management practices, and explore new non-interest income avenues.
To read more about how community banks can earn non-interest income through pre-integrated international payments technology, read our blog:
As community banks navigate profitability challenges, core providers are stepping up with new solutions to help them compete in an evolving financial landscape. Leading core banking service providers are expanding their offerings to improve digital payments, real-time transaction capabilities, and embedded finance options.
These developments present new opportunities for community banks and credit unions to enhance their digital offerings and better compete with larger institutions. Real-time payments, embedded finance, and international payments can help community financial institutions meet growing customer expectations while streamlining operations. By leveraging these advancements from their core providers, community financial institutions can offer more seamless, technology-driven financial services without the need for costly in-house development.
Read the press release about Acceleron’s integration with Fiserv Payments Exchange.
Starting this summer, the Federal Reserve will double its send limit for banks enrolled in FedNow, its real-time payments system. This will allow banks to send real-time payments of up to $1 million, from the current $500,000 limit, according to a post on its website. FedNow processed more than 20 billion dollars in the fourth quarter of 2024, and more than 915-thousand total settled payments, which represents a 172% volume growth over the previous quarter.
In addition, the Clearing House's RTP® network has achieved a significant milestone by processing over 1 billion payments as of January 31, 2025. This accomplishment comes just 18 months after the network reached its first 500 million transactions, indicating a rapid acceleration in the adoption of instant payments across the United States. On the day it surpassed the 1 billion mark, the RTP network also set new single-day records with 1,592,419 transactions totaling $1.44 billion in value.
All this growth reflects the increasing demand from consumers, businesses, and financial institutions for faster, more transparent, and always-available payment solutions.
The rapid growth of both RTP and FedNow signals real traction for real-time payments, creating new opportunities for community banks to enhance their payment offerings. As consumer and business demand for instant, 24/7 transactions increases, community banks can evaluate the benefits and risks of implementing instant payment solutions.
On February 20, President Donald Trump signed an executive order titled "Commencing the Reduction of the Federal Bureaucracy," mandating the dissolution of several financial advisory groups. The order directs the Federal Deposit Insurance Corporation (FDIC) to terminate its Community Bank Advisory Council, a platform facilitating regular discussions between community bankers and FDIC leadership. Additionally, the Consumer Financial Protection Bureau (CFPB) was instructed to disband both its Academic Research Council and Credit Union Advisory Council. James Akin, head of regulatory affairs at America's Credit Unions, said in a statement that the Credit Union Advisory Council served as a vital conduit for credit unions to convey their insights to CFPB leadership, and that this action removes a crucial channel for dialogue.
The dissolution of these councils removes a significant platform through which community bankers engaged directly with FDIC and CFPB officials. Without these dedicated forums, community banks may need to find alternative ways in conveying their perspectives to regulators so that they create policies that consider the nuances of community banking operations. Staying proactive in seeking other avenues for communication with regulatory bodies will be essential for community banks to ensure their voices continue to influence policy decisions affecting their sector.
A federal judge has issued a temporary injunction preventing the Consumer Financial Protection Bureau (CFPB) from proceeding with more firings, following the termination of approximately 70 probationary employees, and 70-100 term employees. Earlier in the month, Acting Director Russell Vought initiated a halt to all CFPB activities. In addition, he shut down CFPB headquarters in Washington D.C. and placed most remaining employees on administrative leave. In response to a lawsuit filed by the National Treasury Employees Union, the court has paused further firings and ordered the preservation of agency data until a scheduled hearing on March 3. Amidst these events, President Trump has nominated former Federal Deposit Insurance Corp. board member Jonathan McKernan to lead the CFPB, signaling potential shifts in the bureau's direction.
The recent upheaval within the CFPB could lead to changes in regulatory oversight and enforcement practices that directly impact community banks. With the nomination of Jonathan McKernan, known for advocating reduced regulatory burdens, community banks might anticipate a more lenient regulatory environment. However, the current uncertainty and operational pauses at the CFPB may also result in delays or shifts in compliance expectations. Community banks should stay informed about these developments to proactively adjust their compliance strategies and ensure alignment with any new regulatory directives that may emerge from the CFPB's evolving leadership and policies.
President Trump has nominated Jonathan Gould to lead the Office of the Comptroller of the Currency (OCC). Gould served as the OCC's senior deputy comptroller and chief counsel during the first Trump administration, where he played a key role in implementing the Economic Growth Act to reduce regulatory burdens on smaller banks. Following his tenure at the OCC, Gould was the chief legal officer at blockchain firm Bitfury and later a partner at law firm Jones Day in Washington, D.C. Industry leaders, including the Consumer Bankers Association and the American Fintech Council, have expressed support for his nomination, citing his commitment to fostering a financial system that balances innovation with consumer protection.
Jonathan Gould's nomination signals a potential shift towards a regulatory environment that may be more accommodating to community banks. His previous efforts to lessen the regulatory load on smaller financial institutions suggest a continued focus on creating a balanced framework that promotes both innovation and consumer protection. Staying informed about the confirmation process and any subsequent policy changes will be crucial for these institutions to adapt and thrive under the new leadership.
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