Guidance to Help Financial Institutions and Facilitate Recovery in Areas of Vermont Affected by Severe Storms and Flooding

Summary:

The FDIC has announced a series of steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Vermont affected by severe storms and flooding.

Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-supervised financial institutions.

Highlights:

• Severe Storms and Flooding caused significant property damage in areas of Vermont from July 7, 2023 and continuing.
• The Federal Emergency Management Agency (FEMA) declared a federal disaster for selected areas affected in Vermont on July 14, 2023. FEMA may make additional designations after damage assessments are completed in the affected areas. A current list of designated areas is available at www.fema.gov .
• The FDIC is encouraging banks to work constructively with borrowers experiencing difficulties beyond their control because of damage caused by severe storms and flooding.
• Banks that extend repayment terms, restructure existing loans, or ease terms for new loans in a manner consistent with sound banking practices can contribute to the health of the local community and serve the long-term interests of the lending institution.
• Banks may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.
• The FDIC also will consider regulatory relief from certain filing and publishing requirements.

SUPERVISORY PRACTICES REGARDING DEPOSITORY INSTITUTIONS AND BORROWERS AFFECTED BY SEVERE STORMS AND FLOODING IN VERMONT

The Federal Deposit Insurance Corporation (FDIC) recognizes the serious impact of severe storms and flooding on customers and operations of financial institutions in affected areas of Vermont and will provide regulatory assistance to institutions subject to its supervision. These initiatives will provide regulatory relief and facilitate recovery. The FDIC encourages depository institutions in the affected area to meet the financial services needs of their communities.

The affected areas in Vermont are Chittenden, Lamoille, Rutland, Washington, Windham, and Windsor Counties.

Lending: The FDIC encourages bankers to work constructively with borrowers in communities affected by severe storms and flooding. The FDIC realizes the effects of natural disasters on local businesses and individuals are often transitory, and prudent efforts to adjust or alter terms on existing loans in affected areas should not be subject to examiner criticism. In supervising institutions affected by severe storms and flooding, the FDIC will consider the unusual circumstances they face. The FDIC recognizes that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound banking practices as well as in the public interest. 1

Community Reinvestment Act (CRA): Financial institutions may receive CRA consideration for community development loans, investments, or services that revitalize or stabilize federally designated disaster areas in their assessment areas or in the states or regions that include their assessment areas.  For additional information, institutions should review the Interagency Questions and Answers Regarding Community Reinvestment at Section 12(g)(4)(ii).  For help in identifying community development activities to revitalize or stabilize a disaster area, financial institutions can contact their regional Community Affairs Officer .

Investments: Bankers are encouraged to monitor municipal securities and loans affected by severe storms and flooding. The FDIC realizes local government projects may be negatively affected and encourages bankers to engage in appropriate monitoring and take prudent efforts to stabilize such investments.

Reporting Requirements: FDIC-supervised institutions affected by severe storms and flooding should notify the New York Regional Office if they expect a delay in filing Reports of Income and Condition or other reports. The FDIC will evaluate any causes beyond the control of a reporting institution when considering the length of an acceptable delay.

Publishing Requirements: The FDIC understands the damage caused by severe storms and flooding may affect compliance with publishing and other requirements for branch closings, relocations, and temporary facilities under various laws and regulations. Banks experiencing disaster-related difficulties in complying with any publishing or other requirements should contact the New York Regional Office.

Consumer Laws: For consumers’ principal dwelling-secured loans, Regulation Z provides consumers an option to waive or modify the three-day rescission period when a “bona fide personal financial emergency” exists.  To exercise this option, the consumer must provide the lender with a statement describing the emergency in accordance with the regulation.

Temporary Banking Facilities: The New York Regional Office will expedite any request to operate temporary banking facilities by an institution whose offices have been damaged or that desires to provide more convenient availability of services to those affected by severe storms and flooding. In most cases, a telephone notice to the FDIC will suffice initially. Institutions may submit necessary written notification later.

• 1

  Institutions that report modifications of existing loans in accordance with Accounting Standards Codification (ASC) Subtopic 310-40, Receivables — Troubled Debt Restructurings by Creditors should evaluate those modifications individually to determine whether they represent troubled debt restructurings. For institutions that have adopted ASC Topic 326, Financial Instruments — Credit Losses, and Accounting Standards Update (ASU) 2022-02, Troubled Debt Restructurings and Vintage Disclosures, modifications of existing loans should be evaluated individually to determine whether the modification of the existing loan is a modification to a borrower experiencing financial difficulty. Under both ASC Topic 326 and ASU 2022-02, this evaluation should be based on the facts and circumstances of each borrower and modification.