Louisiana Bankers Notes Blog


U.S. Senate Passes Regulatory Relief for Community Banking

A recent tweet by democratic Sen. Mark Warner, a supporter of the Senate regulatory relief bill, S. 2155, that passed March 14, is worth sharing. He wrote: “Virginia only lost one community bank during the financial crisis. We’ve lost 21 since Dodd-Frank passed. Regulations should keep Wall Street in check, not run small community banks out of business.” That prompted me to find the same numbers for Louisiana banks. Which are: one bank failed during the financial crisis, and 38 bank charters have gone away sine Dodd-Frank’s enactment in 2010. Since Dodd-Frank passed there have been only seven new bank charters nationwide. As of the third quarter of 2017, Louisiana had 127 domiciled banks. Another 10 are domiciled in another state and have locations here. It is unclear now what the U.S. House of Representatives will do with S. 2155. Whatever they do, it must not overreach to the point it loses the democratic support necessary in the Senate. 

The loss of community banks that has taken place in Louisiana and Virginia is representative of what is occurring nationwide. This trend began well before Dodd-Frank, and that law has certainly accelerated the trend. All bankers need to help blunt the aggressive nature of federal banking agencies and Congress to continually impose greater demands on community bankers. We must not let our congressional delegation believe that the relief contained in S. 2155 is the end of banking’s need for relief. We need to communicate it is the beginning. See the article by Joe in this newsletter for more details on the bill’s provisions. This year’s LBA Washington Visit is July 10-12. We are working to have meetings with key people, including Acting Director of Consumer Financial Protection Bureau Mick Mulvaney. Be present to finally hear from federal bank regulators some encouraging developments and to voice your need for more. 



What We Can Control

Our own actions are what we can control. What we can do individually and collectively to help Louisiana community banking grow and prosper. I recently read a speech given in 1966 titled “Will Small Banks Survive?” given by George Mitchell, a member of the Board of Governors of the Federal Reserve System. The speech cites many of the concerns we hear today, including this: 

“We are now witnessing another banking transformation brought on by a new banking ideology, a largely unforeseen technological revolution in credit and settlement accounting, and a large and steady flow of savings from a prosperous economy. In this latest maelstrom of change there is apprehension in some quarters about the survival of the small or moderate-sized community bank.” 

To address the implied question, we know community banking will survive. Probably fewer of them, but the business model and the good people working today in community banking are not going away. The trends the speech addresses, like technology innovations, demographics, challenges in rural areas, lack of economies of scale competitors have, among others, remain. These factors, or secular trends, are largely not in our control. At the time the speech was given there were nearly 14,000 banks, today there are less than 6,000. At the LBA we are focused on what we can do collectively to promote, strengthen, and advocate for Louisiana banking to assure it can grow and prosper. That focus is manifested through you the banker. It’s advocacy with policy makers in telling your story, but also bankers making sure we here understand the challenges you face and keeping us on point in our work. That only happens through our interaction with you in all the ways that are available through LBA programs and events, or through phone calls and emails. We depend on bankers to keep us focused, and acting together on things we can impact. Let’s do that this year and keep the positive momentum going. 




End of 2017 Has Banking on Cusp of Great News

Read that headline again. You have waited a long time to see that. Good things out of D.C. are in sight. All those visits to D.C. by Louisiana bankers and your banking colleagues around the country are paying off. The Senate Banking Committee recently passed S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, which has many positive provisions that will help Louisiana banks. It is not all that we want but is a very good start. It has the support of enough democrats to assure final passage in the Senate. I watched part of the hearing and the democrats on the committee that support this bill made very strong emphatic statements that they understand changes need to be made in banking regulation to promote economic activity and consumer access. We are hopeful this is the first of many positive developments as we move into 2018. I understand the full Senate will vote on S. 2155 in January. The tax reform bill now being negotiated in Congress could be very welcome news for banks and their customers. While we continue to have specific concerns that we are communicating to our congressional delegation, we are hopeful. You also are seeing the change in federal regulatory leadership in D.C. at the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Federal Reserve and soon the FDIC. Since Congress passes laws directing banking agencies to fill in the blanks of what they pass through writing rules, there is significant opportunity for rules to be rewritten or interpreted differently that we should see play out over the coming years. Keep engaged and be part of the LBA effort to push for positive changes in 2018. 

All of us here at LBA are thankful to work for Louisiana bankers. Each of us comes to work with the focus to serve your needs as best we can. Bankers are the single most important factor in directing our work. The better we all work together, the better the outcome. Help us, keep us focused and know that we are grateful to be here at LBA.




Tax Reform & Louisiana Banking

Tax legislation that can have a significant impact on your bank, employees and customers, both positive and negative, is moving through Congress. You have likely seen through media reports that tax reform is on the fast track, with the House passing their bill yesterday and the Senate Finance Committee, on which Sen. Bill Cassidy is a member, passing their version out of committee yesterday as well. The full Senate could tax up the bill the week after Thanksgiving. Both House and Senate bills have provisions that are concerning. Both House and Senate bills initially had very detrimental sections on non-qualified deferred compensation plans. Fortunately, the House removed that provision in committee last week. The Senate bill also initially had that provision, but it too was removed. Both Sen. Cassidy and Sen. John  Kennedy and their staffs were actively engaged in helping achieve the positive result. We here at LBA will remain diligent on this issue as long as the tax reform bills are being considered. Bankers did a very good job of getting the attention of our delegation this week when we sent out an alert to contact Sen. Cassidy’s staff. 

The LBA board met with Sen. Kennedy November 17 at LBA’s office and discussed tax concerns, such as the S corporation pass through tax rate, deferred compensation and credit unions not being taxed in the current bill. Also discussed was regulatory relief, which LBA Director of Government Relations Joe Gendron has written about in his article in this issue. Also discussed was flood insurance, that has not yet developed a consensus in Congress on a path forward for reauthorization. Other items were covered and we appreciate Sen. Kennedy’s positive and constructive approach. 

Continuing on tax reform, reducing corporate tax rates is the core of tax reform. C corporations are given a 20% rate in both bills, which we strongly support. The challenge is with the pass-through corporate entities and assuring they have rates equal in effect. About half of Louisiana banks are organized as S corporations. Some proponents of the pass-through provisions contained in the House bill assert they are achieving a 25% rate that is about equal to the C corporation 20% rate. However, the information we are receiving from our banking association partners in D. C. indicates the provisions impacting S corporation banks in both bills, as they are now, fall significantly short of that goal. In fact, it could be that the motive of some is to incent S corporations to move to C corporations. LBA is strongly communicating our concerns on the S corporation provisions. Sen. Cassidy, who is on the committee, and his staff, are hearing from us and others. Additionally, we are asking Congressman Steve Scalise and his staff to assist, as is Sen. Kennedy and others of the Louisiana delegation. We have heard this issue of pass through corporations and the rate of tax they will pay is one of the major issues that must be resolved by congress as they move toward enactment of tax reform. When the House and Senate bills go to conference committee to reconcile the two bills, Congressman Scalise can be an advocate for changes if the bills are still short of getting to the 25% rate goal. LBA is very appreciative of the staff of the Louisiana congressional delegation. We have been able to get our concerns heard and acted upon as best they can. As this and other issues develop we will keep you updated.