By Jeff McDaniels
President and CEO, Farmers Bank and Trust Company
As we all head into 2018, I wanted to take this opportunity to revisit what was a productive 2017 from an industry advocacy standpoint. To get the past year started quickly, the Independent Community Bankers of America (“ICBA”) unveiled its 2017 Plan for Prosperity on January 10th, 10 days prior to the Inauguration of President Donald Trump on January 20, 2017. Among many things, this Plan laid the general groundwork for regulatory and tax relief for community banks to be able to promote economic growth.
Shortly thereafter, on March 9th, ICBA Leadership participated in a joint meeting with the American Bankers Association (“ABA”) hosted at the White House by President Trump, Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn. The meeting was to discuss what the White House described as regulatory burdens facing smaller financial institutions under the Dodd-Frank Act.
Then, on April 30, 2017, the Bluegrass Community Bankers Association’s (“BCBA”) very own Paul Goodpaster joined approximately 100 community bankers representing ICBA on April 30, 2017 at the White House. This exclusive engagement with President Trump and other top administration officials kicked off ICBA’s Capital Summit being held in Washington DC that week. Representatives from our BCBA Board were part of more than 1,000 community bankers from throughout the country in town to visit members of Congress in support of ICBA’s call for tiered and proportionate regulation for community banks under the aforementioned Plan for Prosperity. It is this consistent appeal for a properly tiered banking system that treats true community banks equitably when compared to the larger banks that separates ICBA as the chief proponent of community banking in our country.
Further emphasizing the importance of the ICBA platform relative to that of other’s was the October testimony of Wells Fargo CEO Timothy Sloan, in which Sloan cited improvements to that institution’s “Community Bank”. ICBA CEO Cam Fine was quick in response in an October 5th letter stating: “Pardon me? In case you forgot, that’s what the $2 trillion-asset bank calls its massive retail banking arm, which perpetrated the fraud of roughly 3.5 million customers.”
Then, later in that same month, BB&T’s Chairman/CEO Kelly King made the argument he feels the industry is still over-banked, even though the number of US banks has declined from more than 18,000 to fewer than 5,800 in just three decades. CEO Fine, coming at this from another angle, wrote: “This excessive consolidation has led to too few community banks, particularly in areas where scarce capital is needed the most.” Fine also noted that: “Just 0.2 percent of US banks hold more than two-thirds of industry assets, posing systemwide risks and the continued threat of taxpayer assistance should those massive institutions again reach the brink of failure.”
As the 2017 year was nearing conclusion, tax reform was finalized at a national level and ICBA was again at the forefront of protecting our industry. While fully supporting the lower tax rate for C corporation community banks, ICBA led in the grassroots effort to create greater parity between S and C corporation community banks and to ensure the 20% deduction of S Corporation earnings was available to trusts and estates. ICBA efforts also bolstered the end results of non-qualified deferred compensation, business interest deduction, mortgage provisions, the estate tax, corporate alternative minimum tax, and preservation of the tax exemption on private activity and municipal bonds.
It is because of all of these efforts that BCBA, as the Kentucky state affiliate, is proud to be a part of the ICBA team. We know and value the difference between the largest banks and the “true” community banks, and plan to continue to work hard to help ensure our elected leadership in both Washington DC and Frankfort recognize that difference as well.
Before concluding, BCBA does want to encourage its membership to jointly support a recent study completed by the Kentucky Bankers Association (“KBA”) in regard to Kentucky’s Bank Franchise Tax (“BFT”). Talking points produced by KBA from their study illustrates how the BFT’s capital/equity method of taxation results in a disproportionate marginal corporate tax rate on Kentucky banks versus other Kentucky non-bank corporations. With the topic of taxes high on the minds of the 2018 General Assembly, we strongly concur that every banker in Kentucky needs to engage with their representative on this issue.
On behalf of BCBA and its Board of Directors, I want to wish each and every one of you a Happy New Year! Good luck in 2018!