Montana is now well into the spring months. Having grown up in Montana, this is one of the best times of the year to be a resident of the Treasure State. Spring sees the leaves returning to the trees, the grasses are greener than they will be for the remainder of the year, the bears are out of hibernation and the roads into Glacier National Park are about to be plowed open.
Spring 2024 sees the association preparing for the annual MIB Convention and Tradeshow. The MIB convention will be held July 17-19 in Missoula. We are excited to return to the Garden City this year, not the least of which is the location of Norman Maclean’s iconic book “A River Runs Through It.” And to quote Mr. Maclean, “I did not know that stories of life are often more like rivers than books.”
You will find within the pages of this edition of the magazine all the information you need to attend the 2024 convention — information ranging from how to register, how to sign up for fun activities and how to book a hotel room. The association has once again arranged for a great lineup of informative speakers and timely topics and issues.
The convention will kick off with the always fun opening night reception on July 17. The next day will feature speaker Commissioner of Banking Melanie Hall before finishing with rafting, golf activities and the evening vendor reception and dinner. The final day of the convention, July 19, affords the opportunity to hear from several great presenters, including Steve Beck and Joni Hopkins with the Federal Reserve, before concluding with a delicious lunch.
We look forward to seeing you in July for big fun under the Big Sky. To register for the convention and/or to find out more information, please visit the MIB webpage located at mibonline.org/convention. Questions related to sponsorships and activities can be directed to Terri James at (406) 449-7444 or assistant@thunderdomelaw.com.
Spring 2024 also finds the community banking industry in the midst of a challenging time for the industry. It seems as if every time we open the newspaper, there are troubling stories related to the fallout from the banking spring 2023 banking crises, namely the high-profile failures of Silicon Valley Bank, Signature Bank and First Republic Bank.
Mid-sized regional banks still appear to be struggling some 12 months later. Early in February, Moody’s downgraded New York Community Bancorp’s (NYCB) rating to junk status. This came after NYCB detailed major losses tied to commercial real estate loans that went south.
Across the country, including here in Montana, CRE is an area that is struggling. This is due to the manner in which the pandemic changed working and living behaviors. We here at the association are watching to determine if there is more trouble ahead for banks with exposure to commercial real estate. This is a nationwide situation to keep a close eye on in the coming months.
Another troubling situation is the increasing trend of tax-exempt credit unions purchasing banks. This trend started in the late 2010s and has really started to accelerate since the pandemic. For example, in early September 2023, ICBA announced its concern after five announced acquisitions of banks by credit unions. This concern was only highlighted by the fact that nearly 20% of the bank deals announced in 2023 were credit union bank purchases.
As a result of that troubling situation, ICBA urged Congress to investigate the credit union tax exemption and its harmful impact on local communities. Rebeca Romero stated, “The surge in credit unions leveraging their taxpayer subsidies to acquire local community banks has devastating implications for local communities that go well beyond their expansion of the federal tax exemption for more than $2 trillion in credit union assets.”
The credit union purchase trend comes on the heels of the ongoing bank consolidation trend that can be attributed to the high number of federal regulations enacted in the wake of the financial crises of 2007-2008. Those regulations, which were designed under Dodd-Frank to reign in the too-large-to-fail institutions, have arguably had a distorting impact on the ability of community banks to fairly compete against national banks.
Based on my discussions with MIB’s members, this ongoing consolidation in the industry is of no surprise as it was a predicted result of the increased regulatory burden placed upon banks of all sizes as a result of the wrongdoing of a few mega financial institutions. Obviously, there are other factors at play beyond increased regulatory burden, which such factors would help explain the consolidation trend. For example, a study performed by the Conference of State Bank Supervisors (CSBS) noted that many owners of privately held banks were getting older and determined that this would be a good time for them to exit the industry. In addition, rural populations are shrinking, and some small banks are expanding to become bigger banks.
This consolidation trend poses several immediate questions. First, the question needs to be asked on whether consolidation in the industry, namely consolidation of Montana community banks, is a bad thing. The second question that needs to be asked is what can be done to curb the trend of a small number of financial institutions holding a majority of U.S. banking assets. As to the first question, that is best answered by your institution, your customers and your owners/shareholders. As to the second question, it has certainly been MIB’s and ICBA’s position that the best way to stop the trend of too-big-too-fail growth was for Congress to start undoing the regulatory morass created by Dodd-Frank and to allow community banks (and market forces) more regulatory flexibility.
As you know, we here at the MIB have been working hand-in-hand with our national organization, the ICBA, to pass through Congress a series of regulatory bills that will recognize the difference between a Wall Street bank and a hometown bank, such as your bank. The general idea is to create a regulatory system that regulates a bank of $10 billion or less in a different manner than a bank of $100 billion or more. Such regulatory system would recognize the reality that small banks have a more difficult time complying with today’s highly complex regulatory environment than the Chase Manhattans of the world.
Further, MIB joins ICBA in expressing our mutual concern about the distorting impact of allowing credit unions to operate under the tax subsidy being used to underwrite financial services consolidation. As ICBA has stated, Congress should respond by holding hearings, requesting a Government Accountability Office (GAO) study on the credit union industry, and considering an “exit fee” on these acquisitions to capture the value of the tax revenue lost once the acquired bank’s business activity becomes tax-exempt.
MIB members will be discussing these legislative proposals with Montana’s congressional delegation during ICBA’s Washington Policy Summit held April 28 through May 1, 2024. Issue and policy advocacy is one of the association’s most valued member benefits. And, as such, we encourage you to join us in Washington as we bring the “community banking voice” to Montana’s elected officials.
Have a great spring, and we look forward to seeing you in Missoula as we share in what Mr. Maclean called the “stories of life.”
