Subchapter S Bank Association Mounts Grassroots Legislative Initiative

Jul 09, 2014

All too often Washington completely forgets about Subchapter S banks and their special needs and circumstances. We’ve seen it first-hand with the original TARP and SBLF programs. It is now more important than ever that the Subchapter S bank community work in a concerted effort with regulators and legislators to improve capital access to assure the long term ability of Sub S Banks to grow and serve their communities. This can only be achieved through discussion and policy-making that includes the needs and interests of Subchapter S banks at the outset of the process rather than as a mere afterthought.

As many of you know, we have conducted meetings with a large number of Sub S bank CEOs from around the country and we continue to hear the concern expressed about long term capital accumulation amid increasingly challenging regulation. We also polled our membership on these issues, and the results were dramatically in favor of positive legislative action to increase the maximum number of allowable shareholders in a Subchapter S bank and to authorize the issuance of preferred stock. Based on the overwhelming support for these reforms, we are organizing a coalition of Subchapter S banks from around the country to begin the process of moving these legislative priorities forward.

This Subchapter S Capital Access Coalition will be a “grass roots” effort to generate support for this legislative initiative. We would like to enlist your support for the initiative and welcome any contributions you are able to make to the cause. As a member of the Subchapter S Capital Access Coalition you will be included as a signatory on correspondence submitted to Congress and the bank regulatory agencies supporting the proposed legislation. You will have prior approval of all such correspondence. We also ask that you reach out to your local representatives and other Subchapter S colleagues and ask for their support in this effort.

In addition to the Coalition, we are organizing a “Task Force” of a small number of bankers and bank owners to spearhead this initiative in Washington. Through the Association and our firm, the Task Force will be meeting with members of Congress and bank regulators in Washington to discuss the legislative initiative and will be playing a more active role in the effort.

We have drafted legislation and a short summary describing the purpose behind these proposals. In the past, similar proposals have been attached to large community banking legislative initiatives and have failed to gain sufficient traction in Congress. We believe that a more targeted approach specifically addressing the shareholder limit and preferred stock issues will be a more productive, successful course of action. Undoubtedly, success in moving these initiatives forward, like we had nearly 18 years ago with the legislation allowing banks to make the S election, will require a concentrated effort by bankers – representing the businesses and communities that stand to benefit from these reforms.

Kennedy Sutherland and the Association will lead this effort and serve as organizer of the initiative, but will need assistance from individual banks, bank owners, directors and executives to raise awareness and generate support for the legislation throughout the country.

We have begun the process of identifying potential sponsors and co-sponsors for the legislation in the both the Senate and House. We welcome your participation in this effort and are counting on your local knowledge and influence on your representatives in Congress to succeed.

In addition to robust and vocal support for the reforms, we need to raise a “war chest” to fund the effort. Our goal is to raise between $150K-250K to fund the initiative. Spread among a large group of supporting banks, this fundraising should not be a significant burden, and our success will provide a significant benefit to the 2,200 Sub S banks in the US. We ask that Subchapter S banks interested in moving these reforms forward consider making a contribution to this effort. Kindly reply to this letter by telephone, email, or mail, indicating your willingness to contribute to the cause. In addition, if you are interested in playing a more active role in the legislative initiative, please indicate whether you would like to be added as a member of the Subchapter S Capital Access Coalition or considered for the Task Force.

I would like to contribute $___________________________ to assist in funding the legislative initiative.

I would like to join the: ___ Subchapter S Capital Access Coalition ___ Subchapter S Task Force

All funds contributed will be placed in a segregated account under the responsibility of Kennedy Sutherland LLP, the law firm that represents the Association and provides the substantive content for the Association. The Task Force will meet regularly and work with Kennedy Sutherland and the Association to move the effort forward.

The Task Force will begin meetings in Washington with senior staff of each of the bank regulatory agencies to educate them on Sub S banks and this capital access initiative. In addition, the Conference of State Bank Supervisors will also be enlisted and key member state bank supervisors will also be contacted for support.

We welcome your participation and ask that you spread the word among your Sub S Bank colleagues who may not be aware of this initiative and its benefits.

Very truly yours,

Patrick J. Kennedy, Jr.

Kennedy Sutherland LLP, Managing Partner
Subchapter S Bank Association, President