DANIEL CLIFTON • EDITOR
WASHINGTON, D.C. — When Ken Burgess, chairman of FirstCapital Bank of Texas, and other community bankers voiced their concerns with President Donald Trump during a White House meeting, the Horseshoe Bay resident liked what he heard in the president’s response.
“I was extremely impressed by his willingness to get things done,” Burgess said. “When we would tell him a concern we had, he would turn to his staff — and the treasury secretary was there — and ask if that’s something he could do or would it require legislative action.
“If it was something he could take care of without legislative action, he asked his staff to begin looking into it and often told them to get it done in the next 60 days,” Burgess added.
Burgess was part of a group of American Bankers Association officials asked by the White House to meet with the president March 9.
FirstCapital Bank, with a branch in Horseshoe Bay, employs about 180 people, but like many community banks its size and smaller, it faces several challenges. Since 2010, Burgess said about 1,917 community banks have closed their doors, roughly 30 percent of the industry.
While some lump all banks — no matter the size — into one pile, Burgess said there’s a clear distinction between the larger Wall Street investment banks and the small community banks.
“They way I define community banks is the manager and owner, they tend to live in the community they serve,” Burgess said. “They have buy-in into the community.”
The community banks also support the small towns they are in in a number of ways, including supporting organizations and nonprofits, but where they really help is simply taking care of their customers and local businesses.
“More importantly, we get to know the business owners in our communities and the challenges they face,” Burgess said.
While larger banks typcially concentrate on big corporations and international banking, community banks focus on small towns such as Marble Falls, Horseshoe Bay, Llano, and Burnet. Burgess pointed out that community banks make about 50 percent of small business loans.
“Community banks are important because they help keep the local communities vibrant and growing economically,” he added.
But, he pointed out, since 2010 and the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, community banks have faced an onslaught of regulations. The act was passed in response to the 2007-08 financial crisis in order to keep something like it from happening again.
However, the act triggered an avalanche of regulations that basically applied across the board to banks and financial institutions no matter their size. That’s a big problem as Burgess sees it.
“I think the biggest is (Dodd-Frank) and the 25,000 pages of regulation written and dropped on us,” he said. “For a bank with 10, 25, 50 people, there’s no way that they can wade through all of that regulation.”
Even with 10 people dedicated to keeping abreast of regulations and the changes to them, Burgess said it’s challenging for FirstCapital to keep up. Plus, the regulations often impose draconian punishments — from fines to even jail time — for violations. In a community bank setting, there is little flexibility when it comes to rules and regulations, he added.
Many community banks have opted out of the mortgage business because of these regulations.
Of the 1,917 community banks that have closed since 2010, Burgess pointed out that smaller institutions — those with $100 million and less in assets — have been hit even harder with 43 percent of those banks shuttering in the past seven years.
Before Dodd-Frank, closures would be offset by new charters for banks, but Burgess said only three charters have been granted in the past several years, when before, the industry would be seeing 200-300.
Fewer community banks mean fewer financial resources for the communities they serve.
Those concerns were at the forefront of the visit to the White House by officials for the ABA, of which Burgess is chairman-elect. Burgess said President Trump listened to their concerns and asked questions.
“He was very nice, very professional,” Burgess said.
With the president’s emphasis on creating jobs and bolstering the U.S. economy, Burgess said Trump seemed very concerned about the challenges facing community banks.
“I was probably most excited about his receptivity to our concerns and his willingness to get things done,” Burgess added.
Some of the challenges ABA members and community banks face would require legislative action, but there are some things the president can act on through executive orders or other means. In those situations, Burgess said, the president seemed willing to make decisions and take action.
While it was more of a “listening” meeting, Burgess said he felt community banks might get some regulatory relief in the future.
“If we don’t get this turned around, all we’ll be left with is large banks,” Burgess said. “And they do a great job at what they’re good at with the larger businesses and international banking, but it’s the community banks that really serve their communities and know how to best do it.”
Go to aba.com to learn more about the American Bankers Association and community banks.