Category Archives:Bank Holding Company

Increase Asset Threshold Under Small Bank Holding Company Policy Statement

On April 14, 2016, the House of Representatives passed H.R. 3791 with a vote of 247-171. Introduced by Congresswoman Mia Love (R-UT-04) and passed out of the Financial Services Committee, HR 3791 requires the Federal Reserve to increase the consolidated asset threshold under the Small Bank Holding Company Policy Statement to $5 billion from $1 billion. If enacted into law, institutions of up to $5 billion in total assets would be able to increase their use of debt to raise bank capital, repurchase stock, or make acquisitions. In addition, consolidated capital rules do not apply and capital adequacy is judged at the bank level only. Qualifying institutions would be prohibited from engaging in any non-banking activities involving significant leverage and may not have a significant amount of outstanding debt that is held by the general public. The bill next goes to the Senate.
While 90% of  S corp holding companies have total assets of  less than $1 billion in total assets, passage of this bill could have a significant impact on the ability of those in the $1 – $5 billion asset range to raise capital and to expand. Please let us know if this is important to your institution.

Text of HR 3791

Congresswoman Love’s remarks on the legislation

Kennedy Sutherland to Present at Bank Conference in Iowa

Kennedy Sutherland LLP attorney, Patrick J. Kennedy, Jr. will be presenting at the Bank Holding Company Association’s one day seminar on March 15, 2016 in Moravia, Iowa at the Honey Creek Resort. Kennedy will be covering “How to Make the Most of your S Election.”

Other speakers include:

  • Beau Hurtig, Fredrikson & Byron law firm: “A Look at the Community Bank M&A Landscape”
  • Don Johnson and Rhea Hemish from Eide Bailly: “Strategies for Ownership Succession Planning”
  • Patrick Dix, former WHO-TV anchor, now Senior P.R. manager for Shazam: “Turn your Marketing Expense into a High-yielding Investment”
  • Stevie Ray of Stevie Ray’s Improv Company: “Leadership at Every Level”

Lunch is joint event with Heritage Clubs International, the trade group for bank club directors.

The BHCA “Mini” Seminar is only $84 for the entire day! You do not need to be a BHCA member to attend this event. Click here for more information and to see the day’s agenda.

Don’t Wait; Register NOW!


Kennedy Sutherland Presenting at Bank Holding Company Association Seminar

Join Kennedy Sutherland attorneys, Patrick J. Kennedy Jr. and Dub Sutherland, as they present at the 2015 Bank Holding Company Association Spring Seminar in Bloomington, Minneapolis on May 4th, 2015. The seminar will “Build on a Foundation of Success,” giving financial institutions the information & networking opportunities they need to take their bank holding company to the next level. The seminar is bigger & better than ever with an expanded Monday session, more breakout sessions, & outstanding speakers.

This year Kennedy Sutherland will be part of a new special two-part session that will look at the current issues affecting Sub S banks and holding companies, and investment strategies designed to make the most of a sub S election.


MONDAY, May 4, 2015

2:30 p.m. ~ Registration Desk Opens

3:00 p.m. to 4:00 p.m. ~ “Sub S Issues & Opportunities”
Kevin Powers of Crowe Horwath, LLP, will look at the current issues facing holding companies and banks incorporated under subchapter S rules and compare C vs. S in the current tax environment.

William D. “Dub” Sutherland of Kennedy Sutheland LLP will discuss challenges and opportunities in managing Sub S shareholders, Board and Bank, including specific thoughts on succession planning.

4:00 p.m. to 5:00 p.m. ~ “How to Leverage Your Sub S Election”

Randy Rouse, executive vice president and chief investment officer of Broadway Bank, will share his bank’s investment strategy for making the most of its S election. Broadway is a $2.4 billion community bank in San Antonio, Texas. He is a regular presenter at the annual conference of the Subchapter S Bank Association and is making his first BHCA seminar presentation.

Patrick Kennedy, Jr. of Kennedy Sutherland LLP will provide the most current update on legislative and regulatory matters affecting Subchapter S banks, including discussion of the Association’s Capital Access Initiative as well as other legislative opportunities.

5:00 p.m. to 6:30 p.m. ~ Reception

6:30 p.m. to 7:30 p.m. ~ Dinner

7:30 p.m. to 8:30 p.m. ~ “Eyeing Rates and Other Economic Indicators”

Economist Edmund Seifried will survey the economic landscape, identifying the areas of potential trouble and opportunity for community bank owners. Seifried is the chief economist of the Sheshunoff Affiliation Programs and serves on the faculty of several banking schools.

View the Full Agenda

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Invited Comments on Small Bank Holding Company Policy Statement

The Federal Reserve Board on Thursday invited public comment on a proposed rule to expand the applicability of the Board’s Small Bank Holding Company Policy Statement (Policy Statement) for small bank holding companies as well as certain savings and loan holding companies. Additionally, the Board announced reduced reporting requirements for certain bank holding companies and savings and loan holding companies.

The Policy Statement facilitates the transfer of ownership of small community banks by allowing their holding companies to operate with higher levels of debt than would otherwise be permitted. Institutions subject to the Policy Statement are not subject to the Board’s regulatory capital requirements. Currently, bank holding companies with less than $500 million in total consolidated assets may be subject to the Policy Statement. Eligible firms must also meet certain qualitative requirements with respect to nonbanking activities, off-balance sheet activities, and publicly-registered debt and equity. The proposed rule allows bank holding companies and savings and loan holding companies with less than $1 billion in total consolidated assets that meet the qualitative requirements to qualify.

The Board also adopted an interim final rule to exclude from the Board’s regulatory capital requirements savings and loan holding companies with less than $500 million in total consolidated assets that meet the qualitative requirements in the Policy Statement. Bank holding companies with less than $500 million in total consolidated assets that meet the qualitative requirements in the Policy Statement are already excluded from the Board’s regulatory capital requirements.

The proposed rule and interim final rule would implement a law passed by the U.S. Congress in December 2014. Comments on the proposal and interim final rule will be accepted through March 4, 2015.

In addition, the Board has taken steps to relieve regulatory reporting burden for bank holding companies and savings and loan holding companies that have less than $1 billion in total consolidated assets and meet the qualitative requirements of the Policy Statement. The Board has proposed to eliminate quarterly consolidated financial reporting requirements (FR Y-9C) for these institutions, and instead require parent-only financial statements (FR Y-9SP). The proposal would also eliminate regulatory capital reporting for savings and loan holding companies with less than $500 million in total consolidated assets from the FR Y-9SP. The Board has filed a request with the Office of Management and Budget to make these changes effective on March 31, 2015, while it completes the notice and comment process.

Comments on the regulatory reporting changes will be accepted for 60 days after publication.

Small Bank Holding Company Policy Statement

Bank Regulators Release Public Section of Resolution Plans

Yesterday, the Federal Reserve and the FDIC issued a joint press release making available the public sections of resolution plans of firms with less than $100 billion in qualifying nonbank assets.  Each plan, commonly known as a living will, must describe the company’s strategy for rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure of the company. These plans must include both public and confidential sections.

Companies subject to the rule are required to file their resolution plans on a staggered schedule. The largest bank holding companies are required to submit their plans on or before July 1 each year. Nonbank financial companies that are designated by FSOC also must submit on or before July 1. All other firms generally are required to submit their plans on or before December 31 each year.

The public portions of these “living wills” are available on the Federal Reserve and FDIC websites.

Legislation Passes Easing Capital Formation for Community Banks

On December 11th, 2014, HR 3329 was passed with unanimous consent by the Senate and sent to President Obama’s desk for signature. HR 3329 enhances the ability of community financial institutions to foster economic growth and serve their communities, boost small businesses, increase individual savings, and for other purposes. Specifically, the legislation will double the Small Bank Holding Company Policy Statement asset threshold from $500 million to $1 billion. H.R. 3329 also will allow small savings and loan holding companies to be covered by the policy statement’s provisions. It is estimated that the change will reduce regulatory burdens for 89 percent of bank holding companies, up from 75 percent today. The bill, introduced by Rep. Blaine Luetkemeyer (R-MO,) was a bipartisan bill that passed the House earlier this year.

HR 3329

Kennedy Sutherland to Speak at Bank Holding Company Association's Seminar

Patrick J. Kennedy, Jr., managing partner of Kennedy Sutherland LLP, will be speaking at the Bank Holding Company Association’s Fall Seminar scheduled for October 6-7 at the Minneapolis Airport Marriott Hotel. Mr. Kennedy will be speaking at the Breakout session on Tuesday on Access to Capital and other Subchapter S Bank Issues for bank holding companies. You can register for the conference here.


MONDAY, Oct. 6, 2014

5:00 p.m. to 6:30 p.m.   ~   Registration and reception
6:30 p.m. to 8:30 p.m.   ~   Dinner and program

“Leadership Lessons from Two World Series” Al Newman played for the Minnesota Twins from 1987 to 1991, just long enough to play in two World Series. The switch-hitter filled in where needed, including second base, third base, shortstop and left field. In 1990, he was part of a record-setting two triple plays in a single game. Also playing for the Expos and Rangers, Newman concluded his career as a coach. In addition to stories from the baseball diamond, Newman will share ideas for converting his experiences into useful leadership lessons.

TUESDAY, Oct. 7, 2014   ~    General Session

7:30 a.m. to 8:30 a.m.   ~   Registration/breakfast
8:15 a.m. to 8:30 a.m.   ~   Annual BHCA Business Meeting

8:30 a.m. to 9:30 a.m.             

“Behind the M&A Headlines” Steven P. Kent, president of River Branch Capital, LLC, Chicago, will take us beyond the press releases and newspaper stories in a comprehensive look at the bank mergers and acquisitions scene. Planning to buy or sell a bank, branch or holding company? Kent will describe the current market, analyze the trends and offer ideas about how to succeed in an M&A marketplace that seems to be heating up. Prior to joining River Branch Capital, Kent was Managing Director at Keefe, Bruyette & Woods, Inc., for 13 years.

9:30 a.m. to 10:30 a.m.           

“The Tech-Savvy Board: Helping Directors Understand Technology” Jack Vonder Heide, president of Technology Briefing Centers, Inc., Chicago, leads this information-packed session designed for your directors and senior management. IT risk and strategy has become more consequential as customers migrate to electronic delivery channels. New laws, guidance and regulations require a higher level of board and senior management focus on IT. Vonder Heide provides an easy-to-understand overview of current and emerging bank technology issues with a practical assessment of their benefits and risks.

11:00 a.m. to Noon  ~   Breakout Sessions: Choose from four timely topics listed below.

12:15 p.m. to 12:45 p.m.  ~   Lunch

1:00 p.m. to 1:45 p.m.              

“Surveying the Economic Landscape” Laura Kalambokidis, the new state economist for Minnesota, will share her thoughts on current economic conditions, including taxes, labor markets, interest rates and more from a national, regional and state perspective. Kalambokidis, a professor in the Department of Applied Economics with the University of Minnesota, is an expert on public sector economics and tax policy issues.

2:00 p.m. to 3:00 p.m.            

“Forecast for Weathering Today’s Business Environment” Paul Douglas, former KARE 11 and WCCO television personality, is a nationally respected meteorologist at WeatherNation TV, a new 24/7 weather channel. Founder of Media Logic Group, Douglas and his colleagues provide weather services for a variety of media outlets. A scientist and an entrepreneur, Douglas will share insights based on his experience working in a high-visibility, drastically-changing industry, as well as starting his own businesses.

TUESDAY’S Breakout Sessions

Session A       “Turn Risk into Rewards: How to Avoid Regulatory-Inspired Mediocrity”
New regulatory requirements are fundamentally changing the way bank managers develop risk/reward strategies for their organizations. Bart Smith of Performance Trust Capital Partners, Chicago, will share insights into the regulatory process and discuss keys for managing regulatory issues. Smith is a former senior manager with the FDIC.

Session B      “Bitcoin: Opportunity, Risk or Fad?
We’ve all heard of Bitcoin, but how many of us can explain what it is and how it works? In this session, George Meinz and Hailey Hollenhorst of the Gray Plant Mooty (St. Cloud, Minn.) law firm will provide a primer, with comments about how this open-source payments system might affect your bank.

Session C       “Deal Closed, Now What?”
The accounting and legal work in a bank merger or acquisition transaction is not complete at the end of the closing. What happens as the acquirer begins to merge two sets of books into one? What balance sheet implications should be considered before a potential buyer even considers a deal? Douglas Winn and Brenda Lidke of the Wilary Winn Risk Management firm in St. Paul, walk us through the post-merger accounting implications of a bank M&A transaction.

Session D      “Access to Capital and Other Subchapter S Issues”
While offering tax advantages, subchapter S incorporation status raises unique issues which can affect an organization’s ability to raise capital. Patrick J. Kennedy, Jr. of the Kennedy Sutherland LLP law firm of San Antonio, Texas, will look at the issues specific to subchapter S bank holding companies and banks.

Tax Allocation in a Holding Company Structure

Federal bank regulators recently issued additional guidance on inter-company income tax allocation agreements between holding companies and their depository institution subsidiaries. The addendum, which was open for public comment in late December and early January, was written to address court’s struggles in deciding how to allocate refunds once banks fail. Of particular concern for the regulators was that some refunds generated by a failed bank were the property of its holding company, based on a reading of the express language of the tax allocation agreement as creating a debtor-creditor relationship.

The addendum was intended to ensure that that insured depository institutions (IDI) in a consolidated group maintain appropriate relationships regarding the payment of taxes and treatment of tax refunds. The addendum would clarify the 1988 interagency policy statement that dealt with holding companies filing consolidated tax returns and required that: (i) Holding company tax settlements with their depository institutions be conducted as though the depository institution were a separate taxpayer and (ii) Holding companies receiving refunds from taxing authorities hold such funds as agent for the depository institutions and nonbank subsidiaries they controlled.

The Addendum also clarified that tax allocation agreements are subject to the requirements of Section 23B of the Federal Reserve Act (FRA); agreements that do not clearly acknowledge the agency relationship could be subject to additional requirements under Section 23A of the FRA. “Tax allocation agreements should require the holding company to forward promptly any payment due the [insured depository institution] under the tax allocation agreement and specify the timing of such payment,” the Addendum stated.

The regulators provided sample language for tax allocation agreements. Going forward, the agencies said they will deem agreements “that contain this or similar language to acknowledge that an agency relationship exists” for purposes of the policy statement, Addendum, and Sections 23A and 23B of the FRA. : The Agencies expect institutions
and holding companies to implement fully the Addendum to the Interagency Policy Statement as soon as reasonably possible, which the Agencies expect would not be later than October 31, 2014. Meaning that holding companies and insured depository institutions have less than four months to review and edit their tax allocation agreements to adhere to the addendum.