Patrick McHenryChairman

Washington, October 22, 2012 -

The bipartisan JOBS Act, which originated in the Financial Services Committee and was passed by Congress earlier this year, is working to boost the economy.  A report in the Charlotte Observer notes that provisions of the act are helping community banks to trim regulatory costs and save money – money that can be pumped back into local economies, start small businesses and create jobs. 

At a time when the over-regulation and red tape of the Dodd-Frank Act is driving up their expenses, community banks are getting some much needed relief thanks to the JOBS Act.

Read the Charlotte Observer report below:

Small banks use law to cut regulatory costs

Published in the Charlotte Observer
Oct. 22, 2012

Two Charlotte-area community banks are joining their peers around the country in saving money through a new law intended to boost startups and small businesses.

They’ve been able to trim or avoid regulatory costs at a time when the ongoing implementation of the Dodd-Frank financial reform law has generally driven up their expenses.

“It is a small piece of good news in an otherwise bleak landscape,” said B.T. Atkinson, a partner at law firm Bryan Cave LLP, which represents community banks. He said banks would be able to save, on average, about $250,000.

Signed into law April 5, the Jumpstart Our Business Startups Act passed with broad bipartisan support in both houses of Congress. It’s generally intended to make it easier for small companies to raise money.

Several provisions apply specifically to community banks. The primary one deals with the maximum number of investors a bank may have if it wishes to remove its registration with the Securities and Exchange Commission – a move that saves money and time. The maximum was raised from 300 investors to 1,200 – making many more banks eligible to deregister.

As of last week, nearly 100 banks around the country had filed to deregister with the Securities and Exchange Commission, according to data compiled by SNL Financial. Five of them were based in North Carolina, tying the state for second-most behind Virginia.

Blueharbor Bank, based in Mooresville, announced the decision to do so in August as a way to cut down on the legal and accounting expenses that come with being registered.

“We just saw that as an opportunity to help cut some costs and try to be good stewards of our shareholders’ resources,” CEO Jim Marshall said, saying the bank will be able to save the equivalent of a mid-level executive’s salary per year. “We have 18 employees, so that’s a nice savings.”

In the past, many community banks kept their shareholder counts low to avoid having to register. But Marshall said his bank felt it was more valuable to have a greater number of local shareholders, so Blueharbor decided to keep its minimum investment low.

The tradeoff was the greater regulatory cost – which has now been taken away.

“This JOBS Act allowed us to have the best of both worlds right now,” Marshall said.

On the flip side, for banks that have not registered with the SEC, the JOBS Act raised the threshold for having to register from 500 investors to 2,000.

That’s allowing Charlotte-based NewDominion Bank to bring a number of local business people into the fold without exceeding the cap as the bank works on a $30 million capital raise.

In the bank’s initial offering, it had 374 shareholders – already close to the former threshold, Chief Operating Officer Marc Bogan said. In its current capital raise, to comply with the old standard, the minimum investment would have had to be about $250,000. Now, NewDominion can gain shareholders who put in around $10,000.

“They get to be a part of helping build a bank in their community,” Bogan said.

After an initial surge of banks deregistering with the SEC under the JOBS Act, the pace has slowed in recent months, SNL Financial said.

But Atkinson of Bryan Cave said he believes a number of small banks are still weighing their options and may wade in at the start of the next fiscal year.