April 28, 2021
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Vendor * Spotlight
Bill extends PPP benefits to farmers

The U.S. Senate Committee on Small Business and Entrepreneurship introduced the PPP Flexibility for Farmers, Ranchers, and the Self-Employed Act, bipartisan legislation seeking to provide relief to farmers, ranchers and sole proprietors through changes to the Paycheck Protection Program.

The bill was introduced by Senate Committee Chair Ben Cardin, D-Md., and Sens. James Lankford, R-Okla., Susan Collins, R-Maine, Angus King, I-Maine, Tammy Baldwin, D-Wis., Rob Portman, R-Ohio, and Roger Marshall, R-Kan. The legislation makes changes to PPP loan calculations in order to allow small businesses to apply for increased benefits.

Recent changes to the PPP allow sole proprietors to use gross income rather than net income when applying for program loans. The bill would make those changes retroactive to loans that were disbursed prior to the implementation of the changes. It would also permit self-employed farmers and ranchers to use gross income instead of net income and allow those who applied under the old calculation to recalculate to obtain the increased benefit.
Source: S&P Global Market Intelligence
Tax credits for employee vaccines

The Treasury Department and IRS released details of small-business tax credits under the American Rescue Plan. Eligible employers with fewer than 500 employees can receive a credit for providing paid time off for employees receiving and recovering from COVID-19 vaccines.
Source: IRS
FDIC proposes rule on deposit insurance misrepresentations

The FDIC proposed a rule to bar individuals and organizations from misrepresenting FDIC deposit insurance and misusing the agency’s name or logo.
The proposal describes processes for identifying and investigating potential violations and enforcing statutory prohibitions. Comments are due within 60 days of publication in the Federal Register.
The FDIC said it has noticed an increase in deposit insurance misrepresentations, issuing 165 letters to responsible parties between Jan. 1, 2019, and Dec. 31, 2020.
OCC conditionally approves Paxos bank charter

The OCC conditionally approved the trust bank charter application from Paxos, a cryptocurrency platform.
Paxos applied to charter Paxos National Trust. The trust bank would offer custody, fiduciary, and “know your customer” services; custody and management of stablecoin reserves; and “other cryptocurrency services.”
In a joint letter earlier this year, ICBA and other groups said more information is needed about the applications from Paxos and BitPay. The groups cited vague language in the applications, said they don’t appear to meet trust bank fiduciary requirements, and urged the OCC to postpone the application process and provide more information.
Source: ICBA
Pandemic accelerates shifting banking preferences

The pandemic has accelerated the shift in consumer banking preferences along generational lines, according to new research from BAI. According to the report:
  • Gen Z: 58 percent prefer to open a deposit account via desktop or mobile app;
  • Millennials: 85 percent would bank with a non-traditional bank;
  • Gen X: 45 percent prefer banks and credit unions with branches; and
  • Boomers: Only 63 percent feel their primary financial services provider will protect them from fraud and identify theft—the lowest among the generations.
Source: Bank Administration Institute
Credit union advantages, disadvantages in bank acquisitions

Credit unions face a number of puts and takes when it comes to acquiring banks.

U.S. bank M&A is surging back after historically low levels last year, but credit union acquisitions of banks are still dragging from a record number in 2019. This year has seen two credit union-bank deals so far, compared to six in 2020 and 14 in 2019.

The complexity of these deals and the need to pay a premium to compensate the selling bank for a "double taxation" issue could be contributing to the decline, industry observers said. Ensuring the credit union can acquire the bank's customers into its field of membership and juggling various regulatory approvals from the National Credit Union Administration and the bank's primary regulators can also prove to be a challenge. But credit unions also enjoy several advantages when it comes to M&A. They tend to have extra cash on hand given their tax-exempt status, and there are no shareholders or analysts scrutinizing the financial metrics of a deal, allowing them to focus on strategy.

"These transactions are relatively complex," Douglas Winn, president of Wilary Winn LLC, said in an interview. "I don't think that the credit union industry always understood just how complex these transactions can be from a tax and regulatory approvals standpoint. So we've actually seen a slowdown in these transactions."

'Double taxation' issue
Credit unions typically have to pay up to acquire a bank because the deals are structured as a purchase and assumption of assets and liabilities. If the selling bank is legally structured as a C-corporation, the deal will be taxed twice — once at the corporate level and again at the shareholder level. Traditional bank M&A deals are typically structured as a sale of stock, avoiding the double taxation.

"The double taxation can be a hindrance for a C-corporation to sell to a credit union," said Paul Sirek, a partner with Eide Bailly LLP who works with banks that sell to credit unions, said in an interview. "But if the price is right and the after-tax return on the deal for the shareholders makes sense, I mean, a lot of the times, you just have to look out for your shareholders and get the best deal that is available for that. So it may be a credit union, may be a bank."

Banking industry groups gripe that community banks cannot compete with credit unions' bids in M&A given the high prices they pay, pointing to their tax-exempt status. But the high prices are mostly driven by double taxation, Rick Childs, partner in advisory services at Crowe LLP, said in an interview.

Source: S&P Global Market Intelligence