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March Madness Begins, and Ends…

By Lorenzo Cruz

March Madness marks the start of the NCAA basketball tournament and the conclusion to an active 2022 legislative session for the Wisconsin Bankers Association (WBA) government relations (GR) team.

A Successful Legislative Session in the Books

WBA successfully defeated two bills which would have negatively impacted the banking industry. AB 478/SB 451 would have broadened the powers of credit unions by allowing for: non-member participation in loans, the ability to issue and offer supplemental forms of capital for all credit unions, the automatic adoption of federally chartered credit union activities or powers for state-chartered credit unions, and the broadening of the authority of credit unions on holding property. During the negotiations, it became evident that the priority for the Wisconsin Credit Union League (WCUL) was their supplemental capital change which contributed to the demise of the bill. WBA effectively lobbied and defeated the bills in the Assembly and Senate.

Another piece of legislation that drew a great amount of WBA’s lobbying attention was a bill related to interchange fees. AB 587/SB 572 would have prohibited the application of the interchange fee to the tax portion of the credit card transaction and would have provided a penalty for a violation. A retailer coalition advocated aggressively for the legislative change and WBA, WCUL, and several credit card companies opposed the effort. If passed, the bill would have required credit card companies to implement a split tender transaction for purchasing products or services, which means customers would have to swipe their credit card for the retail sum purchase and then pay with either cash or check for the tax portion of the transaction. WBA warned legislators of the cost shift, customer confusion and frustration that could follow from the change. The bills died in the Senate and Assembly Financial Institutions Committees.

Other bills worth noting are AB 596/SB 596 related to banking modernization and AB 45/SB 19 and AB 46/ SB 20 related to elder fraud. The banking modernization bill would have removed outdated regulation and other impediments to banking and the elder fraud bill would have provided banks with more tools to help protect older customers from fraud and abuse. The legislative proposals passed overwhelmingly in one House but then failed to be acted upon in committee or placed on the calendar for a floor vote. In some ways, the bills became collateral damage from the credit union battle. WBA did make considerable progress on both issues and will collaborate with legislators to reintroduce similar bills in the next legislative session.

Looking Ahead to Next Year

With the end of the March session, WBA GR shifts the team’s focus to political fundraising, member outreach, and strategic planning for the 2023 session. Many of the legislative issues identified above will return and be debated in the next state budget or advanced as separate pieces of legislation. WBA needs to prepare and lay the groundwork for the fight ahead on these critical public policy initiatives.

All members — big, medium, and small — must be more engaged financially in the political process and committed to grassroots advocacy to advance the industry’s priorities. Political campaigns have continued to trend upwards in cost, and the 2022 fall elections should see more spending records broken for state and federal races. With control for the East Wing in play and majorities at stake in both State and Federal Houses, expect hundreds of millions of dollars to be spent in Wisconsin which has become a battleground state for the rest of the country. WBA can ill afford to be a spectator. Sitting on the sidelines runs the risk of electing anti-banking candidates which could have severe negative consequences for our industry. It is imperative to have the political funds in place for WBA to support pro-banking incumbent legislators and challengers. Individual members are strongly encouraged to give to the Wisbankpac or Alliance of Bankers for Wisconsin (ABW) Conduit and corporations are urged to contribute generously to WBA’s issue advocacy fund. For more information go to www.wisbank.com/give.

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Branches on Wheels Offer Different Kind of Mobile Banking

Photo courtesy of PNC Bank

By Paul Gores

The term “mobile banking” typically involves financial apps on smartphones. But for some banks and credit unions, mobile banking also comes on wheels.

More credit unions and banks around the U.S. have been adding mobile branches — trucks or RV-type vehicles outfitted with banking gear ranging from ATMs to teller windows to private loan offices — to reach out to their customers.

Large regional banks doing business in Wisconsin, such as PNC Bank and U.S. Bank, have had mobile branches for years, and PNC is building a bigger fleet. But the vast majority of the nation’s community banks don’t have mobile units, and credit unions tend to own them more often than banks.

In fact, in Wisconsin, a state-based credit union soon will be operating a full mobile branch — a 34-footlong vehicle that is expected to hit the road for Westby Co-op Credit Union this spring.

“We’ll go where our members need us,” said Art Shrader, chief business development officer for the $763 million-asset credit union, also called WCCU. Mobile Facilities LLC in Elkhart, Indiana, is putting the finishing touches on Westby Co-op’s mobile branch, one of up to six the company produces each year for financial institutions.

Matt Fuller, president of Mobile Facilities, said he’s seen more orders and interest in mobile branches in recent years as financial institutions have pared back on branch locations.

“There’s a lot of branches closing everywhere, so they’re looking for other ways to reach out to these smaller communities where it just doesn’t make sense to have a brick-and-mortar branch anymore,” Fuller said.

Fuller said the mobile branches his company makes range from a 23-foot vehicle that costs about $159,000 to a 40-foot financial center on wheels that sells for around $295,000. The key feature of the 23-footer is an ATM, while the 40-footer can include just about whatever the financial institution wants, he said. “Some of them want teller windows on the inside, some want them on the outside. Some want restrooms, some don’t. Some want a lobby area, some want an office area,” Fuller said.

Mobile Facilities offers multiple mobile branch floor plans.

“We install restrooms, all the furniture and fixtures, of course air conditioning, heating, generators, wheelchair lifts on some of the bigger units,” Fuller said.

Fuller said the most popular mobile bank vehicles his company produces are its 29-foot and 34-foot units.

Photo courtesy of PNC Bank

The smaller Mobile Facilities mobile banks are built on a Ford E-450 Super Duty chassis, while the largest are crafted on a Freightliner M2 chassis. The vehicles use only two axles and weigh less than 26,000 pounds, which means they don’t need a specially licensed driver.

Fuller said it typically takes his company eight to nine months to complete a mobile branch vehicle.

Florida-based MBF Industries, Inc. (mbfindustries.com) is another supplier of mobile bank branches, including some built for PNC Bank.

PNC Bank is a big believer in the usefulness of mobile branches. It has a fleet of 12 so far in several sizes and expects to have 20 in all by the end of next year.

While PNC will dispatch the mobile branches to provide banking services where there’s been a natural disaster, its branches-on-wheels are used regularly as community outreach tools, said Chris Hill, senior vice president and PNC mobile branch channel manager.

When PNC Financial Services Chief Executive Officer William Demchak went through a new unit in 2018, he suggested the company build a fleet that could serve low- and moderate-income neighborhoods, Hill said. Now, working with community partners, PNC’s mobile units make regular visits to areas of Baltimore, Chicago, and Detroit, offering not only account-opening services but often financial education to people who might otherwise be outside of mainstream banking. The bank plans to expand the program to more major metro areas in the U.S.

“We have a 30-foot truck that we use for a variety of things, but it’s really what we use in our community outreach,” Hill said. “The employees don’t handle cash. We call it a cashless branch. So we don’t do any tellering services, but we do everything else.”

The unit includes a deposit-taking ATM, so people can make an account-opening deposit at the mobile branch. The bankers — there are always at least two — can issue debit cards on the spot.

“That’s pretty powerful for the consumer — we’ve come to them,” Hill said. “We haven’t asked them to come to us. We’ve brought banking to them.”

U.S. Bank has used its two mobile units mostly at natural disaster scenes. For instance, one unit went to the Bowling Green area when a tornado devastated parts of western Kentucky in mid-December last year.

“After a disaster our customers have appreciated the opportunity to bank right in their own town, typically near where the branch was,” said Doug Reier, senior vice president of operations process and delivery for U.S. Bank. “And our employees are happy to have a place to call a temporary home to work.”

Westby Co-op Credit Union’s Shrader said the new mobile branch is a way for the financial institution to serve all parts of its area better.

“We serve a rural area, and we have populations of Amish throughout the areas as well as non-Amish, and we need to go where our members need us,” Shrader said. “There’s a huge amount of benefits from this, from marketing to PR, but it’s to serve the membership plain and simple.”

He said he also expects that the mobile branch will make visits to offer banking services and financial education to places like schools, nursing homes, county fairs, and other community events.

Shrader said the credit union’s mobile branch will be able to do what a permanent brick-and-mortar branch can do, including lending.

Shrader said the credit union had to get permission for the mobile branch from the Wisconsin Office of Credit Unions, and its operation at first will be “a learning experience.”

Heather A. MacKinnon, vice president – legal for the Wisconsin Bankers Association, said state banks considering a mobile branch should contact the Wisconsin Department of Financial Institutions (DFI).

“From a state banking perspective, Wisconsin Department of Financial Institutions Banking Administrative Code has language referring to a branch location being ‘permanent,’ which may be a consideration to overcome as a concept of permanence is certainly different than ‘mobile,’” she said. “However, after having had informal conversations with DFI, WBA would encourage any bank seeking to file a mobile facility to engage with DFI as there is a willingness for discussions.”

Nationally, the Office of the Comptroller of the Currency requires a branch license for each mobile unit. The regulator defines a mobile branch as a facility that does not have a single, permanent site and includes a vehicle that travels to public locations to conduct branch transactions. It requires a bank to file an application delineating the proposed or expanded geographic area to be served by the mobile branch.

From a safety standpoint, bankers with mobile units said they are loaded with security cameras and other measures to protect staff, the vehicle, and its contents. Local police typically are notified where and when mobile branches will be stationed.

In addition to the service a mobile branch can provide and the good will it generates among its customers, a branch on wheels also is a valuable marketing tool. Whether it shows up at a disaster site, a school, a community event, or a local parade, it presents the financial institution in a positive light as an involved corporate citizen.

PNC takes its mobile units to college campuses during move-in week, making it easier for new students to open accounts without having to find fixed branches.

The mobile branches get noticed.

“They’re billboards for us going down the road. We wrap them from head to toe,” said PNC’s Hill.

U.S. Bank’s Reier also said brand awareness is a side benefit of mobile branches.

“When it’s rolling down the road, of course, but more importantly when it arrives in town,” Reier said.

Paul Gores is a journalist who covered business news for the Milwaukee Journal Sentinel for 20 years.

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Statement on the Recent Acquisition of a Taxpaying Wis. Bank by a Credit Union

By Wisconsin Bankers Association President and CEO Rose Oswald Poels 

In a deal announced yesterday, Summit Credit Union will acquire West Bend’s Commerce State Bank. This marks the sixth acquisition of a taxpaying Wisconsin bank by a tax-exempt credit union in a decade, continuing a concerning trend of taxpaying community banks being bought by large, growth-oriented credit unions. The acquisition will bring Summit Credit Union to nearly $6 billion in assets with 54 locations. With Commerce State Bank’s $837 million in assets, this is one of the largest credit union acquisitions of a bank nationwide to date.

Wisconsin taxpayers should be very concerned about this transaction as the state alone will lose over $1 million annually in future tax revenues with this sale because credit unions do not pay any state or federal income tax. With large credit unions becoming indistinguishable from tax-paying banks, it is time for the public and elected officials to question the public policy rationale for this significant tax benefit. Why should the 14 Wisconsin-based credit unions over $1 billion in asset size pay nothing in state income tax to support social services, law enforcement, schools, and other public services? Individuals, families, and tax-paying businesses are left to shoulder these growing expenses. Not only is tax revenue lost in these transactions, but jobs in the state are often lost when the acquirer is an out-of-state credit union and/or when certain functions are consolidated. This type of consolidation is not in the public’s interest.  

While Wisconsin now has two pending bank acquisition transactions by credit unions, credit unions are also actively seeking expansionist powers from the legislature and their regulator that, among other things, would permit credit unions to raise capital from private equity investors. The days of small, employer- or neighborhood-focused credit unions are long gone. Elected officials should carefully scrutinize this legislation and strongly oppose Wisconsin AB 478/SB451 as it is in direct conflict with the public policy intent behind the tax exemption granted by this same body decades ago.  

It is time for growth-oriented credit unions to be paying their fair share of taxes. Competition in any industry is fair and healthy, but only when the playing field is level. Taking a tax-paying business off the tax roll by a “not-for-profit,” tax-exempt entity directly harms the citizens of this state and threatens the vibrancy and diversity of our state’s financial system.

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Executive Letter: The Importance of Attending Capitol Day

Rose Oswald PoelsBy Rose Oswald Poels

Grassroots advocacy is at the foundation of WBA’s advocacy efforts to ensure that elected officials in Wisconsin and Washington D.C. understand the impact of their initiatives on the banking industry. The relationships that many of you develop with your representatives play a critical role in the success of WBA’s advocacy priorities. As part of our grassroots advocacy, WBA’s hosts an annual Capitol Day in Madison to help bankers around the state connect with their legislators on issues important to the industry and on actions our government can take to aid in the economic growth and strength of our communities.

As our 2022 Capitol Day quickly approaches, I invite you to join your fellow bankers in meeting face-to-face at the State Capitol to advocate on several key issues affecting the banking industry this session. Few Wisconsin legislators have experience in banking and your grassroot involvement is essential in reinforcing the impact legislative proposals will have on your bank, the industry, and your communities.

As we have mentioned in other publications, there will a public hearing on the credit union powers’ bill — SB 451 — on January 11, just one week before WBA’s Capitol Day. The timing of your attendance and conversations with legislators and their staff will be critical in helping us either defeat any further progress made or amend the bill. Moreover, the credit union industry is hosting their annual Capitol Day a week after ours, so it is imperative that we have a strong showing of bankers on January 18 to offset the large numbers we expect the credit union industry to have present at their event.

The event includes hearing from several State Assembly and Senate leaders, moderated discussions with political insiders Scott Jensen and Chuck Chvala, and WBA’s Government Relations update on the legislative session thus far. This information will provide every attendee the knowledge needed to be prepared for the afternoon of meeting face-to-face with your elected legislators in meetings WBA will schedule.

Again, the relationships bankers build at Capitol Day assist us in advocating successfully for the banking industry throughout the year. I hope you and/or others from your team will join me and your fellow bankers at the State Capitol in Madison on January 18 for WBA’s annual Capitol Day.

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Wisconsin state capital building view from above
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Advocacy Updates from WBA’s Government Relations Team

Rose Oswald PoelsBy Rose Oswald Poels

In all facets, 2021 has been a busy year for WBA. Between keeping up with COVID-19 regulations and providing up-to-date resources for our member banks, WBA staff have worked tirelessly to advocate for the banks which our association serves.

Our government relations team has had a particularly busy fall from a policy perspective and so we decided to create periodic videos to keep you, your staff, and your board of directors easily (and quickly) informed not only on what is occurring in the industry but also how these key issues impact Wisconsin banks.

On October 6, WBA and 87 member banks joined in opposition of the Credit Union Legislation (AB 478/SB 451) which would provide credit unions with even more tools to grow beyond the intention of their original chartered mission much to the detriment of Wisconsin’s taxpaying banks and citizens. The grassroots involvement by bankers from around the state that signed on to the letter as well as appeared in person at the hearing allowed us to stop the bill’s current progression, though the work is certainly not done yet. It is because of your engagement that WBA is able to effectively fight against threats to our industry. In taking time out of your day to meet with legislators, they become more informed about the issues that impact us the most.

Twice in the fall session, banks have faced threats related to interchange/credit card swipe fees which call for the prohibition of interchange fees on the tax portion of a transaction. WBA successfully opposed this from being included into the state budget but have and will continue to oppose it as a standalone bill (AB 587/SB 572) as brought forth by the retail coalition.

While both of these bills will remain on our radar as we look onward into 2022, through the efforts of WBA and its member banks, each bill has only been heard by the Assembly Committee of Financial Institutions. It remains important for us to maintain momentum with our legislators until the sessions on each of these bills expires early next year.

Please share this inaugural video with your staff and Board so that they are informed of the top state legislative issues affecting banks. We plan to continue to produce the advocacy-focused videos periodically throughout the year to share both policy and political updates. Thank you again for your active engagement on policy issues as we navigate the next several months of the legislative session. Your voice on behalf of the industry leaves lasting impacts on legislators and doesn’t go unnoticed.

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Eighty-seven Banks Sign on to Letter and Testify in Opposition to Credit Union Expansion

Wisconsin Bankers Association Opposes Assembly Bill 478, Which Would Expand Authorized Activities and Powers of Credit Unions

At today’s hearing of the Assembly Committee on Financial Institutions, the Wisconsin Bankers Association and member bankers from around the state expressed opposition to Assembly Bill 478, which would provide credit unions with even more tools to grow beyond the intention of their original chartered mission much to the detriment of Wisconsin’s taxpaying banks and citizens.

In the early history of the existence of credit unions, they were either employer-based or focused on serving well-defined neighborhoods to serve consumers of modest means, which is the rationale for their income tax-exempt status. It is not difficult today for almost anyone to become eligible for membership in one of Wisconsin’s growth-oriented $1 billion and larger credit unions. In the past eight years, Wisconsin has seen the acquisition of five tax-paying community banks to large credit unions, which translates to a direct loss of tax revenue for the State of Wisconsin.

“Continuing to require that credit unions only do business with members is inherent in the public policy rationale behind which the tax exemption is given,” testified WBA President and CEO Rose Oswald Poels. “Making a substantive change to this foundational public policy principle as proposed in AB 478 should then also call into question, as other states have, the state tax exemption.”

“In Wisconsin, there are 13 credit unions that are over $1 billion in asset size that compete daily with banks like mine across the state. The services offered are no different than those offered by banks, and yet the credit unions enjoy a significant advantage in their income tax-exempt status,” testified Capitol Bank President and CEO and WBA Board Chair Ken Thompson. “Capitol Bank regularly experiences competition from growth-oriented credit unions operating in our market. . . Competition is normally healthy and good for consumers when all parties involved operate on a level playing field. However, that is not the case with the credit union industry.”

Joining WBA on a letter respectfully opposing Assembly Bill 478 as drafted are 87 banks from around the state. The letter explains that taxpayers can no longer afford to continue subsidizing the credit union industry; the goal is to have these large, aggressive credit unions return to their original mission or become subject to the same regulatory, supervisory, and tax requirements as banks.

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WBA’s Grassroots Advocacy on Credit Unions

Following the latest acquisition of a Wisconsin community bank by a credit union, WBA has written to Wisconsin’s Federal Congressional delegation and to members of the Wisconsin State Assembly Committee on Financial Institutions to further illustrate that it’s time for growth-oriented credit unions to be paying their fair share of taxes. Read the letter below:

Yesterday, Dupaco Community Credit Union, a $2.6 billion credit union headquartered in Iowa, announced their acquisition of Home Savings Bank in Madison. According to the joint release, the strategic acquisition will increase Dupaco’s total number of branches to 20 and total assets to approximately $2.8 billion based on 2021 financial data.

A bank’s decision to sell is completely up to bank ownership, directors, or shareholders. While we at WBA are disappointed to see this type of acquisition occurring, we do not question the Home Savings Bank’s motivations for doing so. However, we are hopeful this deal sparks conversation among all members of Congress as to why these deals are possible in the first place.

Growth-oriented credit unions have managed to become nearly indistinguishable from tax-paying banks. This is because they enjoy federal and state income tax exemptions, less stringent oversight, and do not need to adhere to community reinvestment obligations.

Wisconsin banks have opportunities to make acquisitions in these scenarios, and there were institutions that sought to purchase Home Savings Bank. But given the future tax savings credit unions can realize, they can offer purchase terms with which banks simply cannot compete. This is wrong!

This is the fifth credit union acquisition of an income tax-paying community bank in Wisconsin in the last eight years. There have also been numerous credit union purchases of bank branches and bank assets. Each one of these transactions has revenue implications for the State of Wisconsin and the country; bank assets accumulated by credit union acquisition cease to be taxed at the state and federal level. As of this year, credit union acquisitions of community banks nationwide have surpassed 100.

Dupaco’s deal here is another example of a troubling trend in the financial services industry. Rather than return more money or reduce prices and cost to members, credit unions continue to use their tax advantages to expand their footprints and operate outside the scope of their original mission. It is our hope this acquisition will raise a red flag with Rep. Steil whose constituents subsidize credit unions’ competitive advantage that will ultimately leave them with fewer choices for financial products and services. It is time for these growth-oriented credit unions to be paying their fair share of taxes!

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WBA Tells NCUA to Withdraw Proposed Revision to Chartering and Field of Membership Rules

On January 11, 2021, NCUA issued a proposed rule to expand the field of membership for multiple common bond credit unions. WBA filed comments on February 10, 2021, in opposition to this expansion.  

The proposal would modify the definition of service facility for select groups and underserved areas to include any shared branch, shared ATM, or shared electronic facility regardless of whether the credit union is an owner of the shared branch network. In addition, the proposal would erase the distinction between service to select groups and service to underserved areas as delineated in the Act. 

WBA commented that the proposal is another example of NCUA fueling the growth of the credit union industry, which undermines congressional intent to demand a heightened standard of in-person service for underserved communities. Further, WBA expressed concern that the proposal encourages abandonment of credit unions’ statutorily mandated physical presence and common bond requirements, which destroys the nexus between the credit union charter and the federally subsidized mission to provide financial services to underserved communities and people of modest means. 

WBA recommended that NCUA withdraw the proposal in its entirety. 

Click here to view the letter.

By, Ally Bates

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Credit Unions Evolve As Does Policy Debate

If you close your eyes and think about all the issues bankers have lobbied for over the decades, and focus on the one that resurfaces each year, credit union taxation should immediately pop into your mind. Over the years, the credit union industry has consolidated at a pace faster than that of the banking industry, resulting in fewer institutions but, without question, larger ones. Of the top 20 financial institutions headquartered in Wisconsin, 11 are credit unions with the largest one, Landmark Credit Union, ranked #3 at over $5 billion in assets. 

While bankers have consistently asked for taxation of credit unions, we have raised many other regulatory and legislative issues over the years with some success. Just as routinely, credit unions have lobbied Congress and NCUA for expanded powers with some success as well. Most recently, during our Capitol Day legislative meetings, bankers raised the public policy concern over non-tax paying institutions acquiring assets either through branch acquisition or whole bank acquisition of taxpaying institutions. The permanent loss of revenue this presents for government should be a growing concern. 

Given the need for government at the local, state, and federal level to search for more diverse revenue sources, the WBA Board asked staff earlier this year to form a Credit Union Task Force of bankers to research and suggest a strategy to help move us closer to the goal of credit union fairness. The group met Monday afternoon to continue its brainstorming and discussions from its first meeting in February. A representative from both ICBA and ABA also shared their organization’s respective activities this last year and ideas heading into 2021. 

The work of the task force will wrap up later this Fall and will likely consist of, among other ideas, three tangible action steps for the Government Relations Committee and WBA Board to consider for 2021. It is very clear that the large credit unions are not what they seem, and WBA, with the help of our members, is ready to execute on an active strategy. 

Members of the WBA task force include: Charlie Schmalz, East Wisconsin Savings Bank, Kaukauna; Ryan Kamphuis, Bristol Morgan Bank, Oakfield; Ed Schaefer, First Federal Bank of Wisconsin, Altoona; Jimmy Kauffman, Bank of Sun Prairie; Jay McKenna, North Shore Bank, Brookfield ; Dan Ravenscroft, Royal Bank, Elroy; Mike Gargaro, Coulee Bank, La Crosse; Gary Kuter, Capitol Bank, Madison; and Clark Yolitz, Dairy State Bank, Menomonie. 

I encourage you to contact me, or any member of the task force if you have questions or specific suggestions for us to consider as we finalize a strategy.

By, Ally Bates

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Rose on the Road: First Bank of Baldwin

Taking care of communities is what community banks do! Learn how First Bank of Baldwin stepped up to serve a community after it was abandoned by a credit union and left without a financial institution in the latest Rose on the Road!

By, Ally Bates

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