Banking for business, banking for the community
In business, people tend to work with vendors and clients who share like-minded principles, similar expectations and skin in the game. A deep understanding of small-business challenges and hurdles is one big reason business owners choose to partner with community banks.
The banking industry's collective vested interests during the recession have helped to deliver $19 billion in loans to bolster thousands of small businesses in Pennsylvania.
Bank statistics on increased capital ratios and credit and risk management enhancements can sometimes overshadow the importance of bank loans to a strong community fabric. More than 85 percent of the global economy is composed of small business. Communities depend on what banks provide: safe harbor for savers, access to financial resources for borrowers and growth for investors — and, in the case of Pennsylvania banks, more than $663,681,000 in taxes. Just like our small-business customers, we share significant skin in the game in the communities where we serve and do business.
In the world of commercial and business banking, Pennsylvania banks have been leading the recovery with cash and capital. This is not a statistic, it's a primary source. Our business loans, which can be 85 percent of a bank's portfolio, support the job creators with big ideas — those who are ramping up capital expenditures, investing in employees and products, and meeting pent-up consumer demand. Banks are a conduit to help grow our economy and strengthen the tax base.
Laser-focused on return on investment, we are equally focused on the return on value we provide with community pride and neighborhood loyalty. Our bank employees live and shop where we lend. The small businesses we sustain have soldiered through the past six years with a level of resilience that has made our country exceptional. We believe in them, invest in them, support them and walk with them. We build relationships with them that are generations deep. We join them with skin in the game.
Interestingly, in the column in the Central Penn Business Journal's April 5 edition titled "Raise credit union member business lending cap," the credit unions state a reason for increasing credit union lending caps as "the profits small businesses generate from loans provided by Pennsylvania credit unions would be taxed the same as profits from loans generated by banks." But what's missing is the credit union machine's own skin in the game. Where is their fair share of taxes to help responsibly support the communities they are to be serving?
Community banks live the challenges of growing a small business, raising capital, marketing their services and paying taxes. The volume of commercial and business lending provided by Pennsylvania's banks speaks to business leaders' confidence in our resources and safety and soundness. There is a reason why credit unions are overwhelming consumer loan providers: They do not share the journeys of small business. Assuming that credit unions should even make commercial loans, the lending cap imposed by Congress at 12.25 percent is both appropriate and fair.
Community banks are indeed lenders to those men and women who are, according to the credit unions, "true main street small business," putting their "open for business" sign on Main Street, Market Street and Front Street. In fact, the owners of plazas and malls in our towns are also "true main street small business." Many of our commercial real estate developers live where they develop and offer easy-to-access and affordable retail space for local businesses to grow.
Banks don't make a distinction between levels of small business or believe that one business loan customer is more important than another. Growing businesses of every size in our region and our state is a win-win, and growing regional economies has been a historic benefit of banks.
The now $1 trillion credit union industry sought a higher business lending limit in each of the past five sessions of Congress. Their recent efforts — just days before April 15 — were untimely and inappropriate. We believe Congress's refusal to comply so far is rooted in the reality that credit unions don't pay federal income taxes, depriving the U.S. Treasury of nearly $2 billion every year. A missing piece of revenue that size, coupled with their exemption from state and local income taxes, directly affects the lives in the communities we serve.
Credit unions that have outgrown their charter's limitations and seek to move away from their tax-exempt mission of serving people of modest means can and should transform to a bank charter.
Our principles of banking for business, banking for community and banking for every season of life revolve around a strong relationship with customers, businesses and a commitment to giving back. Our reality of lending with honesty, leading with purpose and growing with care remains a financial stabilizer for hundreds of small businesses and the communities we serve.
We strive to remain the true business partners of small business, and we're proud to pay our fair share to continue strengthening the community services that weave us together.
Patricia A. Husic is president and CEO of Centric Bank and vice chair of the Pennsylvania Bankers Association. J. Duncan Campbell III is CEO of the Pennsylvania Bankers Association.