Primary Bank CEO Crystal Dionne, below, says the Bedford-bank’s mission is to serve small to medium-sized businesses. (Photos by Brittany Grimes)
A lighter touch on bank regulations, improved access to funding and capital, and leveling the playing field for community banks are just a few priorities that lawmakers and banking regulators have signaled they intend to pursue in the months and years ahead.
With a new Congress, many in the banking industry are breathing a collective sigh of relief, hopeful for a reversal of course on what the American Banking Association (ABA) has called “an aggressive and misguided regulatory agenda” under the Biden administration, which prompted the ABA and state bankers associations to file an “unprecedented” seven lawsuits challenging statutory overreach and process failures.
The Independent Community Bankers of America (ICBA), which represents the voice of community bankers nationwide, is another trade association advocating for comprehensive banking reform. In a letter to Congress, ICBA President and CEO Rebeca Romero Rainey highlighted that community banks bring “unique and extraordinary value” to local communities, as they’re responsible for the majority of Main Street small business loans and 70% of bank agricultural loans. However, the current regulatory environment continues to “encumber community bank lending, drive industry consolidation, and inhibit local economic growth,” Rainey added.
“Where community banks are disproportionately impacted is on the compliance and regulatory side,” says NH Bankers Association President and CEO Kristy Merrill. Large financial institutions have more resources and compliance personnel to absorb the costs and compliance demands that come with complex banking regulations, whereas for community banks, “it’s a much bigger lift,” she says.
According to the Conference of State Bank Supervisors’ 2024 “Annual Survey of Community Banks,” community bankers ranked cost of funds, regulatory demands, net interest margins, core deposit growth, and technology implementation costs as the top five most important external risks facing their institutions.
“Where community banks are disproportionately impacted is on the compliance and regulatory side,” says NH Bankers Association President and CEO Kristy Merrill. (Courtesy photo)
A renewed regulatory agenda
The ABA’s 2025 “Blueprint for Growth,” and the ICBA’s “Repair, Reform, and Thrive” paints a picture of high-priority issues the banking industry would like to see Congress and the Trump administration address.
Josephine Moran, president and CEO of Hanover-based Ledyard National Bank, says the ABA’s focus is to “advocate for regulation and legislation that drives healthy growth, provides access to financial products and services for consumers and businesses, and maintains a safe and sound financial system.” Moran is one of two CEOs representing New Hampshire on the ABA’s Government Relations Council, alongside Lebanon-based Mascoma Bank CEO Clay Adams.
Among the rules the banking industry is urging Congress to repeal or significantly revise is the Consumer Financial Protection Bureau’s small business lending rule, mandated under Section 1071 of the Dodd-Frank Act. Section 1071 amended the Equal Credit Opportunity Act and requires financial institutions to collect and report to the CFPB certain data about small business loan applicants, such as whether the business is woman-owned or minority-owned.
It further gave the CFPB authority to collect additional data if it would “aid in fulfilling the purposes” of Section 1071, with the overall intent of facilitating enforcement of fair lending laws. However, the banking industry argues that the CFPB’s reporting requirements go far beyond what the statute requires and generally intrudes upon the privacy of small business clients.
“It could fundamentally alter the relationship banking aspect of commercial lending that many small businesses rely upon,” Merrill says.
The ABA, ICBA, and Texas Bankers Association are challenging the CFPB’s small business lending rule in a lawsuit pending in the U.S. Court of Appeals for the Fifth Circuit. They argue that the rule should be vacated, because it exceeds the CFPB’s authority by requiring the collection and disclosure of confidential loan pricing information and the LGBTQIA+ status of small business owners. They further argue the rule is “arbitrary and capricious” due to the CFPB’s “flawed” cost-benefit analysis.
The banking industry faces an uphill battle, however. In August 2024, Judge Randy Crane of the Southern District of Texas found in favor of the CFPB, leading the ABA, ICBA and Texas Bankers Association to appeal. The case remains ongoing.
The CFPB’s “open banking rule,” mandated under Section 1033 of the Dodd-Frank Act, also faces an uphill battle. The rule authorizes third parties, such as financial technology firms, to obtain access to customers’ financial data, if requested by the customer.
“The sheer size of the regulation is a lot for banks to wrap their heads around,” says Joseph Jalbert, a principal at Baker Newman Noyes, a Portland-based accounting and advisory firm. (Courtesy photo)
Compliance will come with a hefty price tag, however, requiring banks and other data providers to create a “developer interface” to handle third-party requests and a “consumer interface,” such as a mobile app, for consumers to access their data. The largest financial institutions would have until April 1, 2026, to come into compliance, whereas smaller banks have up to four years, depending on their asset size or annual revenue.
Aside from the compliance costs, the rule arguably increases the risk of consumer data being stolen or compromised. “Banks cannot ensure the security protocols of potentially thousands of fintechs seeking access to their customers’ data,” the ICBA stated.
A rollback of the Community Reinvestment Act (CRA) may also be on the horizon.
“The sheer size of the regulation is a lot for banks to wrap their heads around,” says Joseph Jalbert, a principal at Baker Newman Noyes, a Portsmouth-based accounting and advisory firm. “Many folks in the banking industry feel it could be simplified significantly. They also feel like a lot of the regulations are outdated and need to be modernized.”
De novo banking
Another major priority shared by industry participants, lawmakers and regulators alike is to incentivize more bank formations. According to the ABA, of the 4,517 banks in the United States today, only 79 were established after the 2010 Dodd-Frank Act.
Among those was Bedford, NH-based Primary Bank, which celebrated its grand opening in 2015 and has since expanded with branches in Manchester, Derry and Nashua. “We are often asked about starting a bank post-financial crisis and the answer is quite simple: NH businesses need community banks,” says Primary Bank President and CEO Crystal Dionne.
“During that time and even today, community banks are being acquired by larger national banks, which makes it far more difficult for small businesses to gain access to capital to grow and sustain their activities,” Dionne adds. “It is a bank like Primary that will step in to assist when a larger bank will not. The need remains prevalent in New Hampshire, and Primary’s mission is committed to serving the small to medium-sized business community in our state.”
The ABA also notes that the United States has 4,316 fewer banks than the 8,833 that existed in 2005, “a precipitous 48.9% decline.”
At the regional level, according to data from the NH Banking Department, New Hampshire has 17 state-chartered banks, totaling 113 branch locations within the state. Bank of New Hampshire, headquartered in Laconia, has the most NH locations, with 28 branches, followed by Mascoma Bank, headquartered in Lebanon, with 14 branches. The largest national banks in New Hampshire are TD Bank and Citizens Bank, according to an online U.S. banks database.
Crystal Dionne joined Primary Bank as president and CEO in February 2024. The Bedford-based bank celebrates its 10th anniversary this year. Since its 2015 founding, Primary has expanded into Manchester, Derry and Nashua. (Courtesy photo)
On Jan. 16, House Representative Andy Barr, R-Ky., and Senator Cindy Hyde-Smith, R-Miss., reintroduced the “Promoting New Bank Formation Act,” which would require federal bank regulators to issue rules instituting a three-year, phase-in period for de novo banks to meet capital requirements to reduce the upfront resource strains of forming a new bank.
The Act also would incentivize de novo bank formation and broader financial inclusion in underserved rural communities by directing the banking regulators to set the Community Bank Leverage Ratio at 8% for de novo banks that open in qualifying rural communities. Additionally, the Act would eliminate agriculture loan concentration limits for qualifying lenders in rural areas.
The bill has received strong backing from the ABA and ICBA. “By facilitating the formation of new banks in urban and rural areas, this legislation expands banking access for both individuals and small and medium-sized businesses. The bill would unlock economic opportunity, growth and investment in communities most in need, while also promoting competition.”
Tailwinds ahead
While it’s too soon to predict how the banking landscape will unfold under the Trump administration, lawmakers and banking regulators, including FDIC Acting Chairman Travis Hill, have signaled that their priorities closely align with those of the banking industry.
For the first time in over a century, a former banker leads the House Financial Services Committee. “As a former founder, chair and CEO of a community bank, I have a plan to make community banking great again,” stated Rep. French Hill, chairman of the House Financial Services Committee.
Josephine Moran, president and CEO of Hanover-based Ledyard National Bank, says she’s optimistic for the banking industry in 2025. Moran was a panelist at NH Business Review’s “Powered by Women” event in November. (Photo by Jodie Andruskevich)
Among Rep. Hill’s priorities will be to require federal prudential regulators to “tailor their actions” based on financial institutions’ “capital structure, risk profile, complexity, financial activities, business model and size,” which the banking industry has long been advocating for.
Senate Banking Committee Chairman Tim Scott’s stated priorities also signal a favorable shift for banking, including “promoting financial inclusivity, advancing affordable housing and increasing access to capital.”
Asked what banks can do to prepare for the changes that lie ahead, Merrill stresses the importance of “being resilient and flexible.”
Community banks, especially, should be open to embracing technology and offering innovative products and services, says Moran. Additionally, offering remote or flexible work schedules to obtain and retain qualified talent is another way for community banks to remain competitive, she says.
Dionne says the biggest lesson she has learned, thus far, is “to always keep the bank’s mission as a foundation in all that we do. We act and react like most entrepreneurs do, putting ourselves in the shoes of a business to creatively craft a solution to whatever need they face. All industries will experience tough times through regular economic cycles, even banks, and it is our steadfast mission that guides us through these tough times.”
“Overall, we are optimistic about 2025 and feel that after two years of headwinds for the banking industry, tailwinds are in sight,” says Moran. “The U.S. economy is entering 2025 on a favorable footing, and the banking industry is strong.”
