JOBS Act could help community banks

The JOBS Act, which passed the U.S. House and could come up for a vote in the Senate this week, could help community banks raise money more cheaply and include more local investors, according to an analysis by legal firm Bryan Cave.

The bill is intended to help small businesses and start-up companies by making them exempt from some federal regulations guiding capital raising, including "crowdsourcing." Though it had brought bipartisan support in the House, some opponents have called it a financial deregulation bill that leaves investors open to fraud.

It's not designed for community banks, but it could help them. Under the terms of the bill, small banks could raise up to $2 million a year in small investments with "minimal legal cost and without needing to limit themselves to accredited investors," Bryan Cave writes. That could give it more local investors.

The threshold for small banks to register with the Securities and Exchange Commission would rise from 500 shareholders of record to 2,000 -- not including "crowdfunding" investors. It also raises the threshold for banks to unregister with the SEC, from 300 to 1,200.

Both these provisions would give community banks the opportunity to lower their costs by exiting SEC registration.