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March 18, 2021

Meeting of the Advisory Committee of State Regulators

of the

Federal Deposit Insurance Corporation

Federal Deposit Insurance Corporation Building

Washington, D.C.

Open to Public Observation via Webcast

March 18, 2021 – 1:00 PM

The meeting of the Advisory Committee of State Regulators 

(Committee) was called to order by Jelena McWilliams, Chairman, 

Federal Deposit Insurance Corporation (FDIC) Board of Directors.

Members of the Committee present at the meeting:

Bret Afdahl, Director, Division of Banking, State of South 

Dakota; Kevin R. Allard, Superintendent, Division of Financial 

Institutions, State of Ohio; Charles G. Cooper, Commissioner, 

Department of Banking, State of Texas; Thomas C. Fite, Director, 

Department of Financial Institutions, State of Indiana; Mary L. 

Gallagher, Commissioner of Banks, Commonwealth of Massachusetts; 

Ray Grace, Commissioner of Banks, State of North Carolina; Greg 

Gonzales, Commissioner, Department of Financial Institutions, 

State of Tennessee; Kevin B. Hagler, Commissioner, Department of 

Banking and Finance, State of Georgia; Melanie G. Hall, 

Commissioner, Division of Banking and Financial Institutions, 

State of Montana; Dawn E. Holstein, Commissioner of Banking, 

Division of Financial Institutions, State of West Virginia; I. 

Lise Kruse, Commissioner, Department of Financial Institutions, 

State of North Dakota; G. Edward Leary, Commissioner, Department 

of Financial Institutions, State of Utah; John Ryan, President 

and Chief Executive Officer, Conference of State Bank 

Supervisors; Antonio P. Salazar, Commissioner, Office of the 

Commissioner of Financial Regulation, State of Maryland; and 

Mick Thompson, Commissioner, Banking Department, State of 

Oklahoma. 

Director Martin J. Gruenberg attended the meeting. The 

following Corporation staff also attended the meeting: John 
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Anderlik, Bobby R. Bean, Rebecca Bittle, Zachary N. Brown, Mary

Calkins, Leonard N. Chanin, Kymberly K. Copa, Julie A. Cross, 

Shannon R. Dahn, Debra A. Decker, Doreen R. Eberley, Bret D. 

Edwards, Diane Ellis, Jasa Gitomer, Patricia S. Gurneau, Martin 

D. Henning, Travis J. Hill, Arleas Upton Kea, M. Anthony Lowe, 

Christopher Lucas, Sultan Meghji, Brandon Milhorn, Jonathan N. 

Miller, Rae-Ann Miller, Arthur J. Murton, Shayna Olesiuk, M. 

Rowie Pangilinan, Mark E. Pearce, Nikita Pearson, Harrel M. 

Pettway, Nicholas J. Podsiadly, Ariana L. Rambuyan, Lisa K. Roy, 

Ryan C. Senegal, Camille C. Schmidt, Michael Shaheen, James 

Sheesley, Maureen E. Sweeney, John F. Vogel, and Katrice L. 

Yokley.

Chairman McWilliams opened and presided at the meeting. 

Arleas Upton Kea, Deputy to the Chairman for External Affairs 

and the Committee’s Designated Federal Officer, moderated the 

proceedings.

Introductory Remarks

Chairman McWilliams opened the meeting by welcoming the 

Committee members from across the country. She briefly 

commented on the FDIC’s focus on core safety and soundness 

principles and its COVID response. She also noted the agency’s 

efforts to promote innovation, including the hiring of Sultan 

Meghji as Chief Innovation Officer, the FDIC’s rapid prototyping 

competition, and the proposed development of a standard setting 

body to aid in vendor due diligence. She also covered recent 

policy changes intended to remove barriers to innovation.

Chairman McWilliams then introduced Ms. Kea to moderate the 

meeting. Ms. Kea invited opening comments from Director 

Gruenberg, who responded by expressing his thanks to the 

Committee members, acknowledging the ongoing economic hardship 

and uncertainty affecting communities across the country, and 

stating his hopes for a turn for the better. He said that he 

looked forward to the discussion, especially with regard to 

vulnerability in the area of commercial real estate (CRE).
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March 18, 2021

Discussion of State Banking Conditions

Ms. Kea introduced a roundtable discussion of state banking 

conditions. Committee members discussed a range of issues, 

including the following: 

Economic Conditions. Most Committee members reported 

significant improvements in economic conditions, especially when 

compared to those prevailing in the spring of 2020. 

Commissioner Gallagher stated, “...vaccine optimism coupled with 

relief from federal stimulus packages present a hope that 

economic damage resulting from the pandemic may be contained.” 

Her statement resonated with the reports of most other Committee 

members. Members expressed support for the American Rescue Plan 

Act of 2021 and acknowledged other federal and state economic 

assistance efforts as helpful to citizens, businesses, and thus 

the banking system. 

Members’ comments reflected varied experiences across the 

states and among sectors. Commissioner Leary reported that Utah 

had recovered all of its job losses attributed to the pandemic, 

and Director Afdahl and Commissioner Hagler reported recovering 

employment as well. Commissioner Hagler raised concerns as to 

whether unemployment rate statistics accounted for drops in 

workforce participation and whether unemployment

disproportionately affected women. Commissioners Gallagher and

Holstein also reported improved unemployment rates, but noted 

that their states’ recoveries in this regard were not complete.

Some members raised concerns about CRE conditions in their 

states, especially in the hospitality and office sectors. Some 

cited the pandemic-driven transition to telework as a problem 

for the commercial office market. Director Fite illustrated 

this by reference to a high profile, multi-floor office tenant 

in his home city opting to put its workforce into an all-remote 

work status. Commissioner Hall highlighted the positive effect 

of this trend on the residential real estate market, attributing 

some of the increase in residential real estate sales to office 

workers relocating to her state to work. Most other members 

commented on the strong residential real estate markets in their 

states, with home values increasing and affordability concerns 

rising. Director Fite reported that his agency formed a housing 

study committee to examine the issue of shortage. Commissioners 
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Gallagher and Salazar mentioned relief efforts intended to help 

avoid evictions and foreclosures in their respective states.

News on other sectors was generally positive. Commissioner 

Kruse reported on 2020 as a good year for farmers in North 

Dakota, while Director Afdahl said South Dakota faced drought 

conditions but that sales of agricultural equipment, an 

indicator he tracks, are strong. The hospitality sector, hard 

hit early in the pandemic, continued to recover according to 

members’ reports. Several members expressed optimism that the 

reopening of states and warmer weather will help the hotel and 

restaurant businesses. 

Commissioner Afdahl observed that, despite the generally 

good economic news, the extensive stimulus complicates 

forecasting. Commissioner Grace raised concerns about the 

macroeconomic impact of the recent, additional fiscal and 

monetary relief “...in the face of what appeared to be a robust 

recovery.”

Banking Conditions. Commissioner Grace commented that,

“State banks have navigated the pandemic surprisingly well.” 

This was a common sentiment expressed by Committee members. 

Nearly all described their state banking conditions as stable or 

strong, with none reporting broadly negative conditions.

Most members described continued strong asset growth and 

stable asset quality. Comments reflected a lack of certainty as 

to the sustainability of this growth, with some members 

attributing much of the growth to Paycheck Protection Program 

(PPP) loans and other stimulus programs; however, others believe 

that some of the growth will be longer term. Commissioners 

Salazar and Grace commented on the value of the PPP as a loan 

generator during a time when traditional loan demand has 

softened. Director Afdahl noted that increased direct support 

to agriculture has hurt loan demand in this area. Members 

reported that asset quality remains stable, with some observing 

that forbearance and moratorium activity is abating and 

deferrals are decreasing. Members described monitoring asset 

concentrations in CRE. Director Afdahl called attention to 

government-sponsored enterprise reports of 90-day delinquencies 

on residential loans, indicating a need for attention even to 

this well-performing asset class.
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March 18, 2021

Members said that the increases in deposits and asset 

volumes are affecting capital ratios and earnings, though none 

reported institutions falling into undercapitalized status as a 

result. Member Hall said she was working to make sure her 

state’s institutions were prepared to maintain capital adequacy 

in the event the asset and deposit increases proved permanent. 

Several commissioners noted the high liquidity in their states’ 

institutions and the concomitant earnings impacts from net 

interest margin compression in the low-yield environment. 

Commissioner Hagler noted an observed drop in insufficient funds

fee income, which speaks well for consumers but adds to the 

earnings pressure. Still, Director Fite reported banks in 

Indiana achieving record earnings in 2020, and Commissioner 

Gallagher observed some recovery to pre-pandemic earnings in 

Massachusetts banks. 

Several members complimented bank management for thriving 

in pandemic conditions. Commissioners praised management 

efforts to protect local economies while also taking necessary 

precautions for the safety of staff and customers. Some 

observed that the unusual financial conditions of 2020 make 

budgeting and other planning difficult.

A few members reported de novo activity, with recent 

charter issuances and banks in formation. Commissioner Hagler

and Director Fite said that prevailing liquidity and earnings 

conditions indicate potential for increased merger and 

consolidation activities.

Covid-19 Pandemic. Nearly all members reported on the 

status of vaccine rollouts in their states, attributing much 

optimism and expectations of increased activity to broad vaccine 

availability. The members described differing levels of public 

health restrictions in their own states, with some still 

significantly locked down and others reporting full openness. 

Cybersecurity. Committee members cited cybersecurity as a 

major concern. Commissioner Cooper said that the primary threat 

to banks is possibly not asset quality, the pandemic, or 

weather, but rather cyber threats that are growing in 

sophistication and intensity. Commissioner Gallagher emphasized 

the need for continued information sharing on cyber and 

information technology (IT) matters between federal and state 
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regulators and indicated that ransomware preparedness is her top 

IT priority. Commissioner Grace noted that the reluctance of 

some banks to spend to upgrade cybersecurity is discouraging and 

may indicate the need for supervisors to address this problem. 

Commissioner Holstein, though, observed that her banks have 

prepared for cyber threats related to the pandemic and have 

proved responsive in this regard.

Innovation. Committee members welcomed the FDIC’s efforts 

to foster innovation and described their own activities in this 

regard. Commissioner Holstein reported activity in her state’s 

FinTech sandbox and said the West Virginia legislature is taking 

steps to clarify its framework to attract innovators.

Superintendent Allard said Ohio is proactively fostering prudent 

innovation. He said that his division formed a Technology 

Advisory Group of chief information officers from some of the 

state’s more innovative institutions to discuss innovation, 

cybersecurity, data governance, and supply chain threats with 

his agency and federal partners. He mentioned his state banking 

commission’s desire to revisit innovation guidance, especially 

with regard to bank and FinTech partnerships. Commissioner 

Salazar spoke of the importance of innovation to community banks 

contending with competition from FinTech companies and other 

nontraditional providers of financial services. Commissioner 

Grace expressed concerns about community banks’ difficulty in 

keeping pace with growth in mobile technology, the use of which 

he said has accelerated during the pandemic. Commissioner 

Gonzales also talked about state efforts to expand broadband 

access for businesses and communities in his state, 

demonstrating attention to an inclusiveness aspect of 

innovation.

Examinations. Several members commented on their states’

bank examination activities. These members described continued 

use of remote examinations, though several indicated the 

potential to return to onsite examinations this summer. 

Commissioners Cooper and Thompson said that the remote 

examination process was proving sufficient. Commissioner Kruse 

and Superintendent Allard said that positive feedback from 

institutions on the remote examination process indicates a need 

to investigate potential long-term changes to the examination 

process. Commissioner Holstein’s statement that “the face-toface value still can’t be discounted” in the bank examination 

process seemed to be shared by other members. Commissioner 
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March 18, 2021

Leary indicated that hiring and training examiners is 

challenging in the remote work environment and expressed 

concerns about accomplishing culture and knowledge transfer 

without the in-the-room examination experience. 

Minority Depository Institutions and Diversity, Equity and 

Inclusion. Commissioner Gonzalez described his state 

government’s efforts to enhance its partnership with minority 

depository institutions, noting that his state is home to the 

oldest, continuously operating minority bank in the United 

States. Superintendent Allard reported recent interest in 

minority banking institutions in Ohio, and his state’s support 

of those efforts. Commissioner Grace reported on the North 

Carolina Bankers Association’s diversity, equity, and inclusion 

efforts. 

Other Topics. Commissioner Salazar mentioned climate 

change as an issue affecting bank regulators. Commissioners 

Cooper and Leary described weather and environmental effects on 

their states’ economies and institutions. Commissioner Kruse 

thanked the FDIC for assistance in her state’s recent revision

of its bank failure statute. Commissioner Leary and Director 

Afdahl noted developments and discussions resulting from hemp 

and cannabis legalization.

Following this discussion, Ms. Kea introduced Shayna 

Olesiuk, Associate Director, National & Regional Risk Analysis, 

Division of Insurance and Research (DIR), and Camille Schmidt, 

Chief, Emerging Issues Section, Policy Branch, Division of Risk 

Management Supervision (RMS). Ms. Olesiuk presented on the 

national economy and banking trends, and Ms. Schmidt presented

on trends in risk management practices.

After welcoming questions of the staff presenters and 

hearing none, Ms. Kea announced the meeting would briefly 

recess. Accordingly, the meeting stood in recess at 2:54 pm.

FDiTech Update

The Committee reconvened at 3:05 pm. Ms. Kea introduced 

Sultan Meghji, FDIC Chief Innovation Officer. Mr. Meghji 

provided an overview of the FDiTech’s innovation program, 
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describing its themes of inclusion, resilience, amplification, 

and protecting the future. 

Research Update: FDIC Community Banking Study and Agricultural 

Lending

Ms. Kea then introduced John Anderlik, Assistant Director, 

National & Regional Risk Analysis, DIR, who presented on the 

FDIC’s 2020 Community Banking Study and the recent FDIC 

Quarterly article, "Farm Banks: Resilience Through Changing 

Conditions.” Mr. Anderlik invited members to contact him with 

any questions. 

State–Federal Coordination

Ms. Kea introduced Doreen Eberley, Director, RMS; Mark 

Pearce, Director, Division of Depositor and Consumer Protection; 

Rae-Ann Miller, Senior Deputy Director, Supervisory Examinations

, RMS; John Vogel, Deputy Director, Operations and Chief of 

Staff, RMS; and Martin Henning, Deputy Director, Operational 

Risk, RMS. Ms. Eberley discussed recent examination practices 

and the partnership with state supervisors. Mr. Pearce reviewed 

customer service and consumer compliance experience during the 

pandemic, as well as efforts to reach the unbanked. He also 

discussed recent FDIC work with state banking and insurance 

authorities to learn how states view mutual aid societies and 

whether mutual aid policies are able to meet regulatory 

requirements for consideration under the federal flood insurance 

rules. Ms. Miller commented on the modernization of examination 

tools and processes. Mr. Vogel provided background on recent 

developments in remote training during telework. Mr. Henning 

discussed IT and cybersecurity supervisory activities, including 

supervision of service providers and information sharing with 

state regulators.

The panel accepted comments and questions from the 

Committee members. Member Cooper expressed his thanks for the 

FDIC’s efforts regarding information sharing as well as his 

support for legislation modernizing the Bank Service Company 

Act. Commissioner Kruse raised questions about the FDIC’s 

supervisory approach to stablecoin and to FinTech partnerships 

with banks. Ms. Eberley responded by highlighting the FDIC’s 

engagement on these topics and suggesting further discussion 

with the Committee in the future. At her invitation, FDIC 
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March 18, 2021

General Counsel Nicholas Podsiadly and Director Pearce also 

responded. Mr. Podsiadly outlined regulatory responses to 

stablecoin and other cryptocurrency assets. Mr. Pearce 

described the FDIC’s consumer education efforts and its approach 

of holding institutions accountable for federal consumer 

protection compliance when offering products through third 

parties. 

Closing Remarks

Following the presentations, Ms. Kea invited closing 

remarks from Director Gruenberg. Director Gruenberg reiterated 

his thanks to the members for their presentations and 

participation. He expressed his view that the partnership with 

state regulators is central to the FDIC’s ability to carry out 

its mission. He also thanked FDIC staff for their 

contributions.

Chairman McWilliams thanked the Committee members and the 

FDIC staff for their participation. She emphasized that the 

Committee meetings provide a valuable forum for strengthening 

cooperation and teamwork as we develop policies regarding the 

regulation of supervised institutions. She closed with her 

hopes that, with the rollout of COVID vaccinations, the next 

meeting of the Committee in the fall of 2021 will be held in

person.

Having no further business to discuss the meeting was adjourned

at 4:25pm.

Debra A. Decker

Federal Deposit Insurance Corporation

Assistant Executive Secretary

and Committee Management Officer

FDIC Advisory Committee of State Regulators
Minutes

of the

Meeting of the Advisory Committee of State Regulators

of the

Federal Deposit Insurance Corporation

Federal Deposit Insurance Corporation Building

Washington, D.C.

Open to Public Observation Via Webcast

March 18, 2021 – 1:00 PM

I hereby certify that, to the best of my knowledge, the attached minutes are accurate and 

complete.

________________________________

Jelena McWilliams

Chairman

Board of Directors

Federal Deposit Insurance Corporation