612 

July 22, 2021 

 The Meeting of the Advisory Committee on Community Banking 

of the 

Federal Deposit Insurance Corporation 

Federal Deposit Insurance Corporation Building 

Washington, D.C. 

Open to Public Observation via Webcast 

July 22, 2021 – 1:00 P.M. 

 The meeting of the FDIC Advisory Committee on Community 

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

Chairman, Federal Deposit Insurance Corporation (FDIC) Board of 

Directors. 

 Committee members present at the meeting: Mike Bock, CEO, 

Dairy State Bank, Rice Lake, Wisconsin; Anthony Capobianco, 

President and CEO, American Community Bank, Glen Cove, New York; 

Sarah Getzlaff, CEO, Security First Bank of North Dakota, New 

Salem, North Dakota; Stephen Hayes, Chairman and President, 

Dakota Prairie Bank, Ft. Pierre, South Dakota; Harold Horvat, 

President, CEO, and Chairman, Centreville Bank, West Warwick, 

Rhode Island; Betsy Johnson, President and CEO, Solutions Bank, 

Forreston, Illinois; Kenneth Kelly, Chairman and CEO, First 

Independence Bank, Detroit, Michigan; Bruce Lowry, President and 

CEO, Ireland Bank, Malad City, Idaho; Neil McCurry, Jr., 

President and CEO, Sabal Palm Bank, Sarasota, Florida; Teri 

Messerschmitt, President and CEO, South Ottumwa Savings Bank, 

Ottumwa, Iowa; Patty Mongold, Chairperson, President, and CEO, 

Mt. McKinley Bank, Fairbanks, Alaska; Gilbert Narvaez, Jr., 

President and CEO, Falcon International Bank, Laredo, Texas; 

Margaret Oldner, CEO, Stone Bank, Mountain View, Arkansas; 

Mark Pitkin, President and CEO, Sugar River Bank, Newport, New 

Hampshire; and John Wharton V, President and CEO, Yampa Valley 

Bank, Steamboat Springs, Colorado. All members attended via 

videoconference. 

Committee members absent from the meeting: Shaza Andersen, 

CEO, Trustar Bank, Great Falls, Virginia; Cynthia A. Kitner, 

President and CEO, Jefferson Security Bank, Shepherdstown, West 
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July 22, 2021 

Virginia; and Andrew West, President and CEO, Eagle Bank, 

Polson, Montana. 

 Director Martin J. Gruenberg attended the meeting. 

Corporation staff in attendance: Lisa D. Arquette, Bobby R. 

Bean, Kendra A. Berch, Amy B. Brown, Michelle L. Cahill, Tiffany 

Cochran, Kymberly K. Copa, Doreen R. Eberley, Richard Foley, 

Eric S. Fultze, Shannon N. Greco, Patricia S. Gurneau, Martin D. 

Henning, Arleas Upton Kea, James D. LaPierre, M. Anthony Lowe, 

Sultan Meghji, Brandon Milhorn, Rae-Ann Miller, Kathy L. Moe, 

Shayna Olesiuk, Elizabeth Ortiz, Jason A. Pan, M. Rowie 

Pangilinan, Nikita Pearson, Harrel M. Pettway, Nicholas J. 

Podsiadly, Evelyn D. Rainey, Ariana L. Rambuyan, Lisa K. Roy, 

Betty J. Rudolph, Jarrod Sanders, Michael Shaheen, James P. 

Sheesley, Noah J. Teixeira, John F. Vogel, Kenneth J. Weaver, 

Lauren A. Whitaker, Lisa M. Williams, Katrice L. Yokley, and 

Matthew Z. Zamora. 

Jocelyn Sutton attended from the Consumer Financial 

Protection Bureau. 

William A. Rowe attended from the Office of the Comptroller 

of the Currency. 

Chairman Jelena 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 welcomed members to the Committee’s 

second meeting of 2021 and thanked them for making time to 

participate. She noted the significant progress the United 

States has made in recovering from the COVID-19 pandemic since 

the Committee’s prior meeting in April. She also praised 

community banks’ role in providing necessary capital, credit, 

strength, and solidarity to their communities and conveyed her 

gratitude and that of the FDIC. She noted her excitement to see 

what progress has been made since April and hear more about what 

the FDIC can do to improve the community banking sector. 

Chairman McWilliams then welcomed Anthony Capobianco, 

President and CEO, American Community Bank, Glen Cove, New York, 

to his first Committee meeting. She expressed her hope to soon 

be able to welcome all Committee members in person, and said she 
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July 22, 2021 

nonetheless looked forward to today’s discussion. She then 

introduced Ms. Kea as the moderator. 

Ms. Kea invited opening comments from Director Gruenberg 

and Acting Comptroller Hsu. Director Gruenberg welcomed all 

Committee members and thanked them for their time. He 

emphasized the importance of the meeting in understanding 

community banks’ perspectives on economic conditions. He 

recalled that, at the prior meeting, most participants seemed to 

share a positive outlook. He conveyed his gratitude to the 

meeting participants for their willingness to share their 

experiences. 

Ms. Kea noted that Acting Comptroller Hsu had yet to join 

the meeting. She then invited opening remarks from General 

Counsel Nick Podsiadly, who noted that because three members of 

the FDIC Board of Directors were expected to join the Committee 

meeting, a reminder about the Government in the Sunshine Act was 

in order. He explained that three members of the Board 

typically constitute a quorum, but that any informal and 

exploratory discussions among Committee and Board members did 

not constitute a meeting of the FDIC Board of Directors and, 

therefore, was not required to be open to the public or subject 

to any notification requirements present in the Sunshine Act. 

He further stated that staff will identify any specific issues 

or proposals requiring further deliberation by the Board and 

refer any such matters to the Board, such that those actions may 

be open to full Board consideration at a later time. 

Community Banking Conditions 

Ms. Kea then turned the meeting over to the Committee 

members for a roundtable discussion on local banking trends and 

issues. The Committee members discussed a broad range of 

topics, including the following: 

COVID-19 Pandemic and Response. 

All of the members discussed the continuing impact of the 

COVID-19 pandemic on their communities and banking operations. 

Members provided updates on the rates of infection and 

hospitalizations. Most members reported improvements in such 

metrics. However, several members expressed concern about the 

Delta variant and a potential winter surge. Member Oldner 

indicated that COVID remains a significant problem in Arkansas. 
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July 22, 2021 

Members provided details on local vaccination efforts, 

including the vaccination of their own workforces. Most members 

indicated their bank branches have re-opened for in-office work 

and in-person customer interaction, but some staff continue to 

work remotely. Member Capobianco noted that keeping branches 

open during the pandemic has built goodwill with communities. 

Members described the loosening of public health measures, with 

mask usage declining and a general trend toward reopening. 

Members touched on the role of community banks in 

supporting businesses and individuals during the pandemic. Half 

of the members discussed their experiences with the Paycheck 

Protection Program (PPP). This discussion included statistics 

on loan originations and forgiveness, assistance provided to 

customers to navigate the process, and the impact of PPP loans 

on small businesses. Members noted that the forgiveness process 

is going well, with most recipients having received forgiveness. 

Member Messerschmitt indicated that many farmers were eligible 

for PPP loans, and efforts were made to reach out to potential 

applicants that could qualify for the funding, including both 

customers and non-customers, to make them aware of the program. 

The fees from PPP loans have been a significant source of income 

for some community banks. Member Kelly discussed the U.S. 

Department of the Treasury’s Emergency Capital Investment 

Program, in which several minority depository institutions and 

community development financial institutions will participate. 

Economic Conditions. 

All members noted that economic conditions are improving. 

Almost all members discussed labor shortages, and some also 

discussed inflation and supply chain challenges. Some members 

indicated that businesses are reducing hours of operation due to 

labor shortages. Members also discussed labor shortages within 

the banking industry, with banks struggling with turnover and 

hiring. Member Pitkin described challenges with “poaching,” 

whereby banks recruit staff from other banks. 

Members reported low inventory and heightened sale prices 

for housing, especially in states experiencing population 

growth, reflecting a seller’s market. Members discussed rising 

costs of construction materials, lack of workers, and increased 

demand for housing. Four members noted that title companies and 

appraisers are challenged by high mortgage loan demand, which 

has delayed closings. Member Horvat observed that residential 

lending is thriving with low interest rates and substantial 

refinance activity.
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July 22, 2021 

Regarding agriculture, several members cited a strong 

harvest and improving commodity prices. Member Johnson observed 

that credit unions are competing with banks for agriculture 

customers. Many members described a rebound in the hospitality 

industry. Members warned that tourism and agriculture may be 

impacted by drought conditions and wildfires. Some members 

noted an increase in commercial real estate lending activity. 

Members Mongold and Getzlaff indicated that commercial real 

estate remains an area of concern due to many businesses 

allowing employees to work from home. Member Hayes noted that 

commercial accounts are starting to recover from COVID, and 

there have been fewer past due accounts. 

Banking Conditions. 

All members reported strong banking conditions in their 

local markets, and many members indicated that they expect such 

conditions to continue. Members also described the effect of 

asset and deposit growth on capital and earnings. 

Members reported strong capital and asset quality. 

However, members have remained cautious as industries recover 

from the pandemic. Members observed fewer delinquencies and 

deferrals, and some noted that borrowers who received loan 

modifications have resumed their regular payment schedules. 

Members expressed concern regarding margin compression, but 

indicated that reduced interest income has been partly offset by 

increased fee income. 

Most members reported a rise in deposits, and several 

members described challenges with deploying the excess 

liquidity. Member Oldner indicated that banks are trying to 

maintain credit standards despite the high liquidity environment 

and are pricing loans lower in an effort to compete. Several 

members described competition from non-bank lenders who do not 

have the same regulatory burden or credit underwriting 

standards. Member Kelly observed that non-bank lenders moved 

more swiftly than banks on PPP loans. 

Examinations. 

Three members discussed recent examination experiences. 

Member Narvaez described the virtual examination as nonintrusive to the bank’s day-to-day operations and a positive 

experience. Member Mongold said that, given the complexity of 

certain topics, there is no replacement for in-person discussion 
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July 22, 2021 

with examiners and thus recommended a hybrid format for 

examinations. Member Bock indicated that FDIC staff started 

advance preparation with the bank earlier than normal, which 

gave the bank more time to prepare for the virtual exam. 

Innovation and Technology. 

Members identified cybersecurity threats, including 

ransomware, as a major concern. Members described attacks on 

businesses in their local communities. Member McCurry explained 

that considerable resources have been invested in prevention, 

but banks are not sure if such investment is enough. Member 

Hayes discussed a June meeting of hundreds of bankers across 

four states that identified cybersecurity as the number one 

issue that keeps them up at night in 2021. Member Wharton 

described an increase in fraud attempts, including those 

involving automated clearing house transactions and emails that 

are specifically targeting real estate transactions, in the 

range of $25,000 to $150,000. 

Members noted that the pandemic has accelerated the 

adoption of online banking and interactive teller machines. 

Members also discussed digital platforms being used for 

cryptocurrencies, and Member McCurry recommended that banks 

adapt to such trends to stay relevant with younger consumers. 

Diversity, Equity, and Inclusion. 

Members discussed efforts to promote diversity, equity, and 

inclusion. Member Kelly observed that discussion of diversity, 

equity, and inclusion is at the highest level it has been in his 

career, and one question is how to turn such discussion into 

tangible outcomes. Member Wharton expressed excitement about 

the FDIC’s #GetBanked initiative and an overall hope that it 

will bring more people into banking. 

Other Topics. 

Members Horvat and Johnson discussed acquisition activity 

at their institutions, and Member Oldner mentioned consolidation 

activity among Arkansas banks. Member Getzlaff discussed limits 

recently announced by the Federal Housing Finance Agency (FHFA) 

and Fannie Mae on loans secured by second homes and investment 

properties. She indicated that her bank would not be able to 

sell those types of loans anymore. Member Getzlaff suggested 

that the FHFA should consider the impact such limits have on 
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July 22, 2021 

small community banks and implement different standards for 

smaller banks that are volume based or origination based. 

Following the Committee member roundtable, Ms. Kea 

introduced FDIC staff members to discuss national and regional 

observations. Shayna Olesiuk, Associate Director, National and 

Regional Risk Analysis, Division of Insurance and Research, 

presented on the national economy and banking trends, including 

a summary of the FDIC’s 2021 Risk Review. Then James LaPierre, 

Regional Director, Kansas City Region, and Kathy Moe, Regional 

Director, San Francisco Region, presented regional perspectives. 

Following this discussion, Ms. Kea thanked the community 

bankers and FDIC staff for their presentations and announced 

that the meeting would stand in recess. Accordingly, the 

meeting stood in recess at 3:15pm. 

Update from the Minority Depository Institutions Subcommittee 

 

The Committee reconvened at 3:25pm. Ms. Kea introduced 

Member Narvaez and Betty Rudolph, National Director, Minority 

and Community Development Banking, to present an update on the 

Minority Depository Institutions Subcommittee, which met on July 

21. 

Financial Inclusion Update 

 Ms. Kea then introduced Nikita Pearson, Director, Office of 

Minority and Women Inclusion, and Elizabeth Ortiz, Deputy 

Director, Consumer and Community Affairs, Division of Depositor 

and Consumer Protection, who presented on FDIC inclusion 

initiatives. 

FDITECH Update 

Next, Ms. Kea introduced Sultan Meghji, Chief Innovation 

Officer, Office of Innovation, who provided an update on the 

FDIC’s ongoing technology initiatives. 

FDIC Ombudsman Update 

 Ms. Kea then introduced M. Anthony Lowe, Director, Office 

of the Ombudsman, who presented an update on the recent 

activities of the Office of the Ombudsman. 
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July 22, 2021 

Supervision Update 

 Ms. Kea then introduced Doreen Eberley, Director, Division 

of Risk Management Supervision (RMS). Ms. Eberley provided an 

overview of the topics to be discussed, then introduced Martin 

Henning, Deputy Director, Operational Risk, RMS, who presented 

on cybersecurity risk management practices. 

 

Following Mr. Henning’s presentation, Member Lowry 

commented on the benefit of examiner recommendations and 

observations that are positive rather than punitive. He said 

the feedback provided from the FDIC’s San Francisco Regional 

Office has been very useful. Mr. Henning said Member Lowry’s 

input was helpful. 

Member Pitkin then commented that discussions with his 

bank’s board and his bank’s technology department regarding 

prior incidents in similar businesses had been valuable in 

improving their own processes. He also noted that the 

cybersecurity session of the Directors, Trustees, and Senior 

Management College, hosted by the FDIC with the New Hampshire 

Bankers Association, provided useful questions that a Board 

could ask its information technology (IT) department. He 

indicated that these questions prompted a dialogue that 

cultivated a stronger culture of cybersecurity in his bank. He 

also said that the most significant impediment to continued 

improvement is cost. Mr. Henning thanked Member Pitkin for his 

comments. 

Member McCurry then stated that he perceives cyber-threats 

as the greatest risk to his bank. He also observed that vendors 

and customers have been victims of cyber-attacks. He agreed 

with Member Lowry’s comment about the benefit of examiner 

recommendations and observations that are positive. He also 

agreed that cost is a limitation. He looks to the FDIC as a 

source of information and appreciated ideas for collaboration. 

Mr. Henning thanked Member McCurry for his comments and said 

that the FDIC would continue to be creative in how it adjusts IT 

examination programs. 

Member Messerschmitt agreed that the practices presented by 

Mr. Henning were important and said that her bank continues to 

monitor incidents. She noted that her bank invites IT personnel 

to educate board members at the beginning of each monthly board 

meeting and makes an effort to train all staff throughout the 

year. She remarked that limited resources, both money and time, 

have been the biggest impediments to continued improvement. She 
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_____________________________ 

Debra A. Decker 

Federal Deposit Insurance Corporation 

Deputy Executive Secretary 

and Committee Management Officer 

FDIC Advisory Committee on Community Banking 

noted that the FDIC’s communications regarding risk management 

practices have been helpful. Mr. Henning thanked Member 

Messerschmitt and the other members who made comments and 

invited further thoughts via telephone and email. 

Mr. Henning then introduced Lisa Arquette, Associate 

Director, Anti-Money Laundering and Cyber Fraud Branch, RMS, who 

presented on certain provisions of the Anti-Money Laundering Act 

of 2020 that will impact community banks. 

Closing Remarks 

Ms. Kea noted that Chairman McWilliams had to step away 

from the meeting a few minutes early. Director Gruenberg closed 

the meeting by thanking Committee members and presenters for 

their thoughtful participation in the meeting. He expressed 

that the roundtable was an extraordinary overview of the range 

of challenges faced by community banks and the broader financial 

system. He also indicated that the economic environment, when 

compared to expectations from over a year ago, has been less 

severe than anticipated. He noted that the remaining 

uncertainty and winding down of public support accompanying a 

post-COVID environment will continue to be a focus of the FDIC 

and the community banking sector. Director Gruenberg indicated 

that the FDIC is specifically focused on financial risks in 

commercial real estate, and there may be other underlying risks 

as well. He added that the next 12 to 24 months will require 

careful attention. Director Gruenberg concluded by reaffirming 

the FDIC’s intention to remain closely engaged with the 

Committee. He cited the discussion of cyber risk as an example 

of the continued value of this Advisory Committee and the FDIC’s 

engagement with it. 

Having no further business to discuss, the meeting 

adjourned at 4:58 p.m. 
Minutes

of the

Meeting of the FDIC Advisory Committee on Community Banking

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Federal Deposit Insurance Corporation Building

Washington, D.C.

Open to Public Observation Via Webcast

July 22, 2021 – 1:00 P.M.

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