642

October 26, 2022

 The Meeting of the Advisory Committee on Community Banking

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Washington, D.C.

Open to Public Observation via Webcast

October 26, 2022 – 9:00 A.M.

The meeting of the Federal Deposit Insurance Corporation 

(FDIC) Advisory Committee on Community Banking (Committee) was 

called to order by Martin J. Gruenberg, Acting Chairman, FDIC 

Board of Directors. 

Committee members in attendance: Mike Bock, CEO, Dairy 

State Bank, Rice Lake, Wisconsin; Troy Campbell, President and 

CEO, Altoona First Savings Bank, Altoona, Pennsylvania; Anthony 

Capobianco, President and CEO, American Community Bank, Glen 

Cove, New York; Harold “Hal” Horvat, President, CEO and 

Chairman, Centreville Bank, West Warwick, Rhode Island; Robert 

James II, Executive Vice President, Carver State Bank, Savannah, 

Georgia; Betsy Johnson, President and CEO, Solutions Bank, 

Forreston, Illinois; Cynthia “Cindy” Kitner, President and CEO,

Jefferson Security Bank, Shepherdstown, West Virginia; Bruce 

Lowry, President and CEO, Ireland Bank, Malad City, Idaho; Trey 

Maust, Executive Chairman, Lewis & Clark Bank, Oregon City, 

Oregon; Neil McCurry Jr., Sarasota and Manatee County Market 

President, Seacoast National Bank, Stuart, Florida; Dominik 

Mjartan, President and CEO, OPTUS Bank, Columbia, South 

Carolina; Gilbert Narvaez Jr., President and CEO, Falcon 

International Bank, Laredo, Texas; Arlen Osterbuhr, Chairman and 

CEO, Minden Exchange Bank and Trust Company, Minden, Nebraska; 

Shane Pilarski, President and CEO, Alliance Bank, Francesville, 

Indiana; Kim Reigelsberger, President, Preferred Bank, 

Rothville, Missouri; Andrew West, President and CEO, Eagle Bank, 

Polson, Montana; and John “PJ” Wharton V, President and CEO, 

Yampa Valley Bank, Steamboat Springs, Colorado. 

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

was absent from the meeting. 
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October 26, 2022

Michael J. Hsu, FDIC Director (Acting Comptroller of the 

Currency), also attended the meeting.

FDIC and FDIC contractor staff in attendance: James L. 

Anderson, Tawanta L. Brinson, Rhonda L. Campbell, Jermain 

Cunningham, Timothy J. Davin, Debra A. Decker, Doreen R. 

Eberley, Sheila R. Finlayson, G. Chris Finnegan, Shannon N. 

Greco, Patricia S. Gurneau, Daniel S. Hoople, Rosilyn L. King,

M. Anthony Lowe, Thomas F. Lyons, Jonathan N. Miller, Shayna

Olesiuk, Jason A. Pan, Mark E. Pearce, Nikita Pearson, Harrel M. 

Pettway, Ariana L. Rambuyan, Lisa K. Roy, Betty J. Rudolph,

Camille C. Schmidt, Michael Shaheen, James P. Sheesley, Michael 

E. Spencer, Derek R. Swanson, Mona L. Thomas, Allen Yarbrough,

and Katrice L. Yokley.

Acting Chairman Gruenberg opened the meeting and presided 

over the proceedings. Doreen R. Eberley, Director, Division of 

Risk Management Supervision (RMS) and the Committee’s Designated 

Federal Officer, moderated the proceedings. 

Introductory Remarks

Acting Chairman Gruenberg noted the Committee’s return to 

in-person meetings and remarked on several macroeconomic factors

currently affecting the banking industry. He and Director Hsu 

expressed their interest in hearing the perspectives of the 

Committee members. 

Discussion of Banking Conditions

Ms. Eberley introduced Shayna Olesiuk, Deputy Director, 

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

Section Chief, RMS, to provide an overview of banking conditions 

with particular emphasis on market, liquidity, and credit risks. 

Ms. Eberley invited the members to provide their thoughts on 

these risks and others. Members provided remarks on a variety 

of topics, including employee hiring and retention, liquidity 

risk, inflation, interest rate risk, agriculture, real estate, 

commercial lending, and underwriting standards. 

Employee Hiring and Retention

Members reported challenges hiring and retaining qualified 

employees. Member Maust observed that the labor force 

participation rate is considerably less than it was prior to the 
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October 26, 2022

pandemic, which may reflect a structural change. Member Mjartan

discussed the challenge of larger banks recruiting staff from 

community banks. Members Johnson, McCurry, and Wharton remarked 

on the impact of employee shortages on both banks and 

businesses. Members Bock, James, and Kitner emphasized the 

cybersecurity and regulatory risks posed by inexperienced staff

and staff working remotely. 

Liquidity Risk

Members expressed varying levels of concern with respect to 

liquidity risk. Member Campbell indicated that his bank is 

limiting loan participation investments to ensure his bank has 

sufficient liquidity to support its direct customers. Members 

James and Mjartan emphasized the unique liquidity challenges 

faced by community banks operating in underserved communities. 

Member Mjartan suggested that, among other things, reform of the 

Community Reinvestment Act may help address liquidity challenges 

for smaller banks. 

Several members discussed increased competition for 

deposits. Member Campbell noted that Federal Home Loan Banks 

(FHLB) are the primary contingency liquidity plan for community 

banks and expressed concern about limited borrowing capacity. 

 

Inflation

Members described the impact of rising inflation on 

community banks. Member Mjartan emphasized the uniquely strong 

impact of inflation on customers in underserved communities. 

Member Johnson expressed the concern about the impact of 

inflation on small businesses. Member Maust warned of potential 

reductions in consumer spending, and Member Wharton remarked 

that rising inflation exacerbates other challenges facing 

community banks, including housing availability and employee 

retention.

Interest Rate Risk

Members discussed the impact of rising interest rates, 

including certain actions their banks are taking in response. 

Members also noted the impact that rising rates have on the net 

interest margin.
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October 26, 2022

Agriculture

Several members remarked on recent trends in the 

agricultural sector that have impacted community banks. Members 

Johnson, Osterbuhr, and Reigelsberger commented on agricultural 

growth following several years of good harvests and favorable 

prices. Member Osterbuhr indicated his bank has increased 

liquidity due to three years of strong performance in 

agriculture, which results in lower loan demand by farmers. He 

also noted higher agriculture costs. Member Reigelsberger 

observed that although grain prices and fertilizer prices are 

higher, profit margins remain about the same for farmers. Member 

Pilarski reported declines in agricultural loans as farmers paid

down lines of credit following profitable years and community 

banks compete with the Farm Credit Administration. 

Real Estate and Housing Costs

High housing costs were also a topic of member discussion. 

Members noted that lower housing supply and rising interest 

rates are impacting home purchases in many communities. Member 

West warned of the potential for a precipitous decline in real 

estate values over the next couple of years, and Member Kitner 

shared her concern about inflated real estate values. 

Member West predicted a drop in loan demand for commercial 

real estate and observed increased demand for home equity lines 

of credit. Member Kitner indicated that due to increased 

volumes of work and supply chain issues, many construction loans 

are running longer than expected.

 

Commercial Lending

Members discussed commercial lending activity, describing a 

challenging environment for businesses amid inflation, rising 

interest rates, and labor shortages. Member James expressed

concern about small business lending. 

Underwriting Standards and Portfolio Stress Testing

Members discussed whether changing economic conditions had 

necessitated adjustments in underwriting standards among 

community banks. Members Capobianco, Horvat, Kitner, McCurry, 

Osterbuhr, and Pilarski indicated that their institutions had 

not adjusted underwriting standards. Member Horvat observed 

that one positive trend is that competing banks have not changed 
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October 26, 2022

their underwriting standards. Member West indicated his bank 

made some underwriting changes to protect against potentially

declining home values. Members Capobianco, West, and Osterbuhr 

reported that their institutions were stress testing their 

portfolios, while Member Kitner suggested that the long-term 

rising rate environment posed challenges in establishing 

meaningful benchmarks for stress testing.

At the conclusion of this discussion, the meeting stood in 

recess from 10:32 a.m. to 10:50 a.m.

 

Update from the Minority Depository Institutions (MDI) 

Subcommittee

The proceedings resumed with Ms. Eberley introducing 

Committee Member Narvaez, a member of the MDI Subcommittee, as 

well as Betty Rudolph, Director, Office of Minority and 

Community Development Banking. Ms. Rudolph began by providing 

background details about the purpose, goals, and composition of 

the MDI Subcommittee. 

Member Narvaez provided a summary of the discussion topics 

from the two meetings held by the MDI Subcommittee in 2022. He 

indicated that the MDI Subcommittee had no current 

recommendations for the FDIC. Member James shared remarks about

risks associated with rapid growth due to the recent influx of 

capital into MDIs. He inquired about technical assistance the 

regulatory agencies could provide relative to prudent management 

of MDI asset growth. Ms. Rudolph shared some details about a 

technical assistance effort that is currently being piloted. 

Acting Chairman Gruenberg encouraged MDI community bankers to 

stay in close contact with their regulators for support and 

technical assistance in managing the risks associated with the 

capital influx. Member James also highlighted the importance of 

tailoring the FDIC examination process to the unique mission and 

role MDIs serve in their communities. Ms. Rudolph shared 

information regarding just-in-time training that the FDIC is 

rolling out.

Amended Restoration Plan and Deposit Insurance Assessments

Ms. Eberley introduced Michael Spencer, Associate Director, 

DIR, and Daniel Hoople, Section Chief, DIR, for a presentation 

regarding the Amended Restoration Plan and deposit insurance 

assessments.
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October 26, 2022

At the conclusion of the presentation, Mr. Hoople and Mr. 

Spencer answered questions from Members Johnson and Mjartan 

pertaining to potential changes to the deposit insurance limit

and the analysis that formed the basis for the planned 

assessment increases. Acting Chairman Gruenberg remarked on the 

importance of maintaining the proper reserve ratio and pointed 

out that the planned assessment increase could prevent a later 

increase during a time of potentially greater economic 

difficulty. 

At the conclusion of this discussion, the meeting stood in 

recess from 11:29 a.m. to 1:06 p.m.

Supervision and Policy Updates

The meeting resumed with Ms. Eberley leading a discussion 

of various supervision and policy updates. First, Ms. Eberley 

and G. Chris Finnegan, Senior Deputy Director, Division of 

Depositor and Consumer Protection (DCP), discussed the FDIC’s 

return to on-site bank examinations. 

Members generally supported a hybrid examination format

including both on-site and remote elements. Members Campbell, 

Lowry, Mjartan, and Reigelsberger remarked that having examiners 

on-site added significant value to the examination process. 

Members Lowry, Mjartan, and James also expressed concern about 

the logistical burden imposed on community banks by large 

examination teams. Several members recommended that the FDIC

strike a balance between remote and on-site examination work, 

with on-site examiners focused on high-risk items and portions 

of the examination process that do not translate well to remote 

work. Members also discussed potential opportunities to 

streamline the examination planning process.

Mr. Finnegan then provided an overview of a Financial 

Institution Letter regarding the assessment of multiple nonsufficient funds fees for the re-presentment of unpaid 

transactions. He also discussed the fees associated with 

“Authorized Positive/Settle Negative” transactions.

Ms. Eberley next introduced Jonathan Miller, Deputy 

Director, DCP, and Rhonda Campbell, Senior Attorney, Legal 

Division. Mr. Miller and Ms. Campbell presented information

regarding the Part 328 rule concerning false advertising and 

misrepresentation of insured status, the FDIC portal for 

submitting complaints about suspected misrepresentations 
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October 26, 2022

regarding deposit insurance, and the Request for Information on 

the modernization of advertising and FDIC logos.

Members expressed concern about the risks posed by 

misrepresentations and customer confusion about the nature and 

availability of deposit insurance. Specifically, Member James 

remarked on the importance of establishing bright-line 

distinctions between banks and nonbank entities. Member Maust

expressed appreciation for the active role that the FDIC has 

taken in combating misrepresentations regarding deposit 

insurance. Acting Chairman Gruenberg reiterated the commitment 

of the FDIC to prevent customer confusion and noted that the 

FDIC takes any FDIC insurance misrepresentation very seriously. 

Ms. Eberley then introduced Thomas Lyons, Associate 

Director, RMS. He provided information regarding the proposed

Interagency Policy Statement on Prudent Commercial Real Estate 

Loan Accommodations and Workouts. 

Office of the Ombudsman Update

Ms. Eberley proceeded to introduce M. Anthony Lowe, the 

FDIC’s Ombudsman, to provide an update on the Office of the 

Ombudsman. He described highlights from the Ombudsman’s 2021 

Annual Report and discussed results of recent post-examination 

surveys. Member Osterbuhr posed a question pertaining to 

capital requirements for FHLB lending and a request for the 

Federal Housing Finance Agency to amend the rule and change the 

requirement. Ms. Eberley provided additional details on the 

rule and corresponding restrictions on FHLB lending. She 

explained that for institutions that either have negative 

tangible equity capital or are on a path to that based on 

unrealized losses on available-for-sale securities, the FDIC 

would discuss management’s strategies for funding and working 

through the issue. Member Johnson suggested that the regulatory 

agencies and FHLB work together to find a way for the FHLB to

continue lending to community banks.

As Mr. Lowe’s presentation was the final item for the day, 

Ms. Eberley turned the proceedings over to Acting Chairman 

Gruenberg for closing remarks.

Closing Remarks

Mr. Gruenberg commented on the value of holding the 

Committee’s meeting in person and expressed favorable sentiments 
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October 26, 2022

about the framework that was used for the roundtable discussion. 

He went on to express his gratitude to the members of the 

Committee whose terms are expiring – Members Johnson, Lowry, 

McCurry, Narvaez, Wharton, and Oldner.

There being no further business to discuss, Acting Chairman 

Gruenberg adjourned the meeting at 2:29 p.m.

______________________________________________

Debra A. Decker

Federal Deposit Insurance Corporation

Executive Secretary

and Committee Management Officer

FDIC Advisory Committee on Community Banking
The Meeting of the Advisory Committee on Community Banking

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Washington, D.C.

Open to Public Observation via Webcast

October 26, 2022 – 9:00 A.M.

I hereby certify that, to the best of my knowledge, the attached 

minutes are accurate and complete.

________________________________

Martin J. Gruenberg

Chairman

Board of Directors

Federal Deposit Insurance Corporation