May 3, 2022 

The Meeting of the Advisory Committee on Community Banking 

of the 

Federal Deposit Insurance Corporation 

Held via Videoconference 

Washington, D.C. 

Open to Public Observation via Webcast 

May 3, 2022 – 1:00 P.M. 

The meeting of the FDIC Advisory Committee on Community 

Banking (Committee) was called to order by Martin J. Gruenberg, 

Acting Chairman, Federal Deposit Insurance Corporation (FDIC or 

Corporation) Board of Directors. Michael J. Hsu, Director 

(Acting Comptroller of the Currency), and Rohit Chopra, Director 

(Director, Consumer Financial Protection Bureau), also attended 

the meeting.

Committee members present at the meeting: Mike Bock, Chief 

Executive Officer (CEO), Dairy State Bank, Rice Lake, Wisconsin; 

Troy Campbell, President and CEO, Altoona First Savings Bank, 

Altoona, Pennsylvania; Harold 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; 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; Teri Messerschmitt, President and CEO, South Ottumwa 

Savings Bank, Ottumwa, Iowa; Dominik Mjartan, President and CEO, 

Optus Bank, Columbia, South Carolina; Gilbert Narvaez, Jr., 

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

Margaret Oldner, CEO, Stone Bank, Mountain View, Arkansas; 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; and Andrew West, 

President and CEO, Eagle Bank, Polson, Montana. All members 

attended via videoconference. 

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May 3, 2022 

Committee members absent from the meeting: Anthony 

Capobianco, President and CEO, American Community Bank, Glen 

Cove, New York; Cynthia A. Kitner, President and CEO, Jefferson 

Security Bank, Shepherdstown, West Virginia; and John Wharton V, 

President and CEO, Yampa Valley Bank, Steamboat Springs, 

Colorado. 

Corporation staff in attendance: Lisa D. Arquette, Bobby 

R. Bean, Shannon M. Beattie, Daniel H. Bendler, Mary Calkins,

John P. Conneely, Kymberly K. Copa, Debra A. Decker, Doreen R.

Eberley, Kristie K. Elmquist, G. Chris Finnegan, Shannon N.

Greco, Patricia S. Gurneau, Robert D. Harris, Martin D. Henning,

Bryan E. Jonasson, Jessica A. Kaemingk, James D. LaPierre, Yan

Y. Lee, M. Anthony Lowe, Rae-Ann Miller, Patrick M. Mitchell,

Shayna Olesiuk, Tara Oxley, Nikita Pearson, Harrel M. Pettway,

Ariana L. Rambuyan, Ryan M. Rappa, Lisa K. Roy, Michael Shaheen,

James P. Sheesley, Philip A. Shively, Jocelyn Sutton, Maureen E.

Sweeney, John F. Vogel, Brian T. Whittaker, and Katrice L.

Yokley.

Acting Chairman Gruenberg opened the meeting and presided 

over the proceedings. Doreen R. Eberley, Director, FDIC 

Division of Risk Management Supervision (RMS), and the 

Committee’s Designated Federal Officer, moderated the 

proceedings. 

Introductory Remarks 

Acting Chairman Gruenberg welcomed members of the Committee 

to the spring meeting. He remarked on the current state of 

affairs in the United States and abroad and related economic 

uncertainties due to rising interest rates, the war in Ukraine, 

and sanctions on Russia. He acknowledged that these events have 

impacted the energy and commodity markets and supply chains and 

noted that these events contribute to further uncertainty 

regarding the economic outlook. The Acting Chairman reiterated 

his enthusiasm to hear from the community bankers about what 

they are experiencing. 

Acting Chairman Gruenberg then welcomed the following new 

Committee members: 

• Troy Campbell, President and CEO, Altoona First Savings

Bank, Altoona, Pennsylvania;

• Robert James II, Executive Vice President, Carver State

Bank, Savannah, Georgia;

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May 3, 2022 

• Trey Maust, Executive Chairman, Lewis & Clark Bank, Oregon

City, Oregon;

• Dominik Mjartan, President and CEO, Optus Bank, Columbia,

South Carolina;

• Arlen Osterbuhr, Chairman and CEO, Minden Exchange Bank and

Trust Company, Minden, Nebraska;

• Shane Pilarski, President and CEO, Alliance Bank,

Francesville, Indiana; and

• Kim Reigelsberger, President, Preferred Bank, Rothville,

Missouri.

Acting Chairman Gruenberg then acknowledged Director Chopra

and asked him to say a few words, noting that Director Chopra is 

a strong supporter of community banks. 

Director Chopra acknowledged the unique circumstances 

referenced by the Acting Chairman. In terms of consumer credit, 

he said that the Consumer Financial Protection Bureau (CFPB) is 

expecting to see a decline in mortgage originations, driven 

primarily by reductions in refinancing. He noted that 

outstanding credit card balances are beginning to increase. He 

also stated that the CFPB is aware of the motor vehicle chip 

supply shortage and the related impact on new and used auto 

sales and loans. 

Acting Chairman Gruenberg thanked Director Chopra for his 

remarks. He then recognized Ms. Eberley to proceed with 

moderating the program. 

Community Banking Conditions 

Ms. Eberley thanked the Acting Chairman and Director 

Chopra. She then turned the meeting over to the Committee 

members for a roundtable discussion of local banking trends and 

issues. The community bankers discussed a broad range of 

topics, including the following: 

Economic Conditions. 

Members discussed inflation and supply chain challenges. 

Member Mjartan noted that the underserved and historically 

disenfranchised, disconnected communities, which are 

particularly communities of color, face unprecedented difficulty 

in accessing credit and capital due to rising interest rates and 

inflation. Member Oldner observed that the underserved, 

unbanked, and the disadvantaged are hurt the most by inflation 

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May 3, 2022 

and borrowing costs, particularly credit card costs. Member 

Maust said that as credit card balances become elevated, that 

will increase inflationary pressures, fiscal strain on 

households, and the potential for defaults. He noted that a 

year ago, inflation could be tied to the reopening of the 

economy, but since then, inflationary pressures have broadened 

and remain more persistent than expected. He also observed that 

supply chains are not broken but are overloaded due to high 

consumer demand. 

Almost all members described labor shortages. Member Maust 

identified tight labor markets as the biggest constraint on the 

economy and growth. Member Messerschmitt described tremendous 

competition between businesses for hiring, and Members Bock and 

Messerschmitt observed that people are changing jobs because 

there are many opportunities. Member Bock noted that due to 

labor shortages, dairy production plants are reducing production 

and thus purchasing less milk from farmers. He also said that 

labor is a challenge for opening resorts for summer recreation. 

Member Horvat indicated that restaurants and hotels are having 

difficulty filling positions. 

Members discussed elevated housing costs and low inventory. 

Member James observed that housing availability and 

affordability continue to worsen in both urban and rural markets 

in Georgia. Members Horvat, Lowry, McCurry, Messerschmitt, and 

West reported that low inventory has increased prices. Members 

Bock and McCurry noted rents have risen, and Member Pilarski 

stated there is a shortage of rentals. Member West indicated 

that increased housing costs are pricing out local residents. 

Member Pilarski said that with agriculture doing well, no one 

wants to turn agricultural land into housing. Members 

Messerschmitt and West reported that a lack of inventory, fewer 

loan refinancings, and the rising interest rate environment have 

significantly slowed residential mortgage lending. 

Members Bock, Johnson, Osterbuhr, and Narvaez described 

increased housing construction. Members Bock, James, Johnson, 

Lowry, McCurry, and Messerschmitt observed that construction 

costs have increased. Member Lowry indicated that robust 

construction has not kept pace with demand for homes. He 

further noted that housing shortages have contributed to labor 

shortages since workers are unable to relocate. 

Members reported on commercial real estate lending 

activity. Member Horvat expects commercial real estate lending 

to continue to be strong for the rest of 2022. He noted growth 

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May 3, 2022 

in the apartment, warehouse, and self-storage segments. Member 

Narvaez reported robust commercial real estate loan demand in 

multiple sectors, including warehousing, hospitality, and land 

development. Member James observed an increase in loan demand 

for community facilities and distribution facilities. 

Members reported varying levels of commercial lending 

activity. Member West indicated that commercial loan demand has 

been above expectations, but he expects it will decrease in the 

third and fourth quarters as interest rates increase. Member 

Bock expressed an expectation that commercial businesses will 

have a higher utilization of lines of credit due to suppliers 

tightening payment terms and raising prices. Member Mjartan 

reported strong interest in small business growth due, in part, 

to customers exiting traditional employment during the COVID-19 

pandemic to pursue entrepreneurship. In contrast, Member 

Messerschmitt noted that commercial loan growth remains subdued 

with businesses remaining cautious. 

Regarding agriculture, members described rising input costs 

and commodity prices. Member Johnson indicated that prices for 

seed, fertilizer, fuel, and rent have increased, with some 

prices tripling. Members Reigelsberger and West noted increases 

in the price of hay used by cattle farmers. Members Oldner, 

Reigelsberger, and West observed that prices for farm equipment, 

including tractors, have increased. Members Johnson, 

Messerschmitt, Osterbuhr, and Pilarski described increases in 

farmland prices. Member West said the price of land has 

increased so much that it is a barrier to entry for agriculture. 

Several members described strong commodity prices, with 

Members Pilarski and Reigelsberger noting that grain farmers 

have more cash to deposit with banks. However, Member Oldner 

said that even though commodity prices are up, it is not enough 

to keep up with increases in input costs. She observed an 

increased demand for crop loans as farmers need to finance their 

production. Member Pilarski identified the Farm Credit System 

as the main competitor for agriculture banks and expressed 

concern that Farm Credit has an unfair playing field given that 

their source of funding, structure, and rules are different. 

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Banking Conditions. 

Members reported strong banking conditions in their 

institutions and local markets, but they expressed varying views 

on whether such conditions will continue. 

Members reported strong levels of capital. Member James 

reported that Tier 1 capital is at its highest level ever. He 

also noted that his bank anticipates receiving additional 

capital this year from the U.S. Department of the Treasury's 

Emergency Capital Investment Program. He added that this new 

capital is greatly needed, because the pandemic exposed the 

continued systemic need for capital in minority and low- and 

moderate-income communities. Member Johnson reported that with 

high deposit balances, leverage capital ratios are a little 

stressed. 

Members Narvaez, Horvat, Mjartan, and Pilarski reported 

strong, even unprecedented, asset quality. Member McCurry 

indicated there are no negative trends such as increasing past 

dues that would cause concern. Member West reported favorable 

asset quality but expressed concern about the future. 

Similarly, Member Oldner reported that Arkansas banks have good 

asset quality indicators, but she is cautious and watching the 

health of borrowers. Member Bock noted that while current 

credit quality standards are very good, business customers face 

challenges such as labor shortages, supply chain issues, 

inventory availability, and costs. Member Osterbuhr added 

rapidly rising interest rates as a challenge. Members 

Reigelsberger and Messerschmitt shared similar comments. 

Members reported varying levels of loan demand and growth. 

Members Johnson, Lowry, and Osterbuhr reported an increase in 

loan demand. Member James reported an increase in loan demand, 

but noted that it is not at the level that his bank would like,

especially with regard to the quality of loan requests. Member 

McCurry reported that loan demand continues to be consistent. 

Member Messerschmitt reported limited loan demand in her bank’s 

area, resulting in 40 percent of assets in the investment 

portfolio. Member Bock reported slow loan growth in the first 

and second quarters, but added he expects it will increase in 

the second half of the year. Member Horvat reported record loan 

growth. 

Members reported varying levels of profitability. Member 

Horvat referenced record net income. Members Narvaez and 

Osterbuhr noted improving net interest margins. A number of 

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May 3, 2022 

members reported net interest margin compression. Members Bock, 

Lowry, and Narvaez indicated they expect their net interest 

margins to improve as interest rates rise and loans re-price. 

Members Oldner and West said non-interest income has declined. 

Members reported on liquidity and deposit growth. Members 

James and Messerschmitt reported having extremely high 

liquidity. Member Osterbuhr noted that deposit growth has been 

very good. Member Horvat observed that deposit growth has 

continued, but not at the same level recognized over the last 

several years. Members Lowry and Bock indicated that deposits 

have stabilized after years of rapid growth. 

Members discussed overdraft fees. Member Johnson referred 

to the FDIC’s recently issued Consumer Compliance Supervisory 

Highlights publication, which addressed additional nonsufficient funds fees assessed for the same transaction that was 

re-presented on one or more occasions after the transaction was 

declined. She indicated that her bank is searching for an 

effective method to address this, but she noted that several 

core processors, including her bank’s core processor, have 

stated that they are unable to provide reports to assist with 

this. She encouraged the FDIC to support banks as they work 

with core processors to obtain the data and resolve this issue. 

Members Horvat, James, Narvaez, and Pilarski addressed customer 

overdrafts and indicated that customers often use them to meet 

liquidity shortfalls. They emphasized the relationship that 

community banks have with their customers. Member James 

encouraged regulators and Congress to evaluate overdraft fees in 

a nuanced way and consider how they are being used in 

communities. 

Examinations and Technical Assistance. 

Members discussed their recent experiences with FDIC 

examinations. Members Osterbuhr, Pilarski, and Oldner had 

virtual examinations. Members Pilarski and Oldner expressed a 

preference for a hybrid format. Member Pilarski indicated there 

were technical issues with the virtual examination and 

acknowledged the benefits of face-to-face conversations for the 

loan portion of the examination. Member Oldner advised that a 

hybrid format would enable better understanding of a bank’s 

culture and would improve communication. 

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Member James described receiving technical assistance from 

the FDIC. The technical assistance related to a planned 

partnership with a Fintech company around consumer lending as 

well as how to construct the Community Reinvestment Act (CRA) 

assessment area as the bank expands its service territory. 

Member Reigelsberger expressed appreciation for the March 

compliance newsletter, which will be used to train bank staff. 

Innovation and Technology. 

Members discussed relationships and competition with 

financial technology companies. Member West observed that 

Fintechs are making headway into consumer lending because they 

offer technologically superior solutions, and it is challenging 

for small banks to invest in the IT infrastructure to compete. 

Member Mjartan described partnerships with Fintechs as a way to 

deliver services more efficiently, develop more responsible and 

responsive products, meet the needs of communities better, and 

bring banks closer to customers. Member Maust expressed support 

for the FDIC's proactive approach to provide initial guidance on 

third-party service providers, particularly in technology. He 

encouraged the FDIC and CFPB to support community banks as they 

provide such guidance to marketing and other partners. 

Member Oldner expressed concern that cryptocurrency is 

supplanting more traditional payment systems and reducing 

deposits at banks, which ultimately limits opportunities to meet 

the lending needs of local communities. Member Messerschmitt 

expressed support for the CFPB to examine non-bank financial 

service providers to determine if their activities result in 

unfair, deceptive, or abusive acts and practices that could 

cause a risk to consumers. Director Chopra agreed with Member 

Messerschmitt’s comment that non-bank oversight is important to 

ensure there is a level playing field, and he added that the 

non-bank supervision program is going to be an increased focus 

for the CFPB. 

Other Topics. 

Members expressed concerns about fraud. Member Bock 

indicated that business customers have been exposed to scams due 

to systems that lack appropriate information security. Member 

McCurry said that in addition to protecting customers’ money and 

information, cybersecurity now encompasses defending against 

hostile countries attempting to incapacitate industries. Member 

Johnson observed that fraud is on the rise and happens in 

streaks, but remains an everyday event. Member Messerschmitt 

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noted fraud is an increasing challenge, and she stated that the 

increased use of online banking has made elderly customers more 

vulnerable. 

Members James, Johnson, and Narvaez discussed acquisition 

activity at their institutions. Members Johnson and 

Reigelsberger expressed support for the FDIC modernizing the CRA 

to accurately reflect digital services. Member Horvat suggested 

that community banks be included in discussions about potential 

climate change regulation. Member Oldner expressed concern 

about the unintended consequences of climate-related 

disclosures. 

Following the extensive dialogue, Ms. Eberley thanked the 

community bankers. She called for a short recess and, 

accordingly, the meeting stood in recess at 3:28 p.m. 

Small Business Lending Survey 

The Committee reconvened at 3:40 p.m. Ms. Eberley 

introduced Philip Shively, Deputy Director of Research and 

Regulatory Analysis, Division of Insurance and Research (DIR), 

and Yan Lee, Senior Financial Economist, DIR, to discuss the 

Small Business Lending Survey. 

Supervision and Policy Update 

Next, Ms. Eberley introduced several FDIC staff members 

from RMS to provide the Committee with updates on supervision 

and policy matters involving crypto activities, the FDIC’s 

climate change initiative, cybersecurity, and implementation of 

the current expected credit losses (CECL) methodology. Ms. 

Eberley also introduced FDIC staff members from the Division of 

Depositor and Consumer Protection (DCP) to discuss the Spring 

2022 Consumer Compliance Supervisory Highlights publication. 

Crypto Activities. 

Rae-Ann Miller, Senior Deputy Director of Supervisory 

Examinations, RMS, provided a briefing on a financial 

institution letter encouraging notification to the FDIC of 

supervised institutions’ planned or existing engagement in 

crypto-related activities. She shared risk considerations 

regarding safety and soundness, consumer protection, and 

financial stability. 

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FDIC’s Climate Change Initiative. 

Bobby Bean, Deputy Director of Capital Markets and 

Accounting Policy, RMS, provided a briefing on the FDIC’s 

initiatives with respect to the financial risks associated with 

climate change. 

Following this update, Ms. Eberley noted that Director Hsu 

had joined the meeting. 

Cybersecurity. 

Martin Henning, Deputy Director of Operational Risk, RMS, 

provided an update on cybersecurity. 

Implementation of the CECL Methodology. 

Shannon Beattie, Chief Accountant, RMS, provided an update 

on the implementation of the CECL methodology. 

Consumer Compliance Supervisory Highlights Publication. 

Chris Finnegan, Senior Deputy Director of Compliance and 

CRA Examinations, DCP, and Tara Oxley, Associate Director of 

Compliance and CRA Examinations, DCP, discussed the Spring 2022 

Consumer Compliance Supervisory Highlights publication that the 

FDIC issued in March. 

At the conclusion of the presentations, Member Oldner 

responded to a call for questions by remarking that although the 

members had not asked questions following each presentation, she 

believed that all did take great interest in the topics and 

would follow up as needed. Member Oldner added that the 

information covered was relevant and appreciated. 

Ms. Eberley thanked the FDIC staff members for their 

reports and Committee members for their thoughtful dialogue and 

insights. She then turned the meeting over to Acting Chairman 

Gruenberg for his closing remarks. 

Closing Remarks 

Acting Chairman Gruenberg thanked Ms. Eberley and all 

Committee members for taking the time to participate in the 

meeting. He expressed his hope to return to in-person meetings 

in the fall, as he believes that in-person interactions help in 

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May 3, 2022 

the overall engagement and exchange between members and the 

FDIC. 

The Acting Chairman then took a moment to thank Teri 

Messerschmitt, President and CEO of South Ottumwa Savings Bank, 

Ottumwa, Iowa, whose term is expiring in July, for her service 

and commitment to the Committee. On behalf of everyone at the 

FDIC, Acting Chairman Gruenberg expressed appreciation to Ms. 

Messerschmitt, sharing that the FDIC has benefitted greatly from 

her contributions and is looking forward to further engaging 

with her in other capacities. 

Lastly, Acting Chairman Gruenberg thanked staff for 

presentations and all of the community bankers for their input, 

which he indicated was enormously helpful in giving the FDIC a 

meaningful snapshot of what is happening at community banks 

across the country. 

There being no further business to discuss, Acting Chairman 

Gruenberg adjourned the meeting at 4:50 p.m. 

______________________________________________ 

Debra A. Decker 

Federal Deposit Insurance Corporation 

Executive Secretary 

and Committee Management Officer 

FDIC Advisory Committee on Community Banking 

641
The Meeting of the Advisory Committee on Community Banking 

of the 

Federal Deposit Insurance Corporation 

Held via Videoconference 

Washington, D.C. 

Open to Public Observation via Webcast 

May 3, 2022 – 1:00 P.M. 

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

minutes are accurate and complete.

________________________________

Martin J. Gruenberg 

Acting Chairman 

Board of Directors 

Federal Deposit Insurance Corporation