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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 

October 6, 2021 – 1:00 P.M. 

The meeting of the FDIC Advisory Committee of State 

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

Chairman, Federal Deposit Insurance Corporation (FDIC) Board of 

Directors. 

The members of the Committee present at the meeting were: 

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; Mary L. Gallagher, 

Commissioner of Banks, Commonwealth of Massachusetts; 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 

Charles A. Vice, Commissioner, Department of Financial 

Institutions, Commonwealth of Kentucky. All members attended 

via video conference. 

Thomas C. Fite, Director, Department of Financial 

Institutions, State of Indiana, and Mick Thompson, Commissioner, 

Banking Department, State of Oklahoma, were absent from the 

meeting. 
 

 

 

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Martin J. Gruenberg, Director (Appointive), and Michael J. 

Hsu, Director (Acting Comptroller of the Currency), attended the 

meeting. 

Corporation staff who also attended the meeting included: 

James L. Anderson, Lisa D. Arquette, Bobby R. Bean, Amber B. 

Beck, Sylvia W. Burns, Tiffany Cochran, Kymberly K. Copa, Bob De 

Luca, Debra A. Decker, Doreen R. Eberley, Diane Ellis, Gerald M. 

Evans, Eric S. Fultze, Patricia S. Gurneau, Martin D. Henning, 

Daniel S. Hoople, Nicholas S. Kazmerski, Steven Key, Christian 

L. King, Glenn A. Kivlen, M. Anthony Lowe, Kathryn J. Marks, 

Ryan McCarthy, Sultan Meghji, Brandon Milhorn, Arthur J. Murton, 

Shayna Olesiuk, Rowie M. Pangilinan, Mark E. Pearce, Nikita 

Pearson, Harrel M. Pettway, Nicholas J. Podsiadly, Ariana L. 

Rambuyan, Ryan M. Rappa, Lisa K. Roy, Betty J. Rudolph, Jarrod 

Sanders, Camille C. Schmidt, Michael Shaheen, Nefretete A. 

Smith, Jocelyn Sutton, Mona L. Thomas, John F. Vogel, and 

Katrice L. Yokley. 

Introductory Remarks 

Chairman McWilliams opened the meeting by welcoming the 

Committee members. She also welcomed Charles Vice, Commissioner 

for the Department of Financial Institutions for the 

Commonwealth of Kentucky, as a new Committee member. Chairman 

McWilliams then introduced Doreen Eberley, Director, Division of 

Risk Management Supervision (RMS), who moderated the meeting. 

Ms. Eberley invited opening comments from Director 

Gruenberg and Acting Comptroller Hsu. Director Gruenberg 

expressed his thanks to the Committee members. He emphasized 

the value of collaboration between the FDIC and state 

commissioners. Acting Comptroller Hsu also expressed his thanks 

to the Committee members. He noted this is his first meeting 

and that he looked forward to the discussion, particularly the 

roundtable about state banking conditions. 

Next, Ms. Eberley introduced Nicholas Podsiadly, General 

Counsel, Legal Division. Mr. Podsiadly then made a statement 

concerning the Government in the Sunshine Act. 

October 6, 2021 
Economic Conditions. 

 

 

 

 

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Discussion of State Banking Conditions 

Ms. Eberley introduced a roundtable discussion of state 

banking conditions. Committee members discussed a range of 

issues, including the following: 

Committee members generally discussed the 

economic conditions in their respective states, including 

unemployment rates and trends in residential and commercial 

real estate (CRE). Some members discussed these trends in 

connection with reports on COVID-19-related issues, including 

vaccination rates and shifts in the labor force resulting from 

increased telework during the pandemic. 

Unemployment. Most members indicated improvements in 

their state unemployment rates since the prior meeting. 

Members also described similar labor shortages. Commissioner 

Kruse commented that many restaurants in North Dakota are 

reducing hours due to a lack of employees. She further noted 

that North Dakota is witnessing the workforce issues that are 

prevalent across the country, with an unemployment rate of 3.2 

percent. Commissioner Leary stated that the Utah economy is 

performing well with low unemployment. Superintendent Allard 

reported that the rate of unemployment in Ohio increased from 

the prior month, but noted that Ohio’s GDP growth rate mirrors 

the national growth rate. Commissioner Salazar indicated that 

the unemployment rate in Maryland is below 6 percent and that 

employers and bankers are reporting employment tightness, 

particularly with respect to information technology (IT) staff. 

Director Afdahl reported that South Dakota’s unemployment rate 

is now below pre-pandemic levels at 2.7 percent as of July. 

Real estate. Trends in real estate, both residential and 

commercial, were widely discussed. Members noted that they are 

continuing to watch CRE concentrations, but those who spoke to 

the issue indicated that the market is fairly stable. 

Commissioner Cooper noted that he is continuing to monitor all 

sectors, but that CRE seems to be holding up. Additionally, 

Commissioner Gonzales indicated that there are a small number 

of banks in Tennessee with non-owner occupied CRE in excess of 

300 percent of capital, but he said that the system as a whole 

appears to be well diversified. 

On the residential side, members reported a generally 

tight housing market and higher home prices. Commissioner 

Leary reported that median home values in Utah increased more 

than the national average. Commissioner Vice noted a strong 

increase in home prices in Kentucky, with lower supply and 

higher demand. Commissioner Hall explained that Montana has 

experienced 
 

 

Banking Conditions. 

 

 

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challenges with increased housing prices and lower housing 

supply. She elaborated that many of the state’s new residents 

are employed in positions that allow them to work remotely for 

companies in other places that pay more. 

Committee members described generally 

stable banking conditions in their states. Members also 

reported stable asset quality, but comments reflected close 

monitoring of certain sectors, such as agriculture in states 

facing drought conditions and CRE. 

Most members noted the high liquidity in their states’ 

institutions and the associated capital and earnings impacts. 

Members said that the increases in deposits and asset volumes 

are diluting Tier 1 Capital ratios and earnings, though none 

reported institutions falling into undercapitalized status as a 

result. Commissioner Gonzales said banks that have experienced 

a decline in their Tier 1 Capital ratios have reduced their risk 

profiles, as increases in deposits continue to be held as cash 

or in investment portfolios. This, as well as a low-yield 

environment, has resulted in net interest margin compression. 

A common concern discussed by Committee members was low 

loan demand, causing negative, stagnant, or low loan growth in a 

low interest rate and high liquidity environment. Some members 

noted that these conditions could lead to asset quality issues 

in the future. Commissioner Kruse said she has “started the 

messaging about how bad loans are made in good times, and 

warning against relaxing underwriting standards.” Commissioner 

Cooper replied to Commissioner Kruse’s remarks by noting that a 

reach for yield historically results in lowering credit 

standards. 

Three members described de novo activity in their states 

with report of one bank being opened in May. Members also 

described merger and acquisition activity within their states, 

and Commissioner Hall noted that merger activity has started 

again after a pause due to COVID-19. Two members touched on the 

number of branch closures, some of which started as temporary 

closures and then became permanent branch closings. 

Several members discussed climate-related issues in their 

states. Commissioner Kruse noted that agriculture is the 

biggest part of North Dakota’s economy, and that sector has been 

challenged as the state experienced both flooding and drought in 

the last year. She further noted that government assistance has 

October 6, 2021 
 

 

Cybersecurity. 

24 

been effective in mitigating the economic effects and the 

overall impact on banks. Director Afdahl reported that only 7 

percent of South Dakota has no drought and that cattle producers 

and operators have been heavily affected. Commissioner Salazar 

indicated that Maryland is participating in a climate change 

task force established by the Conference of State Bank 

Supervisors (CSBS) and led by New York. The group is working on 

tools to help other state regulators with respect to climaterelated issues and information for their supervised 

institutions. 

A number of members generally indicated that 

cybersecurity continues to be a concern for regulators and 

banks, although there was not significant discussion of specific 

issues. Commissioner Leary stated, “Cybersecurity, keeping up 

with emerging threats and bad actors, is a constant challenge. 

Utah bankers continue to devote more time and resources to this 

area.” 

Commissioner Holstein noted that West Virginia is currently 

using a ransomware self-assessment tool to assist banks in 

becoming more self-aware of the risks as ransomware continues to 

be at the forefront. Mr. Ryan noted that CSBS has issued 

cybersecurity tools and a media kit for state supervisors to 

help promote National Cybersecurity Awareness Month among bank 

customers, state consumers, and bankers. 

COVID-19 Pandemic. Nearly all members described the COVID-19 

pandemic's impacts on their respective state economy, banking 

industry, and bank examination operations. Members noted that 

they continue to assess the ongoing impact to business 

operations for the state departments and financial institutions. 

Examinations. Nearly all of the members commented on their 

states' bank examination operations. Most of the members 

reported that their state was successfully conducting exams 

using a hybrid in-person and off-site approach. Many members 

noted that bank executives in their state valued face-to-face 

interaction with examiners. Several members also indicated that 

they were interested in continuing hybrid examinations 

indefinitely. 

Innovation. Several members commented on innovations and 

developments within their states’ banking system. Commissioner 

Vice mentioned that Eastern Kentucky University and the Kentucky 

Bankers Association will host a Bank Innovation Conference on 
 

Minority Depository Institutions. 

 

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October 14, 2021, which will include FDIC Chief Innovation 

Officer Meghji as a panelist. 

Commissioner Leary noted that one of the biggest issues for 

Utah bankers is meeting rapidly evolving consumer expectations. 

He noted that this is causing banks to partner with Fintech 

companies and that there is concern about what such partnerships 

mean for the banking industry. Commissioner Holstein commented 

that West Virginia is currently determining the best way to 

supervise and examine banks that make investments in Fintech 

companies. Commissioner Cooper reported that in June, Texas 

issued an industry notice affirming the ability of Texaschartered banks to provide virtual currency custody services. 

He said that the notice has received a lot of attention from the 

media and industry. 

Superintendent Allard reported 

that there had been some very strong interest in minority 

depository institutions in Ohio. He noted that earlier in the 

year, the Ohio Bankers League, a trade group in Ohio, organized 

and sponsored the Prospective Diversity Director Symposium, an 

event focused on providing more diversity on Ohio bank boards. 

The centerpiece of the event was a panel of three former and 

current minority directors who shared their experiences in serving 

on a bank board. Nikita Pearson, Director of the FDIC’s Office of 

Minority and Women Inclusion, opened the program. Superintendent 

Allard encouraged similar programs in other states. 

Other Topics. Several members commented on the positive impact of 

increased communication and coordination with FDIC Regional 

Offices during the pandemic. Specifically, Commissioner Leary and 

Commissioner Hall stated that the San Francisco Regional Office 

has been helpful in coordinating efforts between the states during 

the pandemic. Commissioner Holstein stated that the pandemic has 

strengthened the West Virginia Division of Financial Institution’s 

relationship with the Atlanta Regional Office. Commissioner 

Salazar and Commissioner Gallagher both expressed appreciation for 

the assistance received from the New York Regional Office during 

the pandemic. Commissioner Gonzales stated that he appreciates 

the working relationship between the Tennessee Department of 

Financial Institutions and the Dallas Regional Office. 

Following the Committee member roundtable, Ms. Eberley 

introduced FDIC staff members to discuss national and regional 

observations. Shayna Olesiuk, Associate Director, National and 

Regional Risk Analysis, Division of Insurance and Research 

October 6, 2021 
 

 

 

 

 

 

26 

(DIR), presented on the national economy and banking trends, 

including a summary of the FDIC’s 2021 Risk Review. Following 

that, Camille Schmidt, Chief, Emerging Issues Section, Policy 

Branch, RMS, discussed trends in risk management practices. 

FDITECH Update 

Ms. Eberley introduced Sultan Meghji, FDIC Chief Innovation 

Officer. Mr. Meghji provided an overview of FDITECH’s 

innovation program, describing its four key pillars of 

inclusion, resilience, amplification, and protecting the future. 

Mr. Meghji also provided an update on the Rapid Phased 

Prototyping pilot project and the FDIC technology sprint 

programs. 

State–Federal Coordination 

Ms. Eberley introduced the next panel discussion where she 

was joined by Mark Pearce, Director, Division of Depositor and 

Consumer Protection, to discuss lessons learned from the 

extended period of remote bank examinations and what bank 

examinations might look like after the pandemic. Following that 

discussion, Ms. Eberley introduced Martin Henning, Deputy 

Director, Operational Risk, RMS. Mr. Henning discussed 

cybersecurity risk management practices. In addition, he 

reviewed comments received in response to the computer-security 

incident notification notice of proposed rulemaking published by 

the FDIC, the Office of the Comptroller of the Currency, and the 

Federal Reserve Board in January 2021. Mr. Henning also 

expressed thanks for the continued participation of states with 

the federal banking agencies in technology service provider 

examinations. Mr. Henning then introduced Lisa Arquette, 

Associate Director, Anti-Money Laundering and Cyber Fraud 

Branch, RMS, who provided an update on the Anti-Money Laundering 

Act of 2020. 

Community Bank Research 

Ms. Eberley introduced Diane Ellis, Director, DIR, and 

Daniel Hoople, Financial Economist, DIR, to share an update on 

community bank research. Ms. Ellis provided an overview of the 

2021 Community Bank Research Conference and expressed thanks and 

appreciation for the partnership with CSBS and the Federal 

Reserve in co-sponsoring the conference. Next, Mr. Hoople 

focused his presentation on how community banks’ use of 

technology supported loan and deposit growth during the 

pandemic. 
 

 

 

 

 

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Minority and Community Development Banking Update 

Ms. Eberley then invited Betty Rudolph, National Director, 

Minority and Community Development Banking, to provide an update 

on minority and community development banking. Ms. Rudolph 

explained that the FDIC’s role in preserving and promoting 

mission-driven banks, which include 144 FDIC-insured minority 

depository institutions and 168 FDIC-insured community 

development financial institutions. She then provided an 

overview of the Statement of Policy Regarding Minority 

Depository Institutions that the FDIC Board approved in June 

2021. Following that, Ms. Rudolph provided an update on the 

Mission-Driven Bank Fund, which was launched in September 2021. 

Closing Remarks 

Following the presentations, Ms. Eberley invited Director 

Gruenberg to make closing remarks. Director Gruenberg shared 

that he appreciated the participation of the members and that he 

valued the comments they shared. He expressed his view that the 

partnership with state regulators is important in helping to 

steer supervised institutions through this extraordinary time. 

Director Gruenberg also acknowledged and expressed thanks to Ray 

Grace, the former Bank Commissioner for North Carolina and 

member of the Committee, who retired in July. 

Having no further business to discuss, the meeting was adjourned 

at 4:38 pm. 

Debra A. Decker 

Federal Deposit Insurance Corporation 

Deputy Executive Secretary 

and Committee Management Officer 

FDIC Advisory Committee of State Regulators 

October 6, 2021 
 

 

________________________________ 

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 

October 6, 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