The OCC MSAAC met yesterday for an abbreviated afternoon session. Essentially half the meeting was devoted to a roundtable dialogue with Comptroller Michael Hsu, with the other devoted to a discussion of the OCC analysis of the utilization of the statutory election to acquire national bank powers under the covered association regulation.
Roundtable
David Barksdale, Piedmont Bank, and AMB member, addressed the Comptroller’s recent “vital signs” speech. He emphasized that mutual banks have a close relationship with their customer and community constituency and are well placed to receive their feedback. He cited his bank’s efforts to educate the customer explaining its success with its financial literacy program. He stated financial literacy is a proud mutual product. He cautioned on the risks of data collection and the cost of regulatory compliance. He cited the 1071 rule and questioned the basis for so called “junk fee” regulation. He pointed out that for mutuals some products are for customer service, not profit, stating that small loans do not often generate profits and Congress is penalizing mutuals with burdensome regulation. Comptroller Hsu complimented Mr. Barksdale’s bank’s cultural service to the community at large, recognizing the close relationship of mutuals with their customers. George Herman, Windsor Federal, discussed his bank’s financial literacy outreach to minority high schools. He explained he eventually hired 25 of the students many who were first in their family with a white-collar job.
The rest of the discussion covered a range of topics ranging from tailored regulation to concerns over unnecessary supervisory burdens. Dave Barksdale pleaded for forbearance from any new regulations given the difficulty of digesting the voluminous recent proposals. A number of attendees questioned the supervisory focus on the volatility of deposits stating that mutual deposits are much more stable than those in many large banks. There was also discussion of FHLBank Liquidity with Senior Deputy Comptroller Beverly Cole distinguishing the differing FHLBank policies and advance practices. Dave Reynolds complimented the southern region’s approach to distinguishing structural differences between mutuals and other banks.
Covered Savings Associations
The staff lead the discussion of the CSA electing associations financial performance. There were three major takeaways: 1.) CSAs are larger than other federals; 2). Residential real estate is s till a significant share of the CSA portfolio, although there are shifts in portfolio to CRE and commercial loans; and 3.) CSA performance does not differ materially from other FSAs peers. The discussion by several of the CSA members suggested that the election process was a streamlined experience. There was some mention of FRB difficulties, but the consensus was that they have been resolved. Tom Rudzewick, Maspeth Federal, a AMB member, mentioned his bank has not seen a need to materially change its asset mix and has elected not to elect CSA status for now. The OCC PowerPoint with detailed analysis is attached.
