Community Banking - CSBS

1 Community Banking in the 21st Century 2017 | RESERVE / CONFERENCE OF STATE BANK SUPERVISORS Community Banking Research and Policy ConferenceCommunity Banking in the 21st Century 2017 | Banking in the 21st Century 2017 | Bankingin the 21st CenturyFifth Annual Community Banking Research and Policy ConferenceCo-sponsored by the Federal Reserve System and the Conference of State Bank SupervisorsOct. 4-5, 2017, at the Federal Reserve Bank of St. LouisCommunity Banking in the 21st Century 2017 | :This publication was made possible by the collaborative efforts of state bank supervisors, Community banks, the Conference of State Bank Supervisors and the Federal Reserve System. The Community Banking in the 21st Century National Survey was administered by state bank commissioners in 37 states. A total of 611 Community bankers participated in the survey. Interviews with Community bankers, referred to in this publication as Five Questions for Five Bankers, were conducted by state bank supervisors in 30 states from April to July.

2 Participation in both the 2017 National Survey and the Five Questions for Five Bankers discussions would not have been possible without the efforts of the following state bank commissioners and members of their staff:AlabamaMike Hill, Superintendent of BanksAlabama State Banking DepartmentArizonaRobert Charlton, SuperintendentArizona department of Financial InstitutionsArkansasCandace A. Franks, Bank CommissionerArkansas State Bank DepartmentCaliforniaJan L. Owen, CommissionerCalifornia department of Business OversightColoradoChris Myklebust, CommissionerColorado Division of BanksConnecticutJorge Perez, CommissionerConnecticut department of BankingGeorgiaKevin B. Hagler, CommissionerGeorgia department of Banking and FinanceHawaiiIris Ikeda, Commissioner of Financial InstitutionsHawaii Division of Financial InstitutionsIdahoGavin M. Gee, Director of FinanceIdaho department of FinanceIllinoisBryan A.

3 Schneider, Secretary, DFPRI llinois department of Financial and Professional RegulationIndianaThomas C. Fite, DirectorIndiana department of Financial InstitutionsIowaRonald L. Hansen, SuperintendentIowa Division of BankingKansasMiki W. Bowman, CommissionerKansas Office of the State Bank CommissionerKentuckyCharles A. Vice, CommissionerKentucky department of Financial InstitutionsLouisianaJohn P. Ducrest, Commissioner of Financial InstitutionsLouisiana Office of Financial InstitutionsMassachusettsTerence A. McGinnis, Commissioner of BanksMassachusetts Division of BanksMichiganKaren K. Lawson, Director, Office of BankingMichigan department of Insurance and Financial Services MinnesotaMike Rothman, CommissionerMinnesota department of CommerceMississippiCharlotte N. Corley, CommissionerMississippi department of Banking and Consumer FinanceMissouriLee Keith, Acting CommissionerMissouri Division of FinanceMontanaMelanie G.

4 Hall, CommissionerMontana Division of Banking and Financial InstitutionsNebraskaMark Quandahl, DirectorNebraska department of Banking and FinanceNevadaGeorge E. Burns, CommissionerNevada Financial Institutions DivisionNew MexicoChristopher Moya, Acting DirectorNew Mexico Financial Institutions DivisionNew YorkMaria Vullo, SuperintendentNew York State department of Financial ServicesNorth CarolinaRay Grace, Commissioner of BanksNorth Carolina Office of Commissioner of BanksOhioKevin R. Allard, SuperintendentOhio Division of Financial InstitutionsOklahomaMick Thompson, Bank CommissionerOklahoma State Banking DepartmentOregonJacob P. Mundaden, Program ManagerOregon Division of Financial RegulationSouth DakotaBret Afdahl, Director of BankingSouth Dakota Division of BankingTennesseeGreg Gonzales, CommissionerTennessee department of Financial InstitutionsTexasCharles G. Cooper, Banking CommissionerTexas department of BankingUtahG.

5 Edward Leary, Commissioner of Financial InstitutionsUtah department of Financial InstitutionsVermontMichael Pieciak, CommissionerVermont department of Financial RegulationVirginiaE. Joseph Face, Jr., Commissioner of Financial InstitutionsVirginia Bureau of Financial InstitutionsWashingtonGloria Papiez, DirectorWashington department of Financial InstitutionsWisconsinJay Risch, SecretaryWisconsin department of Financial InstitutionsWyomingAlbert L. Forkner, State Banking CommissionerWyoming Division of BankingCommunity Banking in the 21st Century 2017 | from Jerome H. Powell ..5 Foreword from Albert L. Forkner ..62017 National Survey ..9 Five Questions for Five Bankers ..35 Alabama ..36 Arkansas ..37 Colorado ..39 Connecticut ..40 Georgia ..42 Idaho ..43 Illinois ..44 Indiana ..46 Iowa ..48 Kansas ..49 Kentucky ..51 Louisiana ..53 Massachusetts ..54 Mississippi ..55 Missouri.

6 57 Montana ..58 Nebraska ..59 New Mexico ..60 North Carolina ..62 Ohio ..65 Oregon ..66 South Dakota ..68 Tennessee ..70Te x a s ..71 Utah ..73 Vermont ..74 Virginia ..75 Washington ..76 Wisconsin ..78 Wyoming ..80 Table of ContentsCommunity Banking in the 21st Century 2017 | Banking in the 21st Century 2017 | from Jerome H. PowellThis year marks five years since the Federal Reserve and the Conference of State Bank Supervisors (CSBS) formed a vital partnership to promote academic research on Community Banking . In this short span of time, the industry has evolved significantly. At the time of the first conference in 2013, there was focused concern about the potential impacts of post-Dodd-Frank rules and regulations on the industry. While there is still concern about regulatory burden, the top issue has shifted. Today s Community bankers are struggling to understand the technological innovations that may require investment in upcoming years.

7 The findings from this year s survey, facilitated by the state bank commissioners and the CSBS, allow us to better understand where Community banks see the greatest opportuni-ties and challenges facing their industry. More than 600 Community bankers from across the lent their voices to this year s survey, and those views are captured in this survey has taken on even greater importance, as researchers are now using the survey data to help answer research questions that will improve our understanding of this ever-changing industry. The quantitative information is melded with anecdotal insights gleaned from conversations between state bank commissioners and bankers in their states. The combination adds to the richness of this Federal Reserve looks forward to continuing this partnership with the CSBS and growing its understanding of our nation s Community banks. Jerome H.

8 PowellGovernor Federal Reserve Board of GovernorsChair, Subcommittee on Smaller Regional and Community BankingBACK TO TABLE OF CONTENTS Community Banking in the 21st Century 2017 | state regulators, we supervise a wide range of financial institutions everything from large commercial banks to start-up fintechs. But the core of state regulation has always been Community banks, the local institutions that finance Main Street busi-nesses, provide essential Banking services in our neighborhoods, sponsor Little League baseball teams and go into schools to teach young adults about how to manage their finances. And we are right in wanting to preserve this form of financial is why I am encouraged by the results in this year s survey of Community bankers, which suggest that the sector, after many years of tumult, might be achieving stability. Commercial lending propelled portfolio growth last year.

9 Community banks remained a strong source of business lending. And they had an active year in mortgages and home equity. Moreover, Community banks saw greater opportunities for business growth. Combined, these and other results are a testament to the staying power of the relation-ship lending business be sure, Community banks have their challenges. Economists at the Federal Reserve Bank of St. Louis calculate that, in 2016, compliance costs once again increased over the prior year, from $ billion to $ billion. And the survey suggests that recent federal mortgage regulations might be depressing credit availability. Understanding these and other implications is why the Conference of State Bank Supervisors partners with the Federal Reserve to host an annual research conference on Community Banking . We look forward to hearing the insights of economists, academics, financial regulators and other thought an era when Banking might be becoming too disconnected from the communities they serve, Community banks are an essential source of credit and Banking services for families and neighborhoods everywhere.

10 Albert L. ForknerChairman, Conference of State Bank SupervisorsState Banking Commissioner, Wyoming Division of BankingForeword from Albert L. ForknerABACK TO TABLE OF CONTENTS 2017 National Sur veyCommunity Banking in the 21st Century 2017 | evolution of Community Banking in the aftermath of the recession was profound, enduring and, at times, painful. Profitability plummeted, as did the number of banks and, to a lesser extent, bank branches. New regulations were enacted. The Federal Reserve System and the Conference of State Bank Supervisors (CSBS) have been at the forefront of examining these issues. Now in its fifth year, the Community Banking in the 21st Century research and policy conference has offered an opportunity to bring together academic experts, federal and state policymakers, and Community bankers to explore relevant topics and the pivotal role of Community Banking in both local mar-kets and the national economy.