Partnership for Progress Program

The System supports MDIs primarily through its PFP program. This program is a national outreach effort to help MDIs confront unique business model challenges, cultivate safe banking practices, and compete more effectively in the marketplace. Through this program, the System strives to provide MDIs with resources supportive of sound banking operations.

Maryann Hunter, Deputy Director of the Board's Division of Banking Supervision and Regulation, serves as national coordinator of the program, while district coordinators from each of the FRBs carry out the program's objectives. Staff from both the Board's Division of Banking Supervision and Regulation and the Division of Consumer and Community Affairs has responsibility for program implementation. Further, an Executive Oversight Committee, comprised of senior officials from both the Board and the Reserve Bank of Philadelphia, meets regularly to discuss progress toward program objectives set for each calendar year.

Preserving the Character and Number of MDIs

To preserve the character and number of state-member MDIs, staff from the Board's applications function coordinate with the FDIC to help identify healthy minority banking organizations capable of acquiring or merging with state-member MDIs that are in troubled condition.¹¹ To this end, PFP staff provides the FDIC with a quarterly list of all MDIs under System supervision. In addition, Board staff in the applications function continues to offer a pre-filing option to MDIs for banking applications to provide critical feedback on potential issues to help avoid processing delays. Finally, whenever the System receives a proposal involving an MDI or an MDI's holding company, every effort is made to ensure that the institution is preserved and that its future prospects are enhanced. During 2013, the number of MDIs under System supervision remained unchanged with that of the prior year.

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Promoting the Creation of MDIs

The System strives to promote the creation of new MDIs by providing guidance about the regulatory applications process to individuals interested in establishing new minority institutions. Further, the System strives to promote the creation of MDIs by posting articles to the Partnership for Progress website, some of which are authored by third parties, that advocate minority bank ownership, inform MDIs of advantageous federally sponsored programs, and promote community development. These web posts also provide guidance about financial institution development, including information regarding the process of starting a bank, managing a bank through the de novo period, and growing shareholder value while ensuring safe and sound operations. Further, district coordinators occasionally field calls from the public asking for guidance on the new bank applications process.

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Providing Technical Assistance to Prevent Insolvency

District coordinators meet regularly with management of MDIs, especially those in troubled condition, to explain guidance, discuss challenges, and respond to management concerns. Because asset quality remained a primary weakness contributing to the troubled condition or less-than-satisfactory condition of some of these institutions throughout 2013, district coordinators provided several MDIs with targeted training on strategies to improve loan portfolio weaknesses.

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Training, Technical Assistance, and Educational Programs

The System continues to use a variety of tools to support MDIs. The primary tools used by the System to provide training and technical assistance are described below.

Partnership for Progress Website

As previously mentioned, one of the primary vehicles for distributing educational materials relevant to MDIs continues to be the System's PFP website. This website promotes the creation of MDIs by

• providing information about new regulations and their impact on community banking organizations;
• advertising regulatory and agency events relevant to MDIs; and
• furnishing articles focused on market conditions and economic data related to areas typically served by MDIs.

To ensure continued relevance of posted material, PFP representatives install regular updates to the site.

Workshops

Throughout 2013, district coordinators invited officials from MDIs to participate in FRB conference calls and seminars focused on a wide variety of banking topics. Most of these topics related to newly issued regulations, asset quality management, and capital planning and maintenance.

Publications

The System continues to support enhanced communications with community banks, including MDIs. To this end, the System continues to disseminate important information about regulatory matters through a number of publications, most of which are accessible through links on the PFP website. Of particular use to state-member MDIs is the System's Community Banking Connections® publication.¹² This publication serves to

• clarify key supervisory guidance;
• highlight new regulations;
• provide perspectives from bank examiners and System staff; and
• address challenges and concerns facing community banks and provide resources to assist them.

During 2013, the publication offered articles on a variety of timely topics, including the allowance for loan and lease losses, cybersecurity, and capital planning.

Another publication offering information and guidance useful to MDIs is the System's FedLinks™ publication, ¹³ which serves to

• discuss supervisory topics that are important to community banks;
• highlight the purpose of related supervisory policy and guidance, if applicable;
• provide examples and illustrations to demonstrate the practical application of covered topics; and
• provide integrated summaries that describe how examiners typically will address the covered topic.

During 2013, this publication offered articles on several topics applicable to MDIs, including supervisory expectations for appraisal and evaluation programs, supervisory expectations for internal control functions, and supervisory expectations for the allowance for loan and lease losses.

Research on Low- and Moderate-Income Communities

Throughout 2013, staff from the FRBs published a number of articles and surveys that both evaluated conditions in low- and moderate-income (LMI) communities and described efforts to support them. Because the success of MDIs is often dependent on the health of the communities they serve, these articles are particularly relevant to the MDI business model. These articles intend to provide service providers, policymakers, and others with a gauge to assess the needs of these communities and to evaluate changes in the economic conditions of these populations.

The following list highlights some of the articles and surveys published during 2013:

• Low- and Moderate- Income Surveys: ¹⁴ Several FRBs, including FRB Kansas City, which retains a large number of state-member MDIs, publish quarterly results from surveys designed to measure the economic conditions of LMI populations and the condition of organizations that serve them.

• Housing Market Recovery in the 12th District: Implications for Low- and Moderate-Income Communities: ¹⁵ This publication focuses on the disproportionate impact of the Great Recession on LMI communities and provides an overview of the housing market recovery and investor activity in the San Francisco FRB District, another district with a large number of state-member MDIs.

• CDFIs: What's in a Name?: ¹⁶ The Philadelphia FRB published this article to explain the importance of Community Development Financial Institutions (CDFIs) to credit markets and lenders, fiscal policymakers, state and municipal officials, and, most importantly, the low-income and low-wealth individuals and communities that CDFIs serve. This article is relevant to MDIs, as nearly half of all MDIs are also certified as CDFIs.

Collaboration with Trade Groups

Throughout the year, district coordinators worked with numerous trade groups to foster mutually beneficial partnerships between MDIs and organizations seeking to promote growth and development of minority communities. Throughout 2013, PFP staff invited MDI officials to participate in conferences, conference calls, and workshops hosted by a number of interested groups, including the National Urban League, the Minority Business Development Agency, the Independent Community Bankers of America Minority Bankers Council, the Small Business Administration, and the NBA. Further, Board staff invited the president of the NBA to the PFP's annual district coordinators meeting, held in January of 2013, to express regulatory concerns on behalf of MDIs to senior Board officials.

Collaboration with Other Agencies

The System's consumer and community affairs function continues to collaborate with other banking agencies to identify opportunities to create incentives for financial institutions to engage in community development activities. Further, throughout 2013, System representatives, along with senior officials from the FDIC and the OCC, attended interagency meetings to identify additional opportunities to collaborate on MDI outreach efforts.

As an example of these collaborative efforts, the System continues to participate in the biannual interagency minority depository conference. During the 2013 conference, Board Governor Sarah Bloom Raskin provided opening remarks, and senior officials from the Board participated in roundtable discussions with MDI representatives.

Examiner Education

District coordinators participate in quarterly conference calls and attend annual meetings to discuss current MDI conditions and concerns. To keep the district coordinators well informed, during these meetings, System staff and representatives from trade associations lead presentations on topics related to MDI preservation. During these meetings, PFP representatives also

• discuss with district coordinators their progress towards meeting annual program objectives;
• provide clarification on annual program objectives;
• solicit input on MDI challenges observed in specific regions;
• consider suggestions from district coordinators on ways to improve program offerings; and
• discuss upcoming System or trade association events, workshops, or seminars that may benefit MDIs.

Further, during 2013, Board staff issued internal guidance to examiners to explain their responsibilities under the PFP program.

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References

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