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 have responsibility for program implementation. Further, an Executive Oversight Committee, composed 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 Federal Deposit Insurance Corporation (FDIC) to help identify healthy minority banking organizations capable of acquiring or merging with state-member MDIs that are in troubled condition.⁸ To this end, PFP staff provide the FDIC with a quarterly list of all MDIs under System supervision. In addition, Board staff in the applications function continue to offer a pre-filing option for banking applications that 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 2014, the number of MDIs under System supervision increased by two. One bank already designated an MDI changed charter and became a state member bank. The other bank, which was already a state member bank, applied for and was granted MDI designation.

Back to section top

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 (www.fedpartnership.gov) that advocate minority bank ownership, inform MDIs of advantageous federally sponsored programs, and promote community development. These web posts--some of which are authored by third parties--also provide guidance about financial institution development, including information about 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.

Back to section top

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 2014, district coordinators provided several MDIs with targeted training on strategies to improve loan portfolio weaknesses.

Back to section top

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 regularly update the website.

Workshops

Throughout 2014, 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 capital maintenance.

Publications

The System continues to support enhanced communications with community banks, including MDIs. To this end, the System disseminates important information about regulatory matters through a variety 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.⁹ 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 2014, Community Banking Connectionsoffered articles on a range of timely topics, including promoting an inclusive financial system, cybersecurity, loan and other real estate owned accounting guidance, recruiting and retaining community bank directors, and managing service provider relationships.

The System's FedLinks™ publication ¹⁰ is another resource that offers information and guidance useful to MDIs. This publication 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 2014, FedLinks offered articles on several topics applicable to MDIs, including supervisory expectations for bank-owned life insurance, municipal lending, developing and maintaining an effective loan policy, and considerations when outsourcing an internal audit.

Research on Low- and Moderate-Income Communities

Throughout 2014, staff from the FRBs published articles and surveys that both evaluated conditions in low- and moderate-income (LMI) communities and described efforts to support them, including by community banks. These publications are intended to equip 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. Indeed, because the success of MDIs is often dependent on the health of the communities they serve, the research shared through these articles and surveys is particularly relevant to the MDI business model. In addition, several of these publications noted the difficulty that minority and LMI populations have accessing credit from mainstream financial institutions. Given the mission and customers served by many MDIs, this research could help bolster the argument that MDIs are necessary and fill a credit gap left by larger, mainstream financial institutions.

Highlights of the research published during 2014 are listed below:

• Low- and moderate-income surveys. ¹¹ Several FRBs, including FRB Kansas City, which has 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.
• Small business credit surveys. In 2014, both the Chicago and Dallas FRBs published surveys of small business owners, seeking to identify their resource needs and gaps. The Chicago survey was specific to black small business owners in Detroit and found that the most important resource need for businesses was human and financial capital.¹² The Dallas survey over-sampled minority-owned and women-owned business enterprises (MWBEs) and found that the starkest contrast between MWBEs and non-MWBEs lies in access to capital: more than double the percentage of MWBEs reported that this is the largest concern in their business growth compared with non-MWBEs (22 percent versus 10 percent).¹³
• Community banks article.In March 2014, Board economists released a paper that used data from 1992 through 2012 to examine the relationships between community bank profitability and various characteristics of the banks and the local markets in which they operate. The authors found that community bank profitability is strongly positively related to bank size, and that local economic conditions have significant effects on bank profitability.¹⁴

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 2014, PFP staff invited MDI officials to participate in conferences, conference calls, and workshops hosted by several interested groups, including the National Urban League, the Minority Business Development Agency, the Independent Community Bankers of America Minority Bank Council, the Small Business Administration, the Community Development Bankers Association, and the National Bankers Association. Further, Board staff invited the president of the National Bankers Association to the PFP's annual district coordinators meeting, held in January 2014, 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 2014, System representatives, along with senior officials from the FDIC and the Office of the Comptroller of the Currency, attended interagency meetings to identify additional opportunities to collaborate on MDI outreach efforts.

As an example of these collaborative efforts, the System continued to prepare for the biennial interagency minority depository conference that took place in July 2015 in Washington, D.C.

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. PFP representatives also participate in the meetings by

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

Further, during 2014, Board staff and staff from the second district hosted a Rapid Response video conference focusing on MDIs. The event focused on the PFP program, Dodd-Frank requirements--namely, preserving MDIs, general industry observations, the state of MDIs, challenges facing MDIs, and supervisory tools.

Back to section top

References

• Other Formats

• Full report (PDF)

• Stay Connected

• Twitter
• YouTube
• Flickr
• RSS Feeds
• Subscribe