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Decade Sees Growth in State Member Banks Seeking Fed Supervision

Monday, January 1, 2007

The number of state-chartered banks choosing Federal Reserve membership is growing in the Eighth District.

Mergers and acquisitions have reduced the total number of banks both District- and nationwide over the past ten years; however, the ranks of state-member banks increased. There were 72 state member banks in 1998 and as of late October, there are 95. This translates to 12.6 percent of the District's total number of banks, up from 7.8 percent in 1998.

What's behind the growth?

One major reason is that the Fed offers consistency to financial organizations by having all supervision conducted by the Fed. By law, the Fed automatically regulates bank holding companies, but not their bank subsidiaries. In the Eighth District, the Fed supervises more than 550 bank holding companies that own approximately 700 subsidiary banks-most of which are regulated by different federal agencies.

The desire for a common regulator spurred HomeBancshares Inc., based in Conway, Ark., to re-evaluate the supervisory situation for its several bank subsidiaries in Arkansas and Florida. Says Ron Strother, president, CEO and director of Home Bancshares, "As our number of affiliates began to grow at Home Bancshares, the burden of dealing with multiple regulators was also increasing. In an effort to streamline and simplify our processes, the management team evaluated the attributes of becoming a Fed member banking organization.

"By reducing our number of regulators to two, the Arkansas State Bank Department and the Fed, we found consistency, thoroughness and a common knowledge of our strategic direction," Strother says. "We have been very pleased with our move."

Says Dennis Blase, assistant vice president in Banking Supervision & Regulation at the St. Louis Fed, "We work hard to be accessible and responsive in terms of timeliness and getting answers to questions," he says. "With safety and soundness the primary focus of bank examinations, making certain that bankers have an approachable and fast-responding supervisor is critical."

The Fed strives to make sure to maintain good working relationships with all seven state banking departments in the Eighth District, explains Blase. He refers to the departments collectively as "our regulatory partners."

The Fed provides formalized, ongoing training to keep Fed examiners at the top of their game when working with banks and state bank departments-and to help ensure that examinations run smoothly and deliver in-depth analysis. "Our examiners are well-trained and very experienced, and with training and experience comes good judgment," Blase says.

While functional teams of examiners are based in St. Louis and Memphis, the Bank's long-range strategy might eventually include supervisory examiner offices in Little Rock and Louisville, according to Blase.

Number of State Member Banks Per Year in the Eighth District:

Number Year
95 2007
(as of Oct. 19)
92 2006
85 2005
80 2004
77 2003
75 2002
79 2001
80 2000
75 1999
72 1998