Cold calls from regulators usually make bankers sweat. But lately, if the call is coming from a state regulator, the banker is likely being recruited to switch to a state charter.
Tom Considine, who leads the New Jersey Department of Banking and Insurance, has aggressively lobbied federally chartered thrifts, arguing that his agency is closer in proximity than federal regulators, less expensive and, unlike the Office of Thrift Supervision, won't dissolve.
At any public speaking event, no matter the subject, "I say 'it's not an accident that the commissioner of banking and insurance … is standing here before you [instead of a] federal bank regulator,' " Considine said. "We have more knowledge of banking and management in our market, and we're … more accessible."
Considine has lured only one thrift since launching the campaign about a year ago. But when the OTS merges into the Office of the Comptroller of the Currency on Thursday, some state regulators expect more converts.
"We think the state charter should be a charter of choice," said Ed Novak, press secretary at the Pennsylvania Department of Banking. "We have a very well-run, responsive group of very professional regulators."
Glenn Moyer, Pennsylvania's secretary of banking, is making the same speech to professional groups. Since December, the state has recruited four national banks but has yet to land a thrift.
Generally, most states have the advantage of being less expensive in assessments than federal charters. Considine says the average state charter is more than 30% less than a federal charter.
Other state regulators are not as aggressive as New Jersey or Pennsylvania, or few publicly admit if they are. Consultants say many of the state regulators have become more vocal with thrifts, positioning themselves as a local, lower-cost option.
"They're being proactive. They're looking for customers [but] … they don't want to make it sound like they're easier regulators," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick. "They're always looking for new banks to regulate" especially now that there are state budgetary issues and "turmoil with the regulators."
Weisman recalls a case where a federal bank examiner joined a state agency and began soliciting Weisman's unnamed client. "The bank called me and said, 'Are you kidding? This is ballistic,' " he said.
OCC spokesman Bryan Hubbard did not discuss state regulators but said the OCC has lowered expectations of how many OTS-regulated institutions would become part of the OCC on July 21, to 648, from 700 a year earlier.
"The OCC has been pretty aggressive too in their outreach" to thrifts, said Paul Aguggua, the head of the financial institutions group at Kilpatrick Townsend & Stockton. "They're trying pretty hard to make sure that any myths about them are corrected."
A handful of OTS-regulated thrifts have gone to state charters from states such as New Jersey, Texas, Louisiana and Tennessee.
"If anybody wants to talk about a conversion we will talk about the advantages … but we aren't out cold-calling," said Robert Bacon, the Texas Department of Banking's deputy commissioner.
Bacon says the main advantage is accessibility. State-chartered banks "can come to Austin rather than go up the chain or track their regulator to Washington."
Novak says there is expectation of more conversions. "A year ago, we weren't sure what Dodd-Frank was going to mean. Now we're up against July 21, and I think the reality is hitting a lot of boards."
New Jersey's efforts didn't yield a convert until Crest Savings Bank in Wildwood switched to a state charter June 29. The New Jersey Department of Banking and Insurance quickly issued a press release with Crest, praising the move and urging others to join. Other state regulators are reluctant to promote themselves.
"It's not state vs. federal," said Tennessee Commissioner Greg Gonzales. "When a federally chartered institution makes a request, we want to provide all the information they need to make a good business judgment … that may be with a federal charter or the state."
Tennessee has averaged a conversion each year for the past eight years, Gonzales said.
On Thursday, First Advantage Bancorp in Clarksville, Tenn., said its thrift converted to a state charter and that it plans to apply with the Federal Reserve to become a bank holding company.
"The state regulator is more knowledgeable of our market," said Earl Bradley 3rd, the CEO of First Advantage. "While specific fees are not that significant, it's the hidden cost of training or educating an unfamiliar set of eyes like the OCC who would be very unfamiliar with Clarksville."
Nearly every federally chartered thrift that went to a state charter said concerns about Dodd-Frank as a reason for converting. OCC representatives have publicly asked OTS-regulated institutions to go through one examination before switching charters. So far, most have taken the advice.
"In this period of turmoil, all banks are considering whether they have the optimal charter," Weissman said. "Our advice is not to make a change … and wait until the smoke clears, because once you make the change it's hard to go back."
