Last week’s announcement by Equity Bank that it is abandoning its national bank charter for a state one might suggest development of a trend.
The $605 million, Andover-based bank is the largest bank headquartered in the Wichita area to announce a change in charters in several years. And Equity’s move follows that of smaller and larger peers based or doing business in the area. Last fall, Derby-based Verus Bank converted its charter from national to state. More significantly, Kansas City, Mo.-based Commerce Bank, a $20 billion super-regional bank, quietly converted its national charter to a Missouri charter last June.
Kansas bank officials suggested there could be more national-to-state charter conversions ahead as banks weigh the costs and benefits of maintaining a national charter.
“We are hearing some national banks are considering a charter change, but until they actually write a letter … then there’s really nothing for us to act on,” said Kansas bank commissioner Ed Splichal, whose agency issues state bank charters.
Bankers said a national bank charter used to make it easier for a bank to branch into other states and to make mortgage loans in locales where it didn’t have an office. But they contend that the broad Dodd-Frank Wall Street Reform Act changed all that. Under the reform, a state bank can establish a “de novo” or new branch without buying a bank charter or acquiring another bank based in a state where it wants to expand. That’s true for states that permit in-state branching by its own banks, said Dean DeBuck, a spokesman for the Office of the Comptroller of the Currency, in an e-mail. The OCC is the regulator of nationally chartered banks.
“The changes with Dodd Frank are clear today and so the value of being a national bank has really changed over the last year,” said Equity chairman and CEO Brad Elliott.
Banks such as Equity and Commerce were also looking to consolidate regulatory oversight. At each institution, their holding companies were regulated by the Federal Reserve and the banks by the OCC. With a state charter, the Fed oversees the holding company and the bank.
“It just felt like it would be clearer if we had the same entity at the holding company level and at the bank level,” said Chuck Kim, chief financial officer of Commerce Banschares, the holding company of Commerce Bank. “We just thought this was a good opportunity.”
An even bigger factor in the charter conversion decision is the cost difference between a state and national charter, bankers said. Banks are charged annual fees, or assessments, to operate a charter. The amount of the assessment is based on how much assets a bank has. Bankers said assessments for Kansas and other state charters are cheaper than for national charters. It’s something that the Kansas Office of the State Bank Commissioner touts on its website.
Kim, of Commerce, wouldn’t provide an exact figure, but said the savings of operating under a state versus national charter was “in the seven figures.”
Elliott said Equity will save $100,000 annually.
And Kevin Chase, CEO of Verus Bank, told The Eagle last year that his bank would save about $30,000 converting charters.
“In this environment, where there’s a lot of regulatory costs, we’re trying to save money everywhere we can,” Kim said. “It’s a significant savings for us in dollars.”
He said Commerce will also save money on staff time “with a simpler, regulatory framework.”
The numbers of charter conversions over the past five years aren’t that impressive. Last year there were three charter conversions in Kansas. The year before that there was one. And in 2009 there were three. That’s according to data from the state bank commission.
Still, there appears to be an increase in at least the number of queries Kansas banks are fielding about changing charters.
Splichal, the bank commissioner, said commission staff have even made visits to some of those banks that are expressing an interest in becoming a state bank
“When we do that there’s no commitment on a bank’s part to convert charters,” he said.
The commission would benefit from more state-chartered banks since those fees support the agency.
“I think Dodd Frank broke down some of the advantages that being a national bank brought,” Splichal said. But he said his agency is careful not to be boastful about those changes and their effect on charters.
When asked if the OCC has seen any changes in the number of nationally chartered banks, DeBuck said there are about 25 national bank to state bank conversions per year.
Intrust Bank, the area’s largest, locally based bank, has been evaluating its national charter in light of changes brought by Dodd-Frank, said Lyndon Wells, public affairs division director.
“We’re trying to understand the value of being a national bank,” he said.
Wells said an evaluation of the bank’s charter requires a “fair amount of analysis” and any decision will take some time. “No decisions have been made.”