Dime Savings Bank, like many other community banks, has filed to convert its federal bank charter to a state charter in reaction to heightened regulation. Customers are right to worry about how they may be impacted, but the change has little to no effect on customer accounts.

The charter conversion shifts the responsibility of regulation from the Office of the Comptroller of the Currency (OCC) to the New York State Department of Financial Services (NYSDFS) and the FDIC.

“We believe that our Bank is a uniquely New York institution, and would benefit from the insight and oversight of the NYSDFS, which is focused on the local New York community banks and financial institutions,” said Vincent F. Palagiano, chairman and CEO of Dime Savings, in prepared remarks.

The move by the Brooklyn, N.Y.-based bank, with more than $4 billion in assets and 26 branches in the New York metropolitan area, follows the path taken by community banks throughout the nation.

It all comes back to regulatory burdens.

Community banks run from federal charter

Earlier this month, San Antonio, Texas-based Frost Bank filed to convert its 113-year-old national bank charter to a state charter.

“With Dodd-Frank and with the new Consumer Protection Bureau and now the OCC taking on the regulation of thrifts … we just decided that it would be in our best interest to be closer to home,” Dick Evans, chairman and CEO of Frost Bank, told the Fort Worth Business Press.

Frost Bank holds $20.3 billion in assets with more than 30 locations in Texas.

First Advantage Bank of Clarksville, Tennessee, with $366 million in assets, completed the conversion from a federal bank charter to a state charter in early February.

“This is a positive change for the bank in light of the Dodd-Frank Act, which made certain changes that removed many of the benefits of operating under our former federal savings bank charter,” Earl O. Bradly, III, CEO of First Advantage Bank, said in a statement for the bank’s fourth-quarter 2011 earnings.

Enacted in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced a plethora of federal regulations for banks and many of its provisions have not been finalized.

Customers see little impact

The changes to bank charters usually have little to no effect on customer accounts.

The conversion “should not adversely affect our customers and will not affect the terms and conditions of our customers’ loans and deposit accounts,” said Palagiano.

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