My bank is just approaching the $500 million mark. We have historically had a primarily internal board. With the new FDICIA guidelines we need an audit committee comprised of outside directors. These directors do not need to meet the "independent of management" requirement. My question is - would it be worth it for us to apply to our regulator for a hardship to not have outside directors on the audit committee? My take on reading the new rule and comments is that the hardship exemption is not something the regulators really want to deal with. The feeling I got when reading the comments, etc with the new rule is that the regulators expect a 1 or 2 rated management to come up with an outside audit committee. (We are in a metropolitan area.) Our management doesn't see that we've had any problems with an internal audit committee, and we would like to avoid that if possible. Does anybody see an out for us?

I agree with your assessment that if you are located in a metropolitan area, I think you are going o be hard pressed to receive an exemption. I would start recruiting if you really don't have any current outside directors that could foot the bill.

I agree as well. A metropolitan bank will not receive a hardship exemption. Show them the rules for a publically traded "Sarbox" bank as an example of how what you need isn't nearly as bad as it could be.