NORTH DAKOTA BANKERS ASSOCIATION
September 16, 2004
Robert Feldman
Executive Secretary
Attention: Comments/Legal ESS Via Email Only
Federal Deposit Insurance Corporation comments@FDIC.gov
RE: RIN number 3064-AC50
Dear Mr. Feldman:
The North Dakota Bankers Association (“NDBA”) appreciates this
opportunity to submit additional comments regarding the proposal to
change the definition of “small bank” to raise the asset size threshold
to $1 billion irrespective of affiliation with a holding company and to
make additional changes to the community development activity criterion
for streamlined CRA evaluation. NDBA is a financial institution trade
association. Our members are banks and federal thrift associations which
operate offices throughout North Dakota. All but one NDBA state
chartered bank members would be “small banks” if the threshold is raised
to $1 billion.
North Dakota is among the most rural states in the United States. In
our state there are only three Metropolitan Statistical Areas (Bismarck,
Fargo and Grand Forks) and only one combined Metropolitan/Micropolitan
Statistical Area (Fargo-Wahpeton). North Dakota banks exemplify
community banking and service; they have established over 400 branch
offices to provide financial services in even the very smallest
communities. NDBA could not more strongly support the FDIC’s proposal to
provide North Dakota banks with meaningful relief from regulatory burden
by defining banks of less than $1 billion in assets as small banks for
CRA examination purposes.
Most North Dakota state chartered banks are small banks under the
current definition. However, several are pushing the $250 limit and
others are between $250 million and $1 billion in assets. These banks
are all growing for a variety of reasons including expansions via new
branch offices and consolidation. For banks that are nearing the $250
million threshold, the effect of a failure to increase the small bank
threshold is clear. Even before they lose small bank status, they must
begin to reallocate resources away from community lending to gear up for
expanded CRA documentation and reporting. The proposed change in
definition keeps these small banks’ attention and resources involved in
community lending, instead of diverting them to compliance. For banks
over $250, but under $1 billion in assets, the effect of the change is
equally promising. Restoration to small bank status will allow them to
reallocate money and manpower back to providing financial services and
lending in their service areas.
North Dakota bankers very much appreciate the new focus on service to
rural residents as a separate matter from urban community development
and low and moderate income housing is. Too often small banks have had
to look past their own communities to investments that promote regional
community
development project and qualify for positive CRA consideration, but
which, in actuality promote progress for urbanites, instead of the
banks’ own community. Accordingly, NDBA is extremely enthusiastic about
the proposal to include services to rural residents to the definition of
“community development”. This change is an overdue recognition that the
provision of banking services and lending to rural residents is critical
community development and unsurpassed as a method for keeping rural
communities viable and vital.
We urge FDIC to adopt a common sense and guidance based approach to
assess whether a bank is providing service to rural residents and to
accord substantial deference to a bank’s judgment and strategies for
serving rural residents. In this vein, we suggest that the delineation
of this new category of community development be made through
descriptions of activities which will not be deemed to be service to
rural residents. This approach adheres to current regulatory practice
regarding undesirable or unacceptable practices for financial service
for consumers and would make it clear that this new category of
community development is not met, for example, by programs for financing
a second, country homes for the affluent.
At this time we oppose making community development a separate
component of the small bank CRA evaluation for small banks under $250
million because that would impose a regulatory burden which has not been
demonstrated to be needed. In North Dakota, banks work very hard to
achieve an “outstanding” CRA ratings and a substantial percentage of
them have succeeded. North Dakota banks have long exhibited their
commitment to lending and other community development activities without
extra regulatory prodding. North Dakota banks invest in community
lending and development because that is the business they are in and
because investments in community development through lending and
otherwise is what keeps the bank in business. We are also concerned that
making “community development” a separate examination item for banks
under $250 million in assets distorts the purpose of CRA, encouraging
local lending, and will cause the banks to conclude they must look to
“community development” actions other than lending to meet their CRA
obligations. This would be wrong and actually detrimental to rural
community development. Our banks have only so many resources to go
around and each separate regulatory burden which is placed on them
consumes those resources. In short, adding “community development” as a
separate CRA criterion for banks under $250 million in assets will have
no beneficial effect in North Dakota. It will simply increase regulatory
burden for most of our banks and decrease the resources for community
lending.
Frankly, NDBA believes that the addition of a separate small bank
community development criterion is demonstrably unwarranted for North
Dakota banks and will have the effect of deflecting our banks’ attention
from lending in the communities of our state- the conduct CRA was
intended to encourage. Here, the reality is that banks which have
started out in small communities and which have developed successful
strategies for growth within North Dakota are one reason our smallest
communities have bank branch offices to serve residents. The FDIC web
site does not report one single North Dakota bank as having received a
CRA rating below satisfactory. This is the most concrete evidence
available that the banks themselves are in the best position to
determine how to effectively and efficiently meet their CRA obligations.
However, if FDIC is committed to the concept of adding a separate
community development test to the small bank CRA examination in tandem
with an increase in the small bank threshold, we suggest a graduated
approach under which a new and separate criterion applies separately
only to banks over $500 million. Banks which are now between $500
million and $1 billion are presently equipped and staffed for CRA
compliance under the large bank standards and could adjust to this new
approach to the small bank examination standards while still obtaining
substantial regulatory burden relief. Additionally, the imposition of an
intermediate level of CRA burden on community banks over $500 million
would leave the same percentage of bank assets subject to full CRA
burden as existed when the regulations were last revised about ten years
ago.
In summary, NDBA applauds the decision by FDIC to reconsider the
small bank threshold and its recognition that CRA regulations are
responsible for a significant and counter productive regulatory burden
on North Dakota’s community banks. We also are thrilled that our banks
now have an opportunity to receive relief from regulatory burden similar
to that which the OTS has already provided to thrift associations. In
this endeavor to give meaningful regulatory relief to community banks,
we urge the FDIC to base its decisions on the facts as they relate to
FDIC regulated community banks, not urban mega-banks. Substantial
regulatory relief to North Dakota’s banks will directly benefit our
communities and their banks and should be boldly implemented without
delay.
Thank you for consideration of our comments on this important
initiative.
Sincerely Yours,
North Dakota Bankers Association
James Schlosser
Marilyn Foss
Executive Vice President General Counsel
120 North Third Street, Suite 200 PO Box 1438 Bismarck ND
58502-1438
Telephone (701) 223-5303 Fax: (701) 258-0218 Email: ndba@ndba.com
