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FDIC Federal Register Citations
Weymouth Bank

From: James Golden [mailto:james.golden@weymouthbank.com] 
Sent: Tuesday, March 14, 2006 12:43 PM
To: Comments 
Cc: Robert Terravecchia 
Subject: 2006-01 - Commercial Real Estate Lending, Sound Risk MgtPractices--01/13/06 

March 14, 2006

Mr. Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
Attention: Comments
550 17th Street NW
Washington, DC 20429

Dear Mr. Feldman:

As a community banker, I am extremely concerned about the impact that the recently proposed guidance on sound risk management practices related to commercial real estate lending will have on small community banks. As this proposed guidance has noted, commercial real estate lending has become a significant part of many small community banks overall loan portfolios. While it is a prudent step for the regulatory agencies to place greater emphasis on insuring that all banks have proper policies and oversight procedures in place to manage this line of business, I believe that the guidance places an undue burden upon smaller banks in meeting these proposed requirements.

The proposed guidance states that the regulatory agencies are reinforcing their existing regulations associated with real estate lending and safety and soundness practices. To meet the requirements of the previously issued regulations associated with CRE lending, my bank and many others in Massachusetts have invested significant resources in the area of commercial real estate lending. Our investment has included the addition of experienced personnel in the areas of CRE lending underwriting, servicing, analysis and portfolio review. My bank's commercial loan portfolio, policy and procedures have been reviewed during safety and soundness examinations performed by the FDIC and Commonwealth of Massachusetts Division of Banks. These regulatory agencies have found very few material deficiencies related to our lending practices and procedures. In addition, when areas in need of improvement have been noted during these examinations, the bank has taken appropriate action to correct these deficiencies.

In the case of my bank, a mutual institution, our ability to generate additional capital is limited to our earnings. The language contained in the proposed guidance which limits the amount that may be invested in certain areas of CRE lending based upon the bank's capital level would essentially end our participation in these lines of business. Our exit from these CRE lending lines of business would severely limit our ability to generate increased earnings in an extremely competitive banking market. In addition, the competitive environment that has existed between small, mid size and large banking institutions would be greatly impacted thereby creating a situation that could adversely affect the economies of the communities that we serve.

My bank has fully examined the level of risk associated with these CRE lending lines of business. The bank's senior management team and board of directors are comprised of seasoned business professionals who have an in depth knowledge of the communities we serve. To take the approach of limiting the amount a bank may invest in certain CRE lending opportunities based solely upon the bank's capital level would completely ignore the "Know Your Customer" principles and sound underwriting and credit analysis practices that small community banks have come to rely on when making lending decisions. I would hope that the regulatory agencies would take all factors that may affect the level that a bank may participate in CRE lending opportunities into account when developing guidance on this subject.

Thank you for considering my views on this proposed guidance.

Sincerely,

James Golden
Vice President
Weymouth Bank
744 Broad Street
East Weymouth, MA 02189



Last Updated 03/15/2006 Regs@fdic.gov

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