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FDIC Federal Register Citations
Hometown Bank

From: Matt Sosik [mailto:msosik@hometowncoop.com] 
Sent: Tuesday, March 07, 2006 11:53 AM
To: Comments
Subject: 2006-01 - Commercial Real Estate Lending, Sound Risk Mgt Practices--01/13/06

Dear Sirs:

As CEO of a small, mutual bank in Massachusetts I am extremely concerned
about the implications of your proposed guidance on Commercial Real Estate
Lending.  CRE lending has been a staple of our balance sheet for many years.
The proposed guidance is very broad and allows for little flexibility in
applying it from one institution to the other.  As a small bank, I am very
concerned about the added burden this will place on our operation, an
operation already heavily weighed down by regulatory requirements.  We
strongly believe that our underwriting and risk management practices speak
for themselves.  In some way, we address each of the issues and areas
outlined in your proposal.  However, the "one size fits all" nature of your
guidance as proposed will require us to arbitrarily commit significant
additional resources to comply.

As a small bank, we maintain a one-on-one personal relationship with each of
our commercial borrowers.  We underwrite based on the merits of each loan
and the character of the borrower.  If a problem arises, we sit down with
each borrower and work out a plan.  We have suffered almost no loan losses
($28,000 in Commercial charge-offs over the last 10 years) using our
approach.  Obviously, we understand that our method of running a CRE
portfolio does not work for all (i.e. larger) institutions, but that is in
the same way that your proposed guidance does not work for all (i.e. small)
banks.

As a former FDIC bank examiner in the early 1990's I had first hand
knowledge of the examination approach at that time.  The examinations
focused on loan quality, risk management processes, and the strength of the
loan management team.  That focus was because loan quality was a critical
issue at that time.  If CRE is again a critical issue for the FDIC, why not
approach this subject by altering your proposed guidance into an "Alert and
Best Practices" document to inform banks that future examinations will once
again be focusing on loan quality and portfolio management issues.  In that
way, Banks can continue to manage their institutions as they see fit and the
FDIC can manage its examination focus as it sees fit.  As the FDIC uncovers
CRE issues in particular institutions, they will be handled by the
regulators appropriately I am sure.  In that way, the rest of us bankers
(the non-offenders) will not suffer under another debilitating layer of
regulation.

I appreciate the opportunity to respond to your proposed guidance.  Please
feel free to direct any questions to me via email.

Thank You,


Matthew S. Sosik
CEO & Treasurer
Hometown Bank, A Cooperative Bank




Last Updated 03/08/2006 Regs@fdic.gov

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