SPIRIT BANK
September 17, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold for
the
Small Bank CRA Streamlined Examination
Dear Sir:
I am the Compliance Officer of SpiritBank with our Head Office
located in Tulsa, Oklahoma with a population of 387, 807. The Bank has
branches in nine other towns within the state. Five of the branches are
located in towns, with populations ranging from less than 8,510 to 568
residents. My bank has total assets of $592,749,966.00 and is already
subject to large bank CRA exams. I am writing to strongly support the
FDIC’s proposal to raise the threshold for the streamlined small bank
CRA examination to $1 billion without regard to the size of the bank’s
holding company. This would greatly relieve the regulatory burden
imposed on many small banks such as my own under the current regulation,
which are required to meet the standards imposed on the nation’s largest
$1 trillion banks. I understand that this is not an exemption from CRA
and that my bank would still have to help meet the credit needs of its
entire community and be evaluated by my regulator. However, I believe
that this would lower my current regulatory burden by 192 man hours a
year which is the equivalent of 24 days a year or two days a month spent
on geo-coding coding and input of data.
I also support the addition of a community development criterion to
the small bank
examination for larger community banks. It appears to be a significant
improvement over
the investment test. However, I urge the FDIC to adopt its original $500
million threshold
for small banks without a CD criterion and only apply the new CD
criterion to community
banks greater than $500 million up to $1 billion. Banks under $500
million now hold about
the same percent of overall industry assets as community banks under
$250 million did a
decade ago when the revised CRA regulations were adopted, so this
adjustment in the CRA
threshold is appropriate. As FDIC examiners know, it has proven
extremely difficult for
small banks, especially those in rural areas, to find appropriate CRA
qualified investments in
their communities. Many small banks have had to make regional or
statewide investments
that are extremely unlikely to ever benefit the banks’ own communities.
That was certainly
not intent of Congress when it enacted CRA.
Examiners in our last exam noted that the Bank’s level of community
development was satisfactory for our asset size and considering
demographics. But none of the Development loans made benefited the
nonmetropolitan assessment area of the Bank. The Bank received an
Outstanding rating for its’ efforts for being a leader in and helping to
meet the credit needs of its entire assessment area which included low
and moderate income neighborhoods and loans made in our rural markets.
An additional reason to support the FDIC’s CD criterion is that it
significantly reduces the
current regulation’s “cliff effect.” Today, when a small bank goes over
$250 million, it must
completely reorganize its CRA program and begin a massive new reporting,
monitoring and
investment program. If the FDIC adopts its proposal, a state nonmember
bank would move
from the small bank examination to an expanded but still streamlined
small bank
examination, with the flexibility to mix Community Development loans,
services and
investments to meet the new CD criterion. This would be far more
appropriate to the size
of the bank, and far better than subjecting the community bank to the
same large bank
examination that applies to $1 trillion banks. This more graduated
transition to the large
bank examination is a significant improvement over the current
regulation.
I strongly oppose making the CD criterion a separate test from the
bank’s overall CRA
evaluation. For a community bank, CD lending is not significantly
different from the
provision of credit to the entire community. The current small bank test
considers the
institution’s overall lending in its community. The addition of a
category of CD lending (and
services to aid lending and investments as a substitute for lending)
fits well within the
concept of serving the whole community. A separate test would create an
additional CD
obligation and regulatory burden that would erode the benefit of the
streamlined exam.
I strongly support the FDIC’s proposal to change the definition of
“community
development” from only focusing on low- and moderate-income area
residents to including
rural residents. I think that this change in the definition will go a
long way toward
eliminating the current distortions in the regulation. We caution the
FDIC to provide a
definition of “rural” that will not be subject to misuse to favor just
affluent residents of rural
areas. The Bank is the largest corporate citizen in most of the towns
and surrounding areas that make up our rural markets. SpiritBank
provides products and services, including consumer, consumer real
estate, small business and agriculture loans that allow residents living
and working in these communities to invest and put money back into their
towns and surrounding rural areas. Partly, because of the Bank’s efforts
to be an active part of and to serve its’ communities from our largest
to our smallest with just 568 residents the towns or cities in which we
have branches including our rural markets will have maintained or grown
in the number of residents as suggested by the U.S. Census Bureau
population estimates as of July 1, 2003. Lending in our rural markets
clearly meets the CRA goal of lending to the entire community.
In conclusion, I believe that the FDIC has proposed a major
improvement in the CRA
regulations, one that much more closely aligns the regulations with the
Community
Reinvestment Act itself, and I urge the FDIC to adopt its proposal, with
the
recommendations above. I will be happy to discuss these issues further
with you, if that
would be helpful.
Sincerely,
Ms. Pat Hooks
Compliance Officer
SpiritBank
