BANK OF KANSAS CITYSeptember 10, 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 or Madam:
I am President and C.E.O. of Central Bank of Kansas City, located
in urban core of Kansas City, Missouri. My bank is $130 million
in assets. 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. Even though we would not
currently be affected by the proposal, we have a good capital base and
plan to grow significantly into the future. Thus, increasing the
threshold levels would definitely be advantageous to our bank as well
as being within the spirit of the Economic Growth and Regulatory
Paperwork Reduction Act compliance.
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.
Our bank is a certified Community Development Financial
Institution. We have seven branches, soon to have eight, and
four of them are located in and serve a distressed community.
This location and commitment to our LMI population has helped us to
earn a rating of Outstanding for the past three CRA examinations.
Even though we are under the streamlined rules, due to our size, our
commitment to the community has not lessened. In fact, we
continue to receive accolades regarding our service to the community.
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.
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,
William M. Dana, Jr.
President & C.E.O.
Central Bank of Kansas City
2301 Independence Blvd
Kansas City, MO 64124
