Federal Deposit
Insurance Corporation

October 5, 2004

Robert E. Feldman
Executive Secretary
Attention: Comment/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW.
Washington, DC 20429

Re: RIN # 3064-AC50

Subject: Proposed Revisions to the Community Reinvestment Act Regulations

Dear Mr. Feldman,

I am the Marketing Director for Northrim Bank, headquartered in Anchorage, Alaska. We have 10 locations in four communities in Alaska with total assets of $739 million.

I am writing to you to express my support for the FDIC’s proposal to change the definition of a “small bank” by raising the large bank asset size to $1 billion, regardless of the size of a bank’s holding company. I also support the inclusion of a community development criterion in the small bank test, but oppose the addition of a separate community development test.

We used to manage CRA in the Marketing Department until we became subject to the large bank CRA exam and much more extensive data reporting requirements. Then, it became a full time compliance position within our bank due to the additional tracking and recordkeeping required.

The overall regulatory burden on small banks continues to grow. As we explain to our customers, we are in business to loan money. It is frustrating as a community bank, with fairly limited resources, to have to dedicate resources to CRA tracking that could be put into lending and meeting the needs of our community. It is difficult to comply with the numerous large bank CRA requirements—both in terms of time and budget.

In moving from a small bank to a large bank for the purposes of CRA, our donations that are targeted to low and moderate income individuals and small business people don’t seem to receive the same weight they use to in the evaluation process, and yet they are an important way we can serve those segments of our communities. With few opportunities for community development loans in a state our size, they are an excellent way of getting needed resources out into the community where we do business.

We believe that a community bank’s role is to meet the credit needs of its community. Our efforts are focused on attracting customer deposits, building long-term relationships, and loaning money back out to help strengthen our local communities. The small bank CRA exam accurately captures the information so that examiners can assess whether we, as a community bank, are helping to meet the credit needs of the communities where we do business.

We think the small bank CRA test is a great improvement, but we don’t believe it should be limited to only those banks with less than $250 million in assets. In the US today, even banks with assets of $500 million to $1 billion often have only a small number of banking locations. There is a huge difference between the resources of the mega banks (and mega credit unions I might add) and the resources that banks like Northrim Bank have available.

This proposal is an important a major step toward reducing the compliance burden on smaller banks. We don’t believe that this change would reduce the number or quality of small business and affordable housing loans that we make. In addition, according to our Compliance Officer, it would reduce our bank’s staff burden by one-fourth to one-half of an officer level position and it would also eliminate the bank’s need for an annual subscription to CRA data management software. It is estimated that it could save our bank up to $25,000 per year.

We also support the addition of community development criteria to the small bank exam for banks over $500 million. The current small bank test looks primarily at lending, and adding community development lending (and services to aid lending and investments as a substitute for lending) to the exam seems to fit well within the goal of serving the entire community. However, our bank does oppose the idea of adding a separate community development test, as it would seriously negate any regulatory relief gained by the streamlined exam and it would compound the complexity of measuring the relative value of loans vs. investments vs. services. It would also create the impression that community development lending is different from the provision of credit to the entire community. We have a hard time finding qualified investments of the size and complexity expected by our CRA examiners in our communities. And those few that are available are difficult to participate in because we have to go head to head with much larger institutions.

In conclusion, I am asking you to support changing the definition of “small bank” to include those with assets of $1 billion or less. We also hope you will eliminate the separate holding company qualification for the small institution examination.

Sincerely,

Lori Philo-Cook
Senior Vice President
Northrim Bank
Northrim BanCorp Inc.

Cc: The Honorable Alan Greenspan
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551