Federal Deposit
Insurance Corporation

From: Patrick Antos [mailto:PAntos@RepublicEbank.com]
Sent: Tuesday, October 19, 2004 2:42 PM
To: Comments
Cc: Scott Nolan; Cathy Crowley; Frank Kurzawa; Jim Adkins; Spero Cantos; Tom Longino; William H. Sperling
Subject: Community Reinvestment -- RIN 3064-AC50

October 19, 2004

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

RE: RIN #3064-AC50

Dear Mr. Feldman:

We would like to voice our support in favor of the changes you are proposing to increase the large bank designation to 1 billion dollars. The banking environment has changed dramatically since the enactment of the Community Reinvestment Act. With the increase in competition and the consolidation of banks to larger regional banks, the average size of the large bank is considerably higher than $1 billion. It is well established in the banking industry that you are a small bank if you are under a billion dollars in assets. In 1994 the number of banks that were under a billion in assets was 12,427. In 2003 there were only 8,676; a reduction of 3,751 or 30 percent. While the number of institutions that are over the 10 billion mark has risen to 110, up from 64 in 1994 or a 60% increase. The FDIC issued a press release accompanying the notification of comments, which spoke of this consolidation in the industry.

In summary, on an industry-wide basis, while increasing the small institution size to $1 billion would result in a decrease in the percentage of institutions considered ``large,'' the percentage of industry assets held by large institutions would decrease to 85.1%--down from 86.2% when the $250 million level was adopted in 1995.

For some time now $1 billion in assets has been the industry benchmark for large and small banks. Making this change will only bring the Community Reinvestment Act up to date with industry standards.

More and more pressure is placed on smaller banks to compete with the large regional banks in their market. For banks to compete they have to become niche marketers. Yet under the current CRA, a $300 million asset bank must compete with a $30 billion asset bank and be held to the same scrutiny. Leaving the regulation as is will only force many small banks to consider selling to large regional banks, due to the economics of trying to compete for the investments with large regional banks. A bank of $300 million in assets cannot compete with a bank that has assets of $3 billion or $30 billion in assets. Small banks are left with taking on riskier investments to meet the large bank criteria. If the regulations remain as is, then small banks will have no choice but to merge with larger banks to avoid going under, or receive unfavorable CRA evaluations and risk not being able to grow.

The impact of more community based financial institutions consolidating will have an undesirable effect on the communities they serve. Small banks are the link many low and moderate-income individuals have with the banking industry. These individuals will not gain access to credit from the mega banks as they would from their small community financial institution in their area. Small community banks will compete for the dollars in their community because it makes business sense to do so. In communities that are thriving, it is in part due to the small banks in that area. Your small bank is better able to work in partnership with local community groups to help achieve the stability the areas need.

With some community groups it is hard to make an impact within your community as a small bank because the funds invested by the mega banks are substantially higher. The price of a seat on a board is far too high. In some cases community groups do not want input from banks. They are using the Community Reinvestment Act as a tool for finding the quick influx of cash, and will see which banks are going to soon have there evaluation to seek donations. These groups are not looking for input unless the donation is substantial. They can do this because the mega banks give larger investments than a small bank can. The best thing for the community is for these groups to work in partnerships with small community banks. They have a personal interest in seeing the neighborhood safer and stable just as the small community banks do. They both live in the neighborhoods they serve.

Raising the requirements to $1 billion will allow small banks to compete fairly with similar institutions. Small banks have and will continue to invest in the communities they are in because it makes sound business sense to do so. Being forced to compete with larger institutions will only cancel the hard work of small banks to compete, and will consolidate the industry further. This will lead to a negative impact on the communities that the Act was designed to help.

As an institution, we understand our role in the development of low and moderate-income areas we serve. We should be accountable for that. But we should be on equal scale to other institutions. A $30-billion multi state bank is not the same as a 9 location $300 million one state bank.

Again, we thank you for the opportunity for allowing us to express our thoughts. We are available for further discussion as needed.

Sincerely,

Pat Antos
Vice President

Scott Nolan
Vice President

William H. Sperling
President & CEO

Republic Bank
1510 75th St. Darien, IL 60561
phone: 630.241.4500 Fax: 6302410434
republicEbank.com