Shelby
County State Bank
March 11, 2004
Robert E. Feldman, Exec. Sec. FDIC
Re: Community Reinvestment Act Regulations
Dear Mr. Feldman:
As a community banker, I strongly endorse the federal
bank regulators’ proposal
to increase the asset size of banks eligible for the small bank
streamlined Community Reinvestment Act (CRA) examination from $250
million to
$500 million and elimination of the holding company size limit
(currently $1 billion). This proposal will greatly reduce regulatory
burden.
I am a Vice President and Office Manager of Shelby County State
Bank, a $200 million bank located in Harlan, Iowa.
The small bank CRA examination process was an excellent
innovation. As a community banker, I support the agencies for recognizing
that
it is time to expand this critical burden reduction benefit to
larger community banks. At this critical time for the economy, this
allows
more community banks to focus on what they do best-fueling America’s
local economies. When a bank must comply with the requirements
of the large bank CRA evaluation process, the costs and burdens
increase
dramatically. And the resources devoted to CRA compliance are resources
not available for meeting the credit demands of the community.
For example, in our bank, we estimate the services required in
complying
with large bank CRA require 75% of a full time loan administrator.
Eliminating the holding company size limit also more
accurately reflects significant changes and consolidation within
the banking
industry in the last 10 years. To be fair, banks should be evaluated
against their peers, not banks hundreds of time their size. The
proposed change recognizes that it’s not right to assess the
CRA performance of a $500 million bank or a $1 billion bank with
the same exam procedures
used for a $500 billion bank. Large banks now stretch from coast-to-coast
with assets in the hundreds of billions of dollars. It is not fair
to rate a community bank using the same CRA examination. And, while
the proposed increase is a good first step, the size of banks eligible
for the small-bank streamlined CRA examination should be increased
to $2 billion, or at a minimum, $1 billion.
Our bank is part of a larger holding company and therefore subject
to this burdensome regulation. Nearly two years ago our bank was
required to begin compliance with large bank CRA. Since then, we
have spent thousands of dollars and countless hours complying with
the special rules of large bank CRA. Serving a rural market in Western
Iowa, the vast majority of our loans (over 99%) fall into the same
income category. This being the case, there is no benefit derived
from compiling all this mostly identical data. The purpose of large
bank CRA is lost in small rural markets such as our own.
Increasing the size of banks eligible for the small-bank streamlined
CRA examination does not relieve banks from CRA responsibilities.
Since the survival of many community banks is closely intertwined
with the success and viability of their communities, the increase
will merely eliminate some of the most burdensome requirements.
In summary, I believe that increasing the asset-size of banks eligible
for the small bank streamlined CRA examination process is an important
first step to reducing regulatory burden. I also support eliminating
the separate holding company qualification for the streamlined examination,
since it places small community banks that are part of a larger holding
company at a disadvantage to their peers. While community banks still
must comply with the general requirements of CRA, this change will
eliminate some of the most problematic and burdensome elements of
the current CRA regulation from community banks that are drowning
in regulatory red-tape. I also urge the agencies to seriously consider
raising the size of banks eligible for the streamlined examination
to $2 billion or, at least, $1 billion in assets to better reflect
the current demographics of the banking industry.
Sincerely,
Jay Fahn
Vice President
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