| First South Bank
From: Tim Ellis [mailto:timellis@firstsouthbancorp.com]
Sent: Tuesday, March 30, 2004 11:13 AM
To: Comments; regs.comments@federalreserve.gov
Subject: Community Reinvestment Act Regulations
Dear Sir or Madam:
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 the Compliance Officer of First South Bank,
a $252 million bank located in Spartanburg, South Carolina.
The small bank CRA examination process was an excellent innovation.
As a community banker, I applaud 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 will allow 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.
Adjusting the asset size limit also more accurately reflects significant
changes and consolidation within the banking industry in the past
10 years. To be fair, banks should be evaluated against their peers,
not banks hundreds of times their size. The proposed change recognizes
that it is 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.
Ironically, community activists seem oblivious to the costs and
burdens, and yet they object to bank mergers that remove the local
bank from the community. This is contradictory. If community groups
want to keep the local banks in the community where they have better
access to decision-makers, they must recognize that regulatory
burdens are strangling smaller institutions and forcing them to
consider selling to larger institutions that can better manage
the burdens.
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 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,
Timothy C. Ellis, Vice President
First South Bank
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