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First National Bank
March 22, 2004
Robert E. Feldman
Executive Secretary
Attn: Comments
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20420
Dear Robert,
As a community banker, I strongly endorse the federal bank
regulator's 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 President of First National Bank, a $490
million bank, located in Pierre, South Dakota.
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 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 - serving our communities
financial needs. 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 my Bank, the estimated costs to comply with CRA is over
$50,000 on an annual basis. The costs and resources used to comply could
better be spent improving our communities economy.
To be fair, banks should be evaluated against their peers, not banks
hundreds of time their size. The proposed change recognizes that it is
not right to assess the CRA performance of a $500 milion 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 of $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 small institutions and forcing them to consider selling to
larger institutions that can better manage the burdens.
Increasing the size of the 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,
Brent E. Dystra
President
First National Bank
Pierre, SD
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