Shelby County State Bank
March 9, 2004
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
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 the President and CEO 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 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. For example, in my
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 times 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 $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 spend 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
Roger E. Claypool
President & CEO
Shelby County State Bank
Harlan, IA
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