AMERICAN HERITAGE BANK
September 17,
2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: RIN Number 3064-AC50-FDIC Proposed Increase in the
Threshold for the Small Bank CRA Streamlined Exam
Dear Mr. Feldman:
I’m writing to express our bank’s strong support for
the FDIC’s proposal to increase the threshold for the streamlined
small bank CRA examination to $1 Billion, without regard to the size
of the bank’s holding company. Even though this proposal would
only have a direct impact on 14 Oklahoma banks, we believe it’s
something that’s needed, both in Oklahoma and across the nation.
Contrary to the political spin by consumer groups, this proposal
does not remove or exempt banks below $1 Billion from their CRA requirements.
It will, however, reduce some of the costs smaller banks face in
trying to live up to the same standards for CRA purposes that are
imposed on large, money-center or regional multi-billion dollar banks.
More to the point, it makes no sense to apply the same standards
to small, community banks and to banks the size of J.P. Morgan-Chase,
for CRA or any other purposes for that matter.
We join with the American Bankers Association in supporting the
addition of a community development criterion to the small bank examination
for larger community banks. However, we believe the FDIC should adopt
its original $500 Million threshold without a Community Development
(CD) criterion.
The new CD criterion
should be applied only to banks greater than $500 Million up to
$1 Billion.
In our state that’s six banks.
Community banks up to $500 Million now hold about the same percent
of overall industry assets as community banks up to $250 Million
did a decade ago when the revised CRA regulations were adopted, so
this adjustment in the CRA threshold is appropriate.
As FDIC examiners
know, it’s been difficult for small banks,
especially those in rural areas, to find appropriate CRA qualified
investments in their communities. Many small banks have had to make
regional or statewide investments that are extremely unlikely to
ever benefit the bank’s own communities or its own customers.
It seems clear to us that such a requirement makes absolutely no
sense, and could not have been intended by Congress when it enacted
the Community Reinvestment Act so many years ago.
Importantly,
we strongly oppose making the CD criterion a test that’s
separate from the bank’s overall CRA evaluation. Such differentiation
creates the impression that CD lending is different from providing
credit to the entire community. The current small bank test considers
the institution’s overall lending in its community, as it should.
The addition of a category of CD lending (and services to aid lending
and investments as a substitute for lending) fits well within the
concept of serving the whole community. A separate test would create
an additional CD obligation and regulatory burden, eroding what we
believe to be the intent of the streamlined exam.
Finally, we strongly
support the FDIC’s proposal that would
change the definition of “community development” to include
rural residents and not just focus on low- and moderate-income area
residents. This change will go a long way toward eliminating distortions
in the current regulations that result in a small rural bank being
told to invest in regional affordable housing bonds for an urban
area not in the bank’s community.
Sincerely,
Bill Berry
Chief Executive Officer and
Chairman of the Board
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