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CENTRAL STATE BANK
From: Dennis McDonald
[mailto:dennis.mcdonald@centralstate.com]
Sent: Friday, April 02, 2004 11:19 AM
To: Comments
Subject: Comments on CRA Revisions
Dennis McDonald
414 Hogan Court
Muscatine , Ia 52761
April 2, 2004
Dear FDIC:
I am writing on behalf of Central State Bank, a state-chartered bank
located in Muscatine Iowa. Our customer base is a mix of blue collar
manufacturing, white collar executive and rural agriculture with lending
activities that are broad based and include commercial, consumer and
real estate lending. Our current asset size is $275,000,000 with a loan
portfolio of $140,000,000. We applaud and appreciate the proposed
amendments to the Community Reinvestment Act being made by the Office of
Comptroller of the Currency, Federal Reserve Board, Federal Deposit
Insurance Corporation and Office of Thrift Supervision, “the Agencies.”
We also appreciate the Agencies’ recognition and understanding of the
challenges faced by community banks in meeting the requirements of the
ever-growing number of compliance regulations.
Increasing the asset size of banks eligible for the small bank CRA
exam from $250 million to $500 million and eliminating the holding
company size limitations will go along way in reducing the regulatory
burden of many small banks, including my institution. It is ridiculous
to compare a bank with three branch locations and total assets of $275
million to a bank with hundreds of locations and billions of dollars in
assets under the same exam process. Small banks simply do not have the
resources (money, manpower, technology) to compete with these large
institutions under the large bank test. To many times a community bank,
that has served its local community well, is not afforded the
recognition it deserves simply because it is compared with huge
multi-million dollar organizations. Just as the community investment
abilities of small and large banks differ, so do the needs of the small
and large communities they serve. The ripple affect of smaller dollar
projects in a rural community may far outweigh a multi-million dollar
investments’ impact a metropolitan area, yet the small community bank’s
CRA rating often does not reflect this.
The reporting requirements under the large bank CRA exam process are
staggering for a small bank. Our time and cost of CRA compliance more
than doubled since we became a "large bank" a year and half ago. Under
the current rules, due to our state’s rural population our institution
is not a HMDA reporter because it is not located in a MSA, but is still
subject to the large bank CRA test and data collection because our
assets are in excess of $250 million. While community banks still must
comply with the general requirements of CRA, this asset-size increase
will eliminate some of the most problematic and burdensome elements of
the current CRA regulation.
I also support the elimination of the bank holding company asset size
threshold. We are the lead bank in a $550,000,000 bank holding company
(Central Bancshares, Inc.) We have four banks within a 75 mile radius
that maintain their own charter, local Board of Directors, management
and operational processes. As CEO of the holding company, it is my
philosophy to select strong board members, hire competent management and
let the bank serve its local market as they see necessary to respond to
their local communities needs. We do not have common names, common
products or commonmarketing. We are a family owned organization and
expect to continue to expand in this way. It is likely we will be over
$1 Billion in a few years. Three of our four banks are under
$250,000,000 and to require these banks to deal with the regulatory
burden under the large bank CRA rule just because we have grown over $1
Billion in assets is absurd. They would“inherit” the regulatory
requirements of the holding company but would not benefit from the
holding company’s resources (we have no employees at the holding company
and it is my intentions to keep it that way) for complying with these
requirements.
Increasing the size of banks eligible for the small-bank streamlined
CRA exam does not relieve banks from CRA responsibilities. The growth
and survival of the bank is intertwined with the growth and survival of
the community. We would not have grown to have the largest deposit base
in Muscatine county if we had not been responsive to the needs of our
customers. The change merely reduces the reporting requirements and
costs for a small bank, freeing up more time and money that can be
better spent in service to the Muscatine community.
Today’s community banks are drowning in regulatory red tape,
utilizing valuable resources to meet regulatory compliance mandates that
could be put to much better use for economic and community development
purposes in the communities they serve. Thank you for recognizing this
and proposing the changes to the Community Reinvestment Act.
Sincerely,
Dennis McDonald
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