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FDIC Federal Register Citations
Tower Bank
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Email: Comments@FDIC.gov
Re: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold for
the Small Bank CRA Streamlined Examination
Dear Mr. Feldman:
I am CRA Officer of Tower Bank, located in Fort Wayne Indiana, which
is a city of approximately 205,727 residents. Tower Bank is a five-year
old community bank. Our assessment area is Allen County with an estimated
population of 331,849. The bank assets reached $473.6 million at June
30, 2004, a 16.4 percent increase over the $407.0 million reported
12 months ago. Tower had assets over $250 million for two consecutive
years in 2003, which was our first year to report CRA as a Large Bank.
We are currently engaged in the complete reorganization of our program
and preparation for our first Large Bank on Site review in December.
I am writing to strongly
support the FDIC's proposal to raise the threshold for the streamlined
small
bank CRA examination to $1 billion without
regard to the size of the bank's holding company. This would greatly
relieve the regulatory burden imposed on many small banks such as my
own under the current regulation, which are required to meet the standards
imposed on the nation's largest $1 billion banks. I understand that this
is not an exemption from CRA and that my bank would still have to help
meet the credit needs of its entire community and be evaluated by my
regulator. However, I believe that this would lower my current regulatory
burden by allowing the time and resources necessary (both human and financial)
to establish an efficient internal system to collect & compile data,
evaluate and implement a plan that supports my bank’s CRA Lending,
Investment and Services criterion for Large Bank Reporting. Our intent
is to provide outstanding financial services to the LMI community. The
opportunity to make a gradual transition into a Large Bank will reduce
the burdens unique to Small Community Banks with less than 500 million
dollars in assets. The cost for this transition is hard to determine
while we’re still in our first reporting cycle. The resources necessary
to make the transition are on going with staff, officers and consultants.
The greater cost cannot be determined until the exam is complete and
a permanent monitoring and reporting system has been designed, developed,
tested and implemented.
I also support the addition of a community development criterion to
the small bank examination for larger community banks. It appears to
be a significant improvement over the investment test. However, I urge
the FDIC to adopt its original $500 million threshold for small banks
without a CD criterion and only apply the new CD criterion to community
banks greater than $500 million up to $1 billion. Banks under $500
million now hold about the same percent of overall industry assets
as community banks under $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 has proven extremely 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 banks' own communities. That was certainly not
intent of Congress when it enacted CRA.
An additional reason to support the FDIC's CD criterion is that it
significantly reduces the current regulation's "cliff effect." Today,
when a small bank goes over $250 million, it must completely reorganize
its CRA program and begin a massive new reporting, monitoring and investment
program. If the FDIC adopts its proposal, a state nonmember bank would
move from the small bank examination to an expanded but still streamlined
small bank examination, with the flexibility to mix Community Development
loans, services and investments to meet the new CD criterion. This
would be far more appropriate to the size of the bank, and far better
than subjecting the community bank to the same large bank examination
that applies to $1 trillion banks. This more graduated transition to
the large bank examination is a significant improvement over the current
regulation.
I strongly oppose making the CD criterion a separate test from the
bank's overall CRA evaluation. For a community bank, CD lending is
not significantly different from the provision of credit to the entire
community. The current small bank test considers the institution's
overall lending in its community. 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 that would erode the benefit of the streamlined exam.
In conclusion, I believe that the FDIC has proposed a major improvement
in the CRA regulations, one that much more closely aligns the regulations
with the Community Reinvestment Act itself, and I urge the FDIC to
adopt its proposal, with the recommendations above. I will be happy
to discuss these issues further with you, if that would be helpful.
Sincerely,
Jomare Bowers-Mizzell
CRA Officer, Tower Bank
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