|
SECURITY NATIONAL BANK
From: Jim Landen
[mailto:jlanden@snbomaha.com]
Sent: Wednesday, March 24, 2004 10:54 AM
To: Comments
Subject: CRA Comments
March 24, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Dear Mr. Feldman:
I am the President of Security National Bank, a $427 million bank
located in Omaha, Nebraska. 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.
In raising the threshold for large-bank CRA, I strongly encourage you
to consider using a pre-existing benchmark for "Community Financial
Institution" if the large-bank threshold is only raised to a level
approximating $500 million. The Federal Housing Finance Board defines a
community financial institution as having average total assets of $548
million for 2004. The Federal Housing Finance Board adjusts the asset
cap for community financial institutions annually. An annually adjusted
cap would be beneficial in keeping the regulation from becoming
outdated. However, adjusting the large-bank CRA limit to the $2 billion
level is viewed as more appropriate and is discussed below.
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 the cost of complying with the large-bank CRA on an
ongoing basis is estimated to be $10,000 annually. The $10,000 does not
take into account the additional time required to implement procedures
and training for the first year our bank was subject to the large bank
CRA test. It would be more beneficial to our community if a portion of
the resources our bank dedicates to complying with the large-bank CRA
standards were instead devoted towards promoting the FDIC's Money Smart
program.
Adjusting the asset size limit also more accurately reflects
significant changes and consolidation within the banking industry in the
last ten years. To be fair, banks should be evaluated against their
peers, not banks hundreds of time the 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
a $500 billion bank. Large banks now stretch from coasttocoast 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.
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 smaller institutions and forcing them to consider selling to
larger institutions that can better manage the burdens.
The following comments are in response to the changes proposed in
Section 25.42. Increasing the number of categories for income groupings
from the current 4 categories to 13 for the CRA Disclosure Statement is
not viewed as an improvement over the current method. Presently, loans
are grouped within the following income categories on the CRA Statement:
low income, moderate income, middle income, and upper income. These
income breakdowns are known in the industry to represent less than 50%
of median income for low income, 50% to less than 80% of median income
for moderate income, 80% to less than 120% of median income for middle
income, and more than 120% of median income for upper income. The
existing income categories known as low, moderate, middle, and upper on
the CRA Disclosure Statement are meaningful throughout the industry for
analysis purposes. As proposed in 25.42 (i), loans would be grouped
according to categories that are much narrower - categories of only 10
percentage. For example, the new categories of median income would be:
less than 10% percent, 10% to less than 20%, 20% to less than 30%, 30%
to less than 40%, 40% to less than 50%, 50% to less than 60%, 60% to
less than 70%, 70% to less than 80%, 80% to less than 90%, 90% to less
than 100%, 100% to less than 110%, 110% to less than 120%, and more than
120%. The benefit of having more income categories on the CRA Disclosure
Statement is not apparent. Increasing the number of income categories
will increase regulatory burden because analyzing the results of the CRA
disclosure statements will be more time consuming. The result of the
analysis under the proposed income categories will not be meaningfully
different than if current categories are retained.
The proposal addresses predatory lending considerations. While I
agree that evidence of predatory lending should negatively impact a
bank's CRA rating, practices already addressed within other regulations
should not be duplicated by the CRA regulation. In relation to predatory
lending the proposal specifically mentions violations of Equal Credit
Opportunity Act, Fair Housing Act, Home Ownership and Equity Protection
Act, Federal Trade Commission Act, Real Estate Settlement Procedures
Act, and the Truth in Lending Act. Issues with those regulations should
be dealt with directly via existing consumer protection laws and should
not be specifically mentioned in the CRA regulation.
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 smallbank 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. The
benefit of increasing the number of income groupings on the CRA
Disclosure Statement is not apparent; therefore, I do not support that
change. Also, violations of pre-existing laws should be addressed
through monitoring compliance with those regulations versus addressing
those regulations through CRA. 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,
James E. Landen
President
Security National Bank
Omaha, NE
|
