FDIC Federal Register Citations

September 15, 2004

Mr. Robert Feldman Executive Secretary
Attention: Comment/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 Streamline Examination

Dear Sir or Madam:

I am the Vice President and Chief Lending Officer of Cashmere Valley Bank, a $650 Million bank located in a rural farming area in the Central part of Washington State with a population 60,000 (made up of many small communities). I am writing to strongly support the FDIC's proposal to raise the threshold for the small bank streamlined CRA examination process to $1 billion without regard to the size of the bank's holding company. This would significantly reduce the burden of the current regulation; a burden that does nothing to promote increased performance of a rural small bank under the regulation. It simply imposes a burden on us that is identical to the burden on a $1 Trillion dollar bank located in a large metropolitan area. It is clear to us that this is NOT an exemption from CRA. Our regulators will still evaluate us for our performance in reinvesting in our community. My estimate is this streamlined process will save us the equivalent of 1 FTE at the cost of $60,000 per year with NO degradation in our performance.

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. As the FDIC examiners know, it has proven extremely difficult for small banks, especially those in rural areas, to find appropriate CRA Qualified investments IN OUR COMMUNITIES. We have been forced to make regional or statewide investments that are unlikely to benefit our community just to improve our performance in CRA. We have also been forced to make exceptions to our investment policy to make CRA qualified investments. While this is clearly not required by the regulation, as practical matter, is has become a necessity to be a good performer under the regulation. The regulation has also created a market situation with investments that drives up the prices of those investment and thus lowers the yield thus reducing or eliminated the risk premiums previously associated with these investments. We purchase these investments when we can, even though they do not meet the risk/return profile we have establish for a safe and sound operation. In each of our bank's last two CRA Public Evaluations, the examiners commented that the bank has few qualified investment opportunities in our community and thus had to make investments outside our community.

When official from the communities we serve get together with local bankers to deal with a community development problem or opportunity, the only bankers in attendance are from the small community banks. The larger banks not only don't have "officials" in the rural offices, nobody from those banks show up to help solve problems and deal with issues that are the very core of CRA. We applaud the success and attention the larger banks receive for their CRA efforts in the metropolitan areas and those results will not change under this proposal.

I also strongly support the FDIC's proposal to change the definition of "community development' from only focusing on low to moderate income area residents to including rural residents. As I mentioned above, our market area is agriculturally based, is faced with high unemployment, and is current designated by our state has economically depressed. However with have virtually NO low to moderate-income census tracts. This makes it very hard to qualify a community development loan or activity. Yet we do many things and make many loans that support our community, which do not qualify under the current CRA regulation.

Finally, I believe you have in front of you an opportunity to contribute to the mandate by Congress to provide regulator relief as stipulated by the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). I attended a Banker's Outreach Meeting and listened to the genuine commitment on the part of the FDIC as articulated by Vice Chairman John M. Reich. I believe this is an excellent opportunity to contribute to this vital congressional mandate.

Thank you for your consideration

Greg Oakes
VP Chief Lending Officer
Cashmere Valley Bank
Cashmere, WA