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KIRKPATRICK BANK September 15, 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: FOIL Proposed Increase in the Threshold for
the Small Bank CRA Streamlined Examination
Dear Mr. Feldman:
Our bank's headquarters is located in Edmond, Oklahoma, a town of
approximately 74,000 residents on the northern border of Oklahoma City.
We also have two branches in Oklahoma City and one in Colorado Springs,
Colorado. We have assets of approximately $315,000,000 as of June 30,
2004. Under the current CRA limits for small and large bank examinations
we will be subject to the large bank format after the end of 2004. 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. We are the only
subsidiary of our holding company. This would greatly relieve the
regulatory burden imposed on many small banks such as ours. Under the
current regulation we will be required to meet the standards imposed on
the nation's largest banks. I understand that this is not an exemption
from CRA and that this bank would still have to help meet the credit
needs of its entire community and be evaluated by our regulator. I would
estimate that if the proposed new parameters are adopted, this would
lower my current regulatory burden by approximately 800 hours or about
$13,000 per year in time and $2,000 per year in office supplies used to
document compliance.
I also support the addition of a Community Development (CD) 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 percentage 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 highly unlikely
to ever benefit the banks' own communities. That was certainly not the
intent of Congress when it enacted CRA. Our bank will have to compete
with much larger banks for investments if the threshold is not changed,
which will be very difficult to do with the number of truly large banks
located in the Oklahoma City metropolitan area.
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. We
currently provide loans to several borrowers who are buying inner city
properties that need rehabilitation. They make improvements to the home
and then sell them to people to increase home ownership in low and
moderate income areas of Oklahoma City that have seen declines over the
past twenty years or so. We also provided financing for complete
rehabilitation of an apartment complex located in a moderate income
tract in 2004.
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,
John Goad
Kirkpatrick Bank
Edmond, OK
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