From: Bart Jonker
Sent: Thursday, March 04, 2004 3:04 PM
To: Comments
Subject: CRA proposal (RIN 3064-AC50)
Robert E. Feldman, Executive Secretary
Attention: Comments (RIN 3064-AC50)
Federal Deposit Insurance Corporation
550 17th Street NW Washington, DC 20429
Via email: comments@fdic.gov
Gentlemen,
We wish to comment on the Proposed
Amendments to the Community Reinvestment Act Regulations, as posted in
the Federal Register on Feb. 6, 2004 and subsequently forwarded to
insured depository institutions through FIL-15-2004 that same date.
Lake Michigan Financial Corporation is a
two-bank bank holding company with combined assets at year-end 2003 of
approximately $419 million. One bank, The Bank of Holland, is located in
Holland, Michigan and it operates two offices – one in downtown Holland
and the other in central Grand Rapids. This affiliate ended 2003 with
$278 million in assets, and will qualify for large-bank status under the
present Community Reinvestment Act on 1-1-2005.
The other bank, The Bank of Northern
Michigan, is located in Petoskey, Michigan, operating from one location
and ending the year with $141 million in assets. This bank does not
qualify for large-bank status under the current CRA, based either on the
asset size of the bank itself or on the asset size of the holding
company. Therefore, the balance of our comments will come from the
perspective of The Bank of Holland – the institution that will be most
directly impacted by any changes to the CRA.
The Bank of Holland competes with a
number of large banking institutions in our market, including Bank One
($290 billion); National City ($114 billion); Fifth Third Bank ($89
billion); Comerica Bank ($53 billion); Standard Federal Bank ($50
billion); and Huntington Bank ($30 billion). While we are in favor of
the proposed increase in the large-bank threshold and eliminating the
holding company asset test, we believe that a move from $250 million in
assets to $500 million does not adequately address the issues of banks
in the small-to-large-bank transition process. These issues have been
well-documented in the past – limited resources (budget and personnel)
to explore new programs or offer innovative solutions in the market;
limited qualified investment opportunities and excessive competition for
that which is available; and overly burdensome reporting requirements
that are onerous for institutions at the lower end of the large-bank
spectrum.
Banks of a size of $1 billion or more in
assets would more reasonably be able to compete at the large bank level,
and we would challenge the agencies to consider this
higher-than-proposed target. This is based on the same rationale for
establishing the present holding company asset threshold.
In addition to competition with
exceedingly large non-local institutions as described above, our bank
also competes with insurance agencies, mortgage brokers, and credit
unions – which are not presently subject to the requirements of the
Community Reinvestment Act. As these non-traditional entities attempt to
look and act more like commercial, regulated banks and dilute commercial
bank market share, we feel it appropriate that the definition of
financial institution under CRA be broadened to take these entities into
account, using the precedent set in the Federal Reserve Board’s
Regulation P.
We support the agencies’ position
relative to abusive lending practices and encourage expansion of the
definition of financial institution on this basis, as well. Traditional
banks are closely scrutinized and highly regulated, and we believe the
abuses this proposal attempts to discourage are generally found to be
more prevalent in non-bank institutions. Applicability of the CRA to
these non-traditional entities would expose any abuses to regulatory
oversight as well as public scrutiny through the reporting and
disclosure sections of the regulation, while at the same time helping to
level the playing field among regulated and non-regulated institutions.
We appreciate the opportunity to comment
on this proposal. Should you have questions or need further information,
please don’t hesitate to contact The Bank of Holland at 616-494-9035.
Cordially,
Bart Jonker, CRCM
Corporate Compliance Officer
Lake Michigan Financial Corporation
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