Central Bank of
Lake of the Ozarks
From: Diebold,
Anna [mailto:anna_diebold@cbolobank.com]
Sent: Wednesday, September 29, 2004 1:05 PM
To: Comments
Subject: craletter1.doc
September 28, 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: FDIC Proposed Increase in the Threshold
for the Small Bank CRA Streamlined Examination
Dear Sir or Madam:
I am Anna Diebold, Vice President, of Central Bank of Lake of the
Ozarks, located in Osage Beach, Missouri, a resort area of less
than 5,000 residents. My bank's asset size is $401 million and
we are subject to large bank CRA exams. 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 trillion 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.
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. Because we are a resort area with higher income
second home owners it has been difficult to find qualified investment
opportunities.
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.
I strongly support the FDIC's proposal to change the definition
of "community development" from only focusing on low-
and moderate-income area residents to including rural residents.
I think that this change in the definition will go a long way toward
eliminating the current distortions in the regulation. We caution
the FDIC to provide a definition of "rural" that will
not be subject to misuse to favor just affluent residents of rural
areas.
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,
Anna Diebold, Vice President, Central Bank of Lake of the Ozarks
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