Central Bank of Lake of the Ozarks
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 Jessica
L Morrison, a Mortgage Loan Officer 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,
Jessica L Morrison, Mortgage Loan Officer, Central Bank of Lake of
the Ozarks
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