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BANK OF LANCASTER
From: John Clickener [mailto:jclickener@banklanc.com]
Sent: Thursday, September 16, 2004 9:26 AM
To: Comments
Cc: psmith@aba.com; aroberts@banklanc.com
Subject: RIN No. 3064-AC50
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:
I am Vice President and Senior Commercial Lender of the Bank of
Lancaster located in Kilmarnock, VA. We are a $300 Million community
bank with seven branches serving the very rural and economically
disadvantaged four counties in Virginia’s Northern Neck.
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. However, I believe that this would lower my
current regulatory burden and enable us to better serve our customers.
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. I firmly believe
Congress intended to promote “local” development financing when it
enacted CRA.
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 an
investment program If the FDIC adopts its proposal, a state
nonmemberbank would move from thesmall 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. (Please
enter any examples of your current lending and investments that you
believe would be treated as Community Development lending under the new
criterion.) (If a significant part of your assessment area is rural,
then add this paragraph.) 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. (Describe your
rural lending and why you think that it clearly meets the CRA goal of
lending to the entire community and why part of it should qualify as CD
lending.) 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 R. Clickener (via e-mail)Vice President
Bank of Lancaster
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