FDIC Federal Register Citations

From: Michelle Loghry [mailto:mloghry@centbk.com]
Sent: Wednesday, April 12, 2006 2:47 PM
To: Comments
Subject: CRE Guidance, Docket Numbers: 06-01, OP-1248, 2006-1

Michelle Loghry
4605 Harrison Blvd Suite #1
Ogden, UT 84403-7000

April 12, 2006

Comments to FDIC

Dear Comments to FDIC:

As a community banker, I would like to share with you my thoughts on the
proposed guidance, Concentrations in Commercial Real Estate Lending, Sound
Risk Management Practices.

Most community banks are underwriting their CRE loans conservatively. They
carefully inspect collateral and monitor loan performance and the
borrower’s financial condition. Community bankers lend in their
communities and are close to their customers. Thus they are positioned
well to know the condition of their local economy and their borrowers.

Community banks have generally increased staff and risk management
practices and capital levels since previous downturns in commercial real
estate lending and are now better equipped to handle future downturns.

There already exists a body of real estate lending standards, regulations
and guidelines. Examiners have the necessary tools to enforce them and
address unsafe and unsound practices; the proposed guidance is
unnecessary. Regulators should address CRE management problems bank by
bank, not by broad brush across the banking industry.

The proposed threshold limits of CRE loans to capital are too restrictive
and do not take into account the lending and risk management practices of
individual institutions. They also do not recognize that different
segments of the CRE markets have different levels of risk. Thus, the
thresholds may not give an accurate picture of the risk in an institution.

Community banks already hold capital at levels above minimum standards and
should not need to raise additional capital because their CRE loans exceed
the proposed thresholds. Regulators should consider the bank’s allowance
for loan losses and current capital levels along with risk management
practices.

The proposed guidance is unfairly burdensome for community banks that do
not have opportunities to raise capital or diversify their portfolio to
the extent that larger regional banks can. The CRE portfolios of many
community banks have grown in response to the needs of their community.
If community banks are pressured to lower their CRE exposures, their
ability to generate income and more capital will be constrained and they
will lose good loans to larger competitors.

The proposal’s recommendations regarding management information system
reports will be particularly costly and burdensome to community banks; the
costs will most likely out weigh the benefits for smaller banks.

For these reasons, I urge you not go forward with the guidance as it has
been proposed. Instead, regulators should use the regulatory tools
already in place to identify and address CRE lending risks where they
truly exist and abandon the proposed thresholds that are too restrictive
and misleading.

Sincerely,
Michelle Loghry