FDIC Federal Register Citations

Hometown Bank

From: Matt Sosik [mailto:msosik@hometowncoop.com]

Sent: Tuesday, March 07, 2006 11:53 AM

To: Comments

Subject: 2006-01 - Commercial Real Estate Lending, Sound Risk Mgt Practices--01/13/06

Dear Sirs:

As CEO of a small, mutual bank in Massachusetts I am extremely concerned

about the implications of your proposed guidance on Commercial Real Estate

Lending. CRE lending has been a staple of our balance sheet for many years.

The proposed guidance is very broad and allows for little flexibility in

applying it from one institution to the other. As a small bank, I am very

concerned about the added burden this will place on our operation, an

operation already heavily weighed down by regulatory requirements. We

strongly believe that our underwriting and risk management practices speak

for themselves. In some way, we address each of the issues and areas

outlined in your proposal. However, the "one size fits all" nature of your

guidance as proposed will require us to arbitrarily commit significant

additional resources to comply.

As a small bank, we maintain a one-on-one personal relationship with each of

our commercial borrowers. We underwrite based on the merits of each loan

and the character of the borrower. If a problem arises, we sit down with

each borrower and work out a plan. We have suffered almost no loan losses

($28,000 in Commercial charge-offs over the last 10 years) using our

approach. Obviously, we understand that our method of running a CRE

portfolio does not work for all (i.e. larger) institutions, but that is in

the same way that your proposed guidance does not work for all (i.e. small)

banks.

As a former FDIC bank examiner in the early 1990's I had first hand

knowledge of the examination approach at that time. The examinations

focused on loan quality, risk management processes, and the strength of the

loan management team. That focus was because loan quality was a critical

issue at that time. If CRE is again a critical issue for the FDIC, why not

approach this subject by altering your proposed guidance into an "Alert and

Best Practices" document to inform banks that future examinations will once

again be focusing on loan quality and portfolio management issues. In that

way, Banks can continue to manage their institutions as they see fit and the

FDIC can manage its examination focus as it sees fit. As the FDIC uncovers

CRE issues in particular institutions, they will be handled by the

regulators appropriately I am sure. In that way, the rest of us bankers

(the non-offenders) will not suffer under another debilitating layer of

regulation.

I appreciate the opportunity to respond to your proposed guidance. Please

feel free to direct any questions to me via email.

Thank You,

Matthew S. Sosik

CEO & Treasurer

Hometown Bank, A Cooperative Bank