Community National Bank
From: Joe Vich
Sent: Monday, March 15, 2004 4:59 PM
To: Comments
Subject: 12 CFR Part 345
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: 12 CFR Part 345
RE: Proposed Revisions to the Community Reinvestment Act Regulations
Dear Mr. Feldman:
As the President of a nearly $250 million bank, I am writing to support the
federal bank regulatory agencies' (Agencies) proposal to enlarge the number
of banks and saving associations that will be examined under the small institution
Community Reinvestment Act (CRA) examination. The Agencies propose to increase
the asset threshold from $250 million to $500 million and to eliminate any
consideration of whether the small institution is owned by a holding company.
This proposal is clearly a major step towards an appropriate implementation
of the Community Reinvestment Act and should greatly reduce regulatory burden
on community institutions like ours that would otherwise need to comply with
the large bank examination requirements.
When the CRA regulations were rewritten in 1995, the banking industry recommended
that community banks of at least $500 million be eligible for a less burdensome
small institution examination. The most significant improvement in the new
regulations was the addition of the small institution CRA examination, which
actually did what the Act required: had examiners, during their examination
of the bank, look at the bank’s loans and assess whether the bank was
helping to meet the credit needs of the bank’s entire community. It imposed
no investment requirement on small banks, since the Act is about credit not
investment. It added no data reporting requirements on small banks, fulfilling
the promise of the Act’s sponsor, Senator Proxmire, that there would
be no additional paperwork or record-keeping burden on banks if the Act passed.
And it created a simple, understandable assessment test of the bank’s
record of providing credit in its community: the test considers the institution’s
loan-to-deposit ratio; the percentage of loans in its assessment areas; its
record of lending to borrowers of different income levels and businesses and
farms of different sizes; the geographic distribution of its loans; and its
record of taking action, if warranted, in response to written complaints about
its performance in helping to meet credit needs in its assessment areas.
The regulatory burden on small banks has only grown larger, including massive
new reporting requirements under HMDA, the USA Patriot Act and the privacy
provisions of the Gramm-Leach-Bliley Act. But the nature of community banks
like ours has not changed. When a community bank must comply with the requirements
of the large institution CRA examination, the costs and burdens on us increase
dramatically. In looking at my bank, a bank that is approaching $250 million
in total assets, converting to the large institution examination requires,
among other things, that we devote additional staff time to documenting services
and investments, which we currently do not do, and begin to geocode all of
our loans that might have CRA value. This imposes a dramatically higher regulatory
burden that drains both money and personnel away from helping to meet the credit
needs of the institution’s community. It is even more of a burden in
our market, as we compete against a billion dollar credit union, the largest
in the State of Iowa, who is not subject to any CRA requirements.
A community bank like ours is not very complex; we take deposits and makes
loans in the communities we serve. Our business activities are focused on small,
defined geographic areas where our bank is known. The small institution examination
accurately captures the information necessary for examiners to assess whether
our bank is helping to meet the credit needs of our community, and nothing
more is required to satisfy the Act.
In today’s banking market, even a $500 million bank often has only a
handful of branches. I recommend raising the asset threshold for the small
institution examination to at least $1 billion. Raising the limit to $1 billion
is appropriate for two reasons. First, keeping the focus of small institutions
on lending, which the small institution examination does, would be entirely
consistent with the purpose of the Community Reinvestment Act, which is to
ensure that the Agencies evaluate how banks help to meet the credit needs of
the communities they serve.
In conclusion, I strongly support increasing the asset-size of banks eligible
for the small bank streamlined CRA examination process as a vitally important
step in revising and improving the CRA regulations and in reducing regulatory
burden. I also support eliminating the separate holding company qualification
for the small institution examination, since it places small community banks
that are part of a larger holding company at a disadvantage to their peers
and has no legal basis in the Act. While community banks, of course, still
will be examined under CRA for their record of helping to meet the credit needs
of their communities, this change will eliminate some of the most problematic
and burdensome elements of the current CRA regulation from community banks
that are drowning in regulatory red-tape.
Sincerely,
Josef M. Vich, C.P.A.
President & C.E.O.
Community National Bank
P.O. Box 1288
Waterloo, Iowa 50704
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