Thomaston Savings Bank
March 13, 2006
Robert E. Feldman
Executive Secretary
Attn: Comments/LegalESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Dear Mr. Feldman,
I am the Chief Lending Officer for Thomaston Savings Bank, headquartered in Thomaston, Connecticut. We are a $435MM mutual savings bank serving our customers through a seven branch network. We have been successful meeting the banking needs of our customers and communities since 1874 and we look forward to continued growth.
The recently proposed guidance concerning concentrations in commercial real estate loans causes a level of concern as I look at our past, current and future success. While the specific types of real estate loans vary, the cornerstone of our bank and many other mutual institutions is real estate lending, especially commercial real estate lending. In today’s ever changing interest rate environment CRE lending and more broadly commercial lending is the avenue that allows community banks to compete with large regional and national banks on the same playing field and because we know our local markets so well, we can compete successfully and profitably. Any guidance that imposes new regulatory requirements in a subjective manner, as evidenced by the use of phrases such as “… more likely…”; “…might be applied…” could lead to policy shifts in the lending practices of community banks that might discourage CRE loans in favor of much riskier C & I loans.
Additionally, it appears that the regulating Agency (in our case the FDIC) can arbitrarily require a bank to increases its capital, no easy task for a mutual savings bank, strictly based on the size of its commercial loan portfolio without consideration for average loan size, loan to value ratios, portfolio concentrations, knowledge of local real estate markets or loan quality. In our real estate lending practices we make wide use of credit enhancements through government loan guarantees and subordinated debt structures, that minimizes our risk in spite of the fact that the loan is CRE facility. Any recommendation concerning capital levels should in my opinion be determined through an enterprise wide risk assessment, not confined to one aspect of the bank’s operation.
Credit concentrations are a concern both for the regulator as well as the banker, however enacting a guidance that targets one specific loan type based on portfolio size would be both unfair and counter productive to the economic growth of our local communities as well as the nation as a whole.
Very truly yours,
Peter R. Doiron
Senior Vice President
Contact: Regs@fdic.gov