LEGACY BANK
September 14, 2004
Robert E. Feldman, Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: Community Reinvestment, RIN number 3064-AC50;
Proposal to Expand Eligibility for the Streamlined CRA Exam
Dear Mr. Feldman:
As a community
banker, I join my fellow community bankers throughout the nation
in STRONG
SUPPORT of the FDIC’s proposal to increase
the asset size limit of banks eligible for the streamlined small-bank
CRA examination. I also strongly support the elimination of the separate
holding company qualification.
The proposal
will greatly alleviate unnecessary paperwork and examination burden
without
weakening our commitment to reinvest in our communities.
Reinvesting in our communities is something we do everyday
as a matter of good business. My community bank will not long survive if my local
community doesn’t thrive, and that means my bank must
be responsive to community needs and promote and support
community and economic
development.
Making it less burdensome to undergo a CRA exam by expanding eligibility
for the streamlined exam will not change the way my bank does business.
In fact, it will free up human and financial resources that can be
redirected to the community and used to make loans and provide other
services.
It is important
to remember that the streamlined CRA exam is not an exemption
from CRA. It
is a more cost effective and efficient
CRA exam. Banks subject to the simplified CRA exam are still fully
obligated to comply with CRA. Just as now, community banks would
continue to be examined to ensure they lend to all segments of their
communities, including low- and moderate-income individuals and neighborhoods.
It just doesn’t make sense and is inequitable to evaluate a
$500 million or $1 billion bank using the same exam procedures as
for $100 billion or $500 billion bank.
One of the problems
with the current large bank CRA exam is that the definition of “qualified investments” is too limited,
and qualified investments can be difficult to find. As a result,
many community banks (especially those in rural areas) have to invest
in regional or statewide mortgage bonds or housing bonds and the
like to meet CRA requirements. These investments may benefit other
areas of the state or region, but they actually take resources
away from the bank’s local community. Community banks and communities
would be better off if the banks could truly reinvest those dollars
locally to support their own local economies and residents.
For this
reason, I find that the FDIC’s proposed community
development requirement for banks between $250 million and $1 billion
is more flexible and more appropriate than the large
bank investment test. The advantage to this proposal is that it continues
to focus
on community development, but considers investments, lending and
services. It would let community banks pursue community development
activities that both meet the local community’s needs and make
sense in light of the bank’s strategic strengths.
Similarly, the
proposal will help rural banks meet the special needs of
their communities
by expanding the definition of “community
development” so that it includes activities that benefit rural
residents in addition to low- and moderate-income individuals. Rural
banks are frequently called upon to support needed economic or infrastructure
development such as school construction, revitalizing Main Street,
or loans that help create needed or better-paying jobs. These activities
should not be ineligible for CRA credit because they do not benefit
only low- or moderate-income individuals.
The FDIC’s
proposed changes to CRA are needed to help alleviate regulatory
burden.
Without changes such as this, more and more community
banks like mine will find they cannot sustain independent existence
because of the crushing regulatory burden, and will opt to sell out.
For many small towns and rural communities, the loss of
the local bank is a major blow to the local community. By easing regulatory
burden, it will make it easier for community banks like mine to continue
to provide committed service to local communities that few other
financial service providers are willing to do.
Thank you for considering my views.
Sincerely,
Michael S. Chaloner
President
Legacy Bank, Hinton, Oklahoma
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