FDIC Federal Register Citations

Bank Iowa

From: Diane Cavin [mailto:dcavin@bankoskaloosa.com]
Sent: Saturday, October 09, 2004 9:08 PM
To: Comments
Subject: FDIC CRA Small Bank Proposal

Diane Cavin
Bank Iowa; 1710 3rd Avenue East
Oskaloosa, IA 52577

October 9, 2004

Comment Site FDIC
,

Dear Comment Site FDIC:

Robert E. Feldman, Executive Secretary
Comments/Legal ESS
Federal Deposit Insurance CorporationAttn
550 17th Street NW
Washington, DC 20429

Re: RIN 3064-AC50

Dear Mr. Feldman,
[Bank Iowa of Oskaloosa is approximately $80 million and is located in a
rural Iowa town of approximately 15,000. Our most recent CRA rating was
satisfactory. Our financial institution takes pride in serving the needs
of our community with a loan to deposit ratio of nearly 75%. We feel
increasing the size of a small bank to assets of less than one bilion is
beneficial, but do not feel you should add any additional criteria in
evaluating the CRA performance of a financial institution. We appreciate
this opportunity to comment on the notice of proposed rulemaking regarding
the Community Reinvestment Act (CRA).

We support the Federal Deposit Insurance Corporation’s (FDIC) proposal to
change the definition of “small bank” from the current asset threshold of
$250 to the proposed total assets of $1 billion, without regard to holding
company affiliation. The overall impact of this change for Iowa would
result in only 32 additional supervised financial institutions being
treated as small banks for CRA examination purposes. This change would
significantly decreased the regulatory compliance burden for these
institutions, affording these institutions to allocate resources
previously dedicated to regulatory compliance to delivery of products and
services within their communities.

However, we cannot support the proposed changes to the small bank
performance standards, which would include a “community development
criterion” for institutions with assets greater than $250 million and up
to $1 billion. This additional performance standard would defeat an
original intent of the February 6, 2004 interagency Notice of Proposed
Rulemaking (NPR), that being to “reduce unwarranted burden consistent with
ongoing efforts to identify and reduce regulatory burden where appropriate
and feasible…” Banks hoping to take advantage of channeling new-found
resources into lending, investment and services available to their local
communities would instead channel those resources back into regulatory
compliance efforts to evidence the banks’ participation in community
development loans, investments and services. Let us use our funds to
improve the overall knowledge of our staff to stay on top of other
regulatory changes and to provide financial products to our customers.
Please do not put any further burden of examination on us. Let the loan
to deposit ratios and the types of loans we make to the low and moderate
income speak for itself.

Under existing examination practices, small institutions are evaluated on
their records of lending to borrowers of different income levels and
businesses and farms of different sizes, focusing primarily on lending
activity within the institutions’ delineated assessment area. The FDIC’s
own discussion in this proposal admits its concern that smaller
institutions presently covered by the large bank tests have noted
difficulties with making qualified investments, including the difficulty
in competing with larger banks for limited investment opportunities and
maintaining staff and resources to do so. The addition of the “community
development criterion” for small banks would place these institutions
right back into the difficult position they have historically found
themselves when being evaluated previously under the large bank tests.

In addition, under existing interagency CRA Q&A’s, examiners can consider
“ lending-related activities,” including community development loans and
lending-related qualified investments, when evaluating the first four
performance criteria of the small institution test.” Q&A 26(a)-1, 66 FR at
36637. Another Q&A states that examiners will consider these types of
lending-related activities “when it is necessary to determine whether an
institution meets or exceeds the standards for a satisfactory rating” or
“ at an institution’s request.” Q&A 26(a)-2, 66 FR at 36637. Yet another
describes that the “small institution performance standards focus on
lending and other lending-related activities. Therefore, examiners will
consider only lending-related qualified investment for the purposes of
determining whether the small institution receives a satisfactory CRA
rating.” Q&A 26(a)-5, 66 FR at 36637. So the “community development
criterion” already exists under existing interagency examination guidance,
allowing small institutions’ performance in making community development
loans and qualified investments to positively impact their overall CRA
ratings. We find little to be gained by adding express “community
development criterion” to small bank performance standards.

Iowa banks take seriously the spirit and intent of the Community
Reinvestment Act, recognizing that no community bank will survive without
meeting the needs of its customers and communities. We urge you to allow
banks to dedicate as much of their resources as possible to meeting those
needs, affording banks with total assets up to $1 billion to be considered
“ small banks” and enjoy the existing streamlined test for “small bank” CRA
performance.

Thank you for the opportunity to comment, and your consideration of such.
Feel free to contact me should you have questions related to these
comments.

Sincerely,

Diane Cavin, VP/Cashier