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1ST CONSTITUTION BANK
September 15, 2004
Mr.
Robert E. Feldman,
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit
Insurance Corporation
550 17th St. NW
Washington, DC 20429
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.
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. Our community bank will not
be successful if the communities we are in do not thrive. To survive
and be competitive with larger institutions we must service our trade
area 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 manner in
which our 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 does not make sense and is inequitable to
evaluate a $500 million or $1 billion bank using the same examination
procedures established for $100 billion bank. These multi-billion
dollar institutions routinely outbid smaller banks for funding
projects, municipal bond bids, etc.
One of the problems with the current large bank CRA examination
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 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 served if the banks
would truly reinvest those dollars locally to support their own local
economies and residents.
For this reason, I find the FDIC's proposed community development
requirement for barks 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 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-income and moderate-income individuals. Rural banks
are frequently called upon to support special 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-income or moderate-income individuals.
The FDIC's proposed changes to CRA are necessary to alleviate
regulatory burden. Without changes such as this, more and more community
banks will find they cannot sustain independent existence because of the
crushing regulatory burden. Should our board of directors decide that it
is no longer possible to be a community bank, there may be a decision
made to sell our community bank to a larger institution. For many small
towns and local communities, the loss of a community bank that is
responsive to their needs would be a major blow to the local economy and
the local community. By easing the regulatory burden, it will make it
easier for community banks like ours to continue to provide committed
service to local communities that few other financial service providers
are willing to entertain.
Very truly yours,
Robert F. Mangano
President & Chief Executive Officer
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