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SPIRITBANK
October 7, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: RIN Number 3064-AC50
Dear Sir:
I am a Branch Executive for SpiritBank whose Head Office is located
in Tulsa, Oklahoma. Our bank has branches in 10 different towns ranging
from populations of 568 residents to 387,807 residents with five of
those branches having a population size of 8,510 residents or less. I am
writing to strongly support the FDIC’s proposal to raise the threshold
for the streamlined small bank CRA examination to $1 billion without
regard to the size of the bank’s holding company. This would greatly
relieve the regulatory burden imposed on many small banks such as my own
under the current regulation, which are required to meet the standards
imposed on the nation’s largest $1 trillion banks. I understand that
this is not an exemption from CRA and that my bank would still have to
help meet the credit needs of its entire community and be evaluated by
my regulator. However, I believe that this would lower my current
regulatory burden by 192 man hours a year which is the equivalent of 24
days a year or two days a month spent on geo-coding and input of data.
I also support the addition of a community development criterion to
the small bank examination for larger community banks. It appears to be
a significant improvement over the investment test. However, I urge the
FDIC to adopt its original $500 million threshold for small banks
without a CD criterion and only apply the new CD criterion to community
banks greater than $500 million up to $1 Billion. Banks under $500
million now hold about the same percent of overall industry assets as
community banks under $250 million did a decade ago when the revised CRA
regulations were adopted, so this adjustment in the CRA threshold is
appropriate. As FDIC examiners know, it has proven extremely difficult
for small banks, especially those in rural areas, to find appropriate
CRA qualified investments in their communities. Many small banks have
had to make regional or statewide investments that are extremely
unlikely to ever benefit the banks’ own communities. That was certainly
not the intent of Congress when it enacted CRA. Examiners in our last
exam noted that the Bank’s level of community development was
satisfactory for our asset size and considering demographics. But none
of the development loans made benefited the nonmetropolitan assessment
area of the Bank. The Bank received an Outstanding rating for its
efforts for being a leader in and helping to meet the credit needs of
its entire assessment area which included low- and moderate-income
neighborhoods and loans made in our rural markets.
An additional reason to support the FDIC’s CD criterion is that it
significantly reduces the current regulation’s “cliff effect.” Today,
when a small bank goes over $250 million, it must completely reorganize
its CRA program and begin a massive new reporting, monitoring and
investment program. If the FDIC adopts its proposal, a state nonmember
bank would move from the small bank examination to an expanded but still
streamlined small bank examination, with the flexibility to mix
Community Development loans, services and investments to meet the new CD
criterion. This would be far more appropriate to the size of the bank,
and far better than subjecting the community bank to the same large bank
examination that applies to $1 trillion banks. This more graduated
transition to the large bank examination is a significant improvement
over the current regulation.
I strongly oppose making the CD criterion a separate test from the
Bank’s overall CRA evaluation. For a community bank, CD lending is not
significantly different from the provision of credit to the entire
community. The current small bank test considers the institution’s
overall lending in its community. The addition of a category of CD
lending (and services to aid lending and investments as a substitute for
lending) fits well within the concept of serving the whole community. A
separate test would create an additional CD obligation and regulatory
burden that would erode the benefit of the streamlined exam.
I strongly support the FDIC’s proposal to change the definition of
“community development” from only focusing on low- and moderate-income
area residents to including rural residents. I think this change in the
definition will go a long way toward eliminating the current distortions
in the regulation. We caution the FDIC to provide a definition of
“rural” that will not be subject to misuse to favor just affluent
residents of rural area. The Bank is the largest corporate citizen in
most of the towns and surrounding areas that make up our rural markets.
SpiritBank provides products and services including consumer, consumer
real estate, small business and agriculture loans that allow residents
living and working in these communities to invest and put money bank
into their towns and surrounding rural area. Partly, because of the
Bank's’efforts to be an active part of and to serve its communities from
our largest to our smallest with just 568 residents the towns or cities
in which we have branches including our rural markets will have
maintained or grown in the number of residents as suggested by the U. S.
Census Bureau population estimates as of July 1, 2003. Lending in our
rural markets clearly meets the CRA goal of lending to the entire
community.
In conclusion, I believe that the FDIC has proposed a major
improvement in the CRA regulations, one that much more closely aligns
the regulations with the Community Reinvestment Act itself, and I urge
the FDIC to adopt its proposal, with the recommendations above. I will
be happy to discuss these issues further with you, if that would be
helpful.
Sincerely,
Brenda A. McClenathan
Vice President
SpiritBank
401 Main Street
Depew, OK 74028
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