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FIRST NATIONAL BANK
September 16, 2004
Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 E. 17th Street, NW
Washington, DC 20429
Re: Community Reinvestment, RIN number 3064-AC-50;
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.
The existing CRA, its interpretation, and its enforcement have been
flawed with respect to community banks in the following ways:
• The amount of human and financial resources required to
stay in compliance limits meaningful community activities and loans;
• The definition of "qualified investments" does not include the
essential loans and investments to small rural communities because
they are not solely for the benefit of low-and moderate-income
individuals; and
• Allowing mega multi-national banks and money centers to take
deposits from small economically distressed local communities and lend
in large thriving urban areas, forcing community banks to bear all the
lending and investment responsibility in those struggling communities,
while at the same time, not getting credit for community developmental
activities.
Making it less burdensome to undergo a CRA exam by expanding
eligibility for the streamlines 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. At present, we must spend $2400 annually to
prove that we make the majority of our loans in our assessment area.
We do not have any census tracts, according to the 2000 census, that
are low- or moderate-income tracts. However, according to the size of
the home loans and small business loans, it is clearly evident that we
are meeting the needs of those individual and small businesses that
the CRA requirements target.
The streamlined CRA exam is not an exemption from CRA, but rather a
more cost effective and efficient exam. Banks subject to the streamlined
exam are fully obligated to comply with the CRA and 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 not
equitable to evaluate a $500 million or a $1 billion bank using the same
procedures as for the $100 billion or $500 billion bank.
Another problem with the CRA requirements for community banks is that
we must invest in regional or statewide mortgage bonds in order to meet
the "qualified investments" definition. However, these types of
investments actually take funds out of the rural communities in favor of
more urban areas. Community banks in rural areas should be able to meet
the "qualified" definition by investing in "quality of life"
improvements when low- and moderate-income housing projects are
nonexistent. Community banks make loans and buy bonds for local
projects, such as schools, senior citizen centers, street improvement
equipment, fire trucks, medical clinics, playgrounds, infrastructure,
and economic development. Many times banks donate the time of officers
and other employees to assist with essential planning and governing of
boards that oversee such projects. These resources should not be
ineligible for CRA credit because they do not benefit only low-and
moderate-income individuals or because the investment made is of
essential in-kind services. Community banks and the communities they
serve would be better off if the banks could truly invest their 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 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 meet
both the local community's needs and make sense in light of the bank's
strategic strengths.
The proposal will also help rural banks meet the special needs of
their communities by expanding the definition of "community development"
so that it includes activities that benefit all rural residents instead
of just low- and moderate-income individuals. The FDIC's proposed
changes will help alleviate regulatory burden. Without these changes
community banks like ours soon will be unable to sustain independent
existence because of the crushing regulatory burden and unrealistic
expectations. We will be forced to sell out. For many small towns and
rural communities, the loss of the local bank is a major blow to the
local community and economy.
Finally, multi-billion dollar banks take deposit dollars from the
small rural communities and invest them in urban areas where there are
large numbers of low- and moderate-income housing projects, in order to
meet their CRA requirements. However, this practice deprives rural
communities of the much needed economic development and services needed
to attract new industry. Many of these areas are already economically
depressed or distressed. The large banks make loans and investments in
areas with stronger economies and better credit strengths. Yet community
banks, if they are to make loans, are forced to make lower quality loans
and bear all the burden of development. Large banks then come in and
under bid our best loan prospects to businesses and municipalities
because they can. That practice is unfair to the community banks that
are meeting the other community needs. If large banks take deposit
dollars from rural communities, they should be forced to reinvest in
those same communities when there are well defined needs.
While I am very much in agreement with the proposed changes, I
believe they should also address the flow of deposit dollars out of
economically distressed communities to thriving urban areas. This
practice has a very negative impact on communities and on the community
banks that serve them. Please give this situation careful consideration.
Sincerely,
Kim Taykor, Loan Officer
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