Two recent articles appearing in American Banker paint two different views of the Office of the Comptroller of the Currency.

The first article ["Suits Reveal Racial Bias and Bullying at the OCC," Dec. 1], written by Alan Wheat, pertained to Sinclair National Bank's litigation against the OCC, while the second ["Bank Consultant Paints Unfair Picture of OCC," Dec. 8] was written by Robert M. Garsson, director of press relations for the OCC.

Both articles stated vastly differing views. I write with a very similar fact pattern to that of Mr. Sinclair, but with a vastly differing opinion of the OCC.

In March our company converted to a bank holding company and acquired United National Bank of Fayetteville, N.C., a failing minority institution. Our holding company has a successful nine-year track record of commercial lending to minority borrowers predominantly secured by single- and multifamily rehabilitative properties in the low- and moderate-income areas of Atlanta.

Indeed, during our nine-year history, we have lent more than $100 million to borrowers who today by most standards would be considered subprime in areas palpably perceived as inner-city, declining, and high-risk by many traditional lenders. We did so with a cumulative loss ratio of 0.00014%.

When we submitted our business plan to the OCC for review, we received a high level of inquiry, particularly considering the concentration of community development lending proposed by our plan. We not only received a fair and impartial review, but the OCC was exceedingly helpful in providing us with information useful in implementing our plans.

With these prefatory remarks made, allow me to address a differing view than that set forth by Mr. Wheat.

During our application process, the OCC's inquiry was consistent: Did our management have the ability to manage the higher risk of inner-city community development lending? Did we possess the systems, have the controls, and exhibit the experience to operate a federally insured depository institution in a safe and sound manner?

A pre-approval site visit was conducted by the Federal Reserve, the Federal Deposit Insurance Corp., and the OCC.

At each hurdle, the OCC was consistent in its view that inner-city community redevelopment lending can be a positive force in meeting the objectives of the Community Reinvestment Act, and providing credit largely to minority borrowers (both women and African-Americans) can be a positive force in enhancing fair access to credit in this desperately underserved market.

However, the OCC was also steadfast and exceedingly cautious in pointing out to us that the regulatory agencies considered our lending to be "nontraditional" and accordingly, they would pay particular attention to our internal controls and risk management systems. Moreover, United National Bank was already being closely watched by the OCC.

It has been nine months since our acquisition of United, and the OCC has visited our bank, which resulted in favorable comments. In fact, our results are exemplary: Since our acquisition of United, past-due loans and classified assets have declined over 50%, and these results were not achieved as a result of aggressive chargeoffs. Rather they were achieved by prudent credit administration and management of the largely nontraditional loan portfolio.

Not only has credit quality markedly improved, but United has also returned to profitability, with a return on equity of 16.89% and return on assets of 2.06% .

Mr. Garsson wrote that "some types of subprime lending might not be appropriate for federally insured institutions," casting a pejorative light on subprime lending.

I, on the other hand, read this statement differently; some types of lending (whether or not subprime) should not be conducted at institutions that do so in an unsafe or unsound manner. It is not the type of the loan, but the quality of the credit that ought to be the test.

Indeed, inner-city redevelopment lending clearly is nontraditional, but in my considered opinion it is not subprime. The emphasis is on the bank's ability to manage the risks inherent in the type of lending in which it chooses to engage. Indeed, in today's market, I question the intelligence (as well as the safety and soundness) of the larger, syndicated loans that many institutions are finding problematic.

It is impossible for me to assess the validity of Mr. Sinclair's claims against the OCC, nor do I know whether the facts leading to his acquisition were similar to ours. However, I can unequivocally state that the OCC does not discriminate against well-run, fundamentally safe and sound institutions, particularly those providing access to credit in underserved minority communities, and to borrowers who might well be classified as "subprime" - provided the activity is conducted safely and soundly.

We have found the OCC to be a tremendous resource, always ready to provide assistance and counsel, particularly to institutions being rehabilitated.

It seems to me they execute their charge exceedingly well: Protect the banking system from unnecessary risk while ensuring that all Americans have equal access to credit under the law.

In our case, we lend in areas most banks won't, to borrowers spurned by traditional lenders; except we do so safely and soundly.

Mr. Garsson's article espoused a position we know firsthand: Properly managed nontraditional lending can be an appropriate activity for national banks and can be a positive force by supplying access to credit to borrowers unable to obtain credit from traditional sources.

In the same regard, the OCC is diligent in requiring institutions that do so to demonstrate their capacity and ability. Perhaps that was not the case in Mr. Sinclair's case, a judgment left to the courts.

Stephen M. Klein
Chairman and CEO
Omni Financial Services Inc.

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