MainSource Financial Group
FDIC
I am writing
a comment to emphasize our institution’s agreement
with the proposed amendment to the definition of a small institution
to mean an institution with total assets of less than $500 million,
regardless of the size of the Holding Company.
I am the corporate compliance officer for a Holding Company that
is over 1 billion dollars. At the current time, there are four affiliates
within our Holding Company structure. If this proposed amendment
were passed as written, three of our affiliates would be part of
a community reinvestment act small bank evaluation. The three affiliates
all serve relatively small town, rural communities and have asset
sizes between 160 -260 million.
There are two issues that I feel that this revised definition will
help alleviate for the three affiliates.
a) The limited
definition for “community development” under
the large bank criteria.
b) The unfair expectations of the investment test.
The proposed amendment to the community reinvestment act would reduce
what we believe are unwarranted expectations on our affiliates in
trying to meet the extensive requirements of the investment test
and community development lending under the large bank evaluation.
The investment
test is not sufficiently tailored to market reality, community
needs, or
our affiliates’ capacities. There are insufficient
investment opportunities, especially for smaller institutions and
those serving rural areas. For these affiliates, trying to meet the
obligations of the investment test and at the same time meet safety
and soundness requirements is often unrealistic. Many times, the
investments that we currently look at to qualify for our investment
test goals under CRA would not be made under any other circumstances
due to safety and soundness considerations. I believe banks are trying
to meet certain goals, not really addressing community needs, and
sometimes taking financial risks that in most cases they would not
necessarily take.
In addition, our affiliates in middle and upper income areas but
that are rural communities and small towns are forced to focus their
investments and donations away from many quality community investments
and donations unless they are targeted to low or moderate income
individuals. Under the large bank test in many cases the affiliate
cannot get CRA credit for quality loans or donations that help the
community because those works are not specifically targeted to Low-to-Moderate
income individuals or Low-to-Moderate income assessment areas.
For example, under the regulation a $1000 donation to a Drug Awareness
Program for local police would not qualify because if it is not in
a Low-to Moderate area or it is not a donation that is targeted to
Low-to Moderate income individuals. For affiliates with limited opportunities
under the Large Bank Investment test, this type of donation should
be counted. Therefore, to me not only are banks put at a disadvantage,
but they are less likely to contribute to community causes because
they are forced to focus their resources elsewhere.
The definition of “Community Development” is not applicable
to small community banks that are covered by large bank criteria.
The requirement that community development activities target primarily
low-to-moderate income individuals or areas should be expanded to
include community–building activities. The regulation should
allow for CRA credit even if they are not targeted to Low-to-Moderate
income areas. A loan to a hospital, mental health facility, nursing
home, volunteer fire department, educational facilities, social services,
and child care should not be based on whether it targets low-to-moderate
individuals and low-to moderate areas. All loans to these type of
entities are and should be considered community development loans.
So for example, our rural small town community bank affiliates with
a mostly Middle and Upper income assessment area did not receive
credit for the following:
An affiliate gave $300,000 loan to a local hospital to help remodel
it. This did not qualify for CRA credit.
An affiliate gave a loan to a local volunteer fire department for
a new fire truck. This did not qualify for CRA credit.
To conclude, changing the definition of a small institution would
be one step closer to allowing more financial institutions to meet
the community needs for all organizations and all individuals of
the towns, cities, and rural communities that they serve. The banks
would be evaluated on their distribution of loans to all income levels
and throughout their entire assessment area.
Banks should serve an active role in the communities that they serve.
There should not be unrealistic expectations on institutions that
forces them to focus bank resources and time away from quality opportunities
to serve their communities.
Sincerely,
David Sutherlin
Corporate Compliance Officer
MainSource Financial Group
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