From: Brent Schultze [mailto:bschultze@bankmidwest.com]
Sent: Thursday, September 16, 2004 10:48 AM
To: Comments
Subject: Proposed CRA Changes
Dear FDIC,
Bank Midwest is a community banking organization operating in 7
locations in southwest Minnesota and northwest Iowa. We 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 small banks under the current regulation, which are required
to meet the standards imposed on the nation’s largest $1 trillion banks.
Community banks would still be required to help meet the credit needs of
their entire communities and would continue to be so evaluated by their
regulator.
Additonally, we support the addition of a community development
criterion to the small bank examination for larger community banks, but
we believe the new community development (CD) criterion should be
applied only to banks greater than $500 million up to $1 billion.
Community banks up to $500 million now hold about the same percent of
overall industry assets as community banks up to $250 million did a
decade ago when the revised CRA regulations were adopted, so this
adjustment in the CRA threshold is appropriate. As bankers and 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. This result certainly was not
intended by Congress when it enacted CRA. We strongly oppose making the
CD criterion a separate test from the bank’s overall CRA evaluation.
Such differentiation creates the impression that CD lending is different
from the provision of credit to the entire community. The current small
bank test considers the institution’s overall lending in its community.
A separate test would create an additional CD obligation and regulatory
burden, eroding the intent of the streamlined exam. We 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. This change will go a long way toward
eliminating the current distortions in the regulations that result in a
small rural bank being told to invest in regional affordable housing
bonds for an urban area not in the bank’s community.
Brent Schultze, Loan Representative
Bank Midwest
118 Downtown Plaza
Fairmont, MN 56031
