Federal Deposit
Insurance Corporation

UnionBancorp

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: FDIC Proposed Increase in the Threshold for the Small Bank CRA Streamlined Examination

Dear Sir:

I am the CRA Officer for UnionBancorp, Inc. a holding company for UnionBank, located in Streator, Illinois, a small town of approximately 7,000. My bank has an asset size of 662,000,900.00. 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 twenty hours and approximately $1200.00 in costs.

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 CPA 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 intent of Congress when it enacted CRA.

The Examiners' comments include few available community development opportunities and even though the level of contribution activity was considered significant, none of these qualified investments were considered either innovative or complex.

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.

In the various communities we serve, we contribute to the entire communities United Way program. Our issue in the last examination was the United Way programs do not spell out they serve towards specifically low to moderate people. Thus, there was a great deal of research and man hours to contact these individual organizations within UW to ask them to write a letter to justify their contributions to low and moderate income people. All our communities are less then 20,000 people so finding low to moderate income people supportive programs is difficult. UW is the program this area has.

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 that 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

areas. The majority of our lending area is all rural. All of LaSalle County, Livingston, Bureau, Whiteside, and DeKalb are rural. Our Kane and Kendall census tracts are made up of I and 2 tracts, respectively and until the last 2/3 years would have been considered rural. With the big boom in housing, this would not be the case any longer.

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,
Lois J. Peterson
CRA Officer