Federal Deposit
Insurance Corporation

Regarding: Community Reinvestment, RIN number 3064-AC50; Proposal to expand Eligibility for Steamlined CRA Exam

Dear Mr. Feldman:

We join our 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. We 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 our communities. Reinvesting in our communities is something we do everyday as a matter of good business. Our community bank will not survive long if our community does not thrive, and that means that our Bank must be responsive to community needs and promote and support community economic development.

Making it less burdensome to undergo a CRA exam by expanding eligibility for the streamlined exam will not change the way our 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.

It is important to remember that the streamlined CRA exam is not an exemption from CRA. It is rather a more appropriate exam for banks under $500 million or even $1 billion. Banks subject to the streamlined CRA exam are still fully obligated to comply with the CRA. Just as now, community banks would continue to be examined to ensure that they lend to all segments of their communities, including low- to moderate-income individuals and neighborhoods. It just does not make sense to evaluate our community bank using the same procedures as CitiBank.

One of the problems with the current large bank CRA exam is that the definition of "qualified investments" is too limited, and qualified investments can be difficult to find. As a result, many community banks (especially those in rural areas) have to invest in regional or statewide mortgage bonds or housing bonds and the like to meet CRA requirements. These investments may benefit other areas of the state or region, but they actually take resources away from the bank's local community. Community banks and communities would be better off if the banks could truly reinvest those dollars locally to support their local economies and residents.

For this reason, we find the FDIC's proposed community development requirements for banks between $250 million and $1 billion is more flexible and appropriate than the large bank investment test. The advantage of 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.

Similarly, the proposal would help rural banks meet the special needs of their communities by expanding the definition of "community development" so that it includes activities that benefit rural residents in addition to low- and moderate-income individuals. Rural banks are frequently called upon to support needed economic or infrastructure development such as school construction, revitalizing main street, or loans that help create needed or better-paying jobs. These activities should not be ineligible for CRA credit because they do not benefit only low- to moderate-income individuals.

The FDIC's proposed changes to CRA are needed to help alleviate regulatory burden. Without changes such as this, more and more community banks like ours will find that they cannot sustain independent existence because of the crushing regulatory burden, and will opt to sell. For many small towns, rural communities and even suburbs of larger metropolitan areas, the loss of the local bank is a major blow to the community. By easing regulatory burden, it will make it easier for community banks like ours to provide the wide range of financial service to the local communities that few financial service providers are willing to do.

Thank you for considering our views.

Sincerely,

Arnold S. Becker, Chairman
David G. Schroeder, President & CEO