Federal Deposit
Insurance Corporation

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 Mr. Feldman:

I am the Compliance and CRA Officer of Carrollton Bank, a $306 million dollar community bank located in Baltimore, Maryland. Carrollton Bank is a subsidiary of a one bank holding company and has 10 branch offices located in Baltimore City, Baltimore County and Anne Arundel County. Carrollton is currently subject to the large bank CRA exam.

I am writing to 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. Raising the threshold would greatly relieve the regulatory burden imposed on many small banks such as my own. We find ourselves spending more money and using more resources just to keep up with compliance. Since lending money is the thrust of the CRA, it seems to me that lessening the burden associated with lending can only free up more time to do just that. There is so much regulatory burden that encompasses the lending function that it is becoming more and more difficult to carry out this mandate.

Banks make money by making loans, not by sitting at our desks dealing with the myriad of paperwork that we have to go through to prove we make loans. The entire small business data collection process as well as HMDA recordkeeping and reporting is a manual process at my bank. We do not have an automated system for collecting the required information. That means that someone has to fill out a “data collection form” that includes all of the required information. Then, someone has to manually input all of the information into a software program. A data collection form is completed for every commercial loan we do, not just small business loans. We do that so that we can make sure that no reportable loans fall through the cracks. We also have two verification processes. First, someone verifies that all of the information on the form accurately reflects the loan and, once it is determined that the information is correct, then a second person verifies that the input of that information was done correctly.

My Bank is committed to making loans in our community. In 2003, Carrollton Bank reactivated Carrollton Mortgage Services, Inc. which is a full service mortgage subsidiary of the Bank focusing on the consumer needs in the current market place. In addition, the Bank added three new commercial lenders in 2004 for focusing on the business sector of our community. Between competing with the “big players”, the increasingly expanding credit union presence and the automobile captured financing programs, we smaller “community bank” institutions are fighting for every loan we can get. And believe me; we understand that a reduction in the threshold does not mean that our Bank will be exempt from the CRA. We fully understand that Carrollton Bank still has an obligation to help meet the credit needs of our entire community and that we will continue to be evaluated by the FDIC on our record for helping to meet those needs.

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 community development criterion and only apply the new community development 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 CRA threshold is appropriate. As FDIC examiners know, it has proven extremely difficult for small banks 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 the intent of Congress when it enacted CRA.

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 community development criterion. This appears to 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 banks with much larger asset sizes. This more graduated transition to the large bank examination is a significant improvement over the current regulation.

In addition, I oppose making the community development criterion a separate test from the bank's overall CRA evaluation. For a community bank, community development 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 community development 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 community development obligation and regulatory burden that would erode the benefit of the streamlined exam.

In 2003, Carrollton Bank celebrated its 100th Anniversary. We have a Board and Management team that is committed to meeting the credit needs of our entire community. Between March 2000 and June 2003, Carrollton Bank had an average loan- to-deposit ratio of 88.64%. Between 2000 and 2002, 85% of the Bank’s total loans were originated within our assessment area. During the same time period, 93% of our small business loans were originated within our assessment area. As of June 30, 2004 our loan-to-deposit ratio was 102.9%. Lending within our community is how we have been able to continue the “business of banking” for over 100 years.

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.

Sincerely,
Lola B. Stokes
Vice President
Compliance
Carrollton Bank
344 North Charles Street
Baltimore, MD 21201