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FDIC Federal Register Citations



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


Last Updated 04/13/2004 regs@fdic.gov

Last Updated: August 4, 2024