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FARMERS & MERCHANTS STATE BANK
September 16, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
RE: RIN Number 3064-AC50; FDIC Proposed Increase in the Threshold for
the Small Bank CRA Streamlined Examination
Dear Sir or Madam:
I serve as the Compliance CRA/Officer for The Farmers & Merchants
State Bank located in Archbold, Ohio. Our bank serves a four county area
that is primarily rural and represented by a thriving agricultural
sector, as well as small business and industry. My bank is currently a
$700 million plus community bank presently covered by the Large Bank CRA
Examination. I strongly support the FDIC proposal to raise the threshold
of 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 under the current regulation, as
we are required to meet the same standards imposed on the national
largest $1 trillion banks. I fully 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.
Reducing the current regulatory burden would be most welcome. The
time and excessive paperwork required to prove and document compliance
is burdensome, costly, and mostly busy time, not productive time. As a
community bank, reinvesting in our communities is something we do
everyday as a matter of good business!! My bank must be responsive the
community needs by promoting and supporting community development, as we
don’t survive if our communities don’t thrive.
I also support the addition of community development criterion to the
small bank examination for larger community banks. It would appear to be
a significant improvement over the investment test, which has proven
most difficult for rurally located banks like ourselves. As FDIC
examiners know, it has proven extremely difficult for banks located in
rural areas to find appropriate CRA qualifying investments in our
communities. In our last two CRA Examinations we received a Satisfactory
rating due to the strength of our Lending, but received a Low
Satisfactory rating on Investments. CRA qualifying investment
opportunities aren’t always available, plus these must be wise
investments choices for the Bank.
If the FDIC adopts its proposal, my bank could easily move from the
current Large Bank CRA exam to an expanded, but streamlined small bank
examination, with the flexibility
to mix Community Development Loans, services, and investments to meet
the new Community Development criterion. Our human and financial
resources could be more appropriately focused on our communities by
making loans and providing community development services. 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. A more graduated transition to the large
bank examination is a significant improvement over the current
regulation.
I strongly 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 addition of a
category for Community Development Lending (and services to aid lending
and investments as a substitute for lending) fits well with the concept
of serving the whole community. A separate test would create an
additional obligation and regulatory burden that erodes the benefit of
the streamlined exam.
I strongly support the FDIC’s proposal to change the definition of
“community development” from only focusing on low- and moderate-income
areas residents to including rural residents. I think 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.
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. I urge the FDIC to adopt its
proposal, with the recommendations above. I would be more than willing
to discuss these issues further with you, if that would be helpful.
Sincerely,
Marilyn K. Johnson
AVP/Compliance & CRA Director
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