Mulvane State Bank
From: Carson, Frank L [mailto:Frank.Carson@MulvaneStateBank.com]
Sent: Friday, September 17, 2004 4:15 PM
To: Comments
Subject:
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 or Madam:
I am Frank L. Carson, III, President and CEO of Mulvane State Bank,
located
in Mulvane, Sumner County, Kansas, a small community of 5,500 residents.
My
bank is $65 Million and not subject to the large bank CRA Exam but
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 due to the excessive regulatory
burden that we deal with every day. This would greatly relieve the
regulatory burden imposed on many other banks 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 those banks would still have to help meet the credit needs of
its
entire community as we currently do and be evaluated by my regulator.
However, I believe that this would lower their current regulatory
burden
easily by hundreds of hours and thousands of dollars annually that
we are
able to save. We have not had any less commitment to our community
as
competition and our dedication to our community are our driving forces
not
regulatory mandates.
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 CRA 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.
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.
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.
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,
Frank L. Carson, III
President & CEO
Mulvane State Bank
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