Community Bank of Mississippi
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 :
I am a Vice President of Community Bank of Mississippi, located in
central Mississippi. We have offices in both metropolitan and rural
areas representing communities with populations ranging from 1,500
to 200,000. My bank is $515,000,000 in assets and is currently subject
to the large bank CRA exam. 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. This would greatly relieve the regulatory burden imposed
on many small banks such as my own 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 my bank would still have to help meet the credit needs
of its entire community and be evaluated by my regulator. However,
I believe that this would lower my current regulatory burden by approximately
300 man hours costing in excess of $10,000 annually.
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. Our rural markets are evaluated
separately from our metropolitan markets and have few qualified investment
opportunities as admitted by the recent examination team. To meet the
investment test in the rural markets, we have to invest outside of
our local communities. It was not the original goal of CRA nor our
desire to take these local deposits and invest them outside of our
communities.
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. Our bank makes a variety
of loans in our rural markets including loans for residences, cattle,
farm equipment, farm land, and poultry houses. These loans clearly
meet the CRA goal of lending to the entire community.
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,
Ethel Watson
Vice President
Community Bank of Mississippi
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