FDIC Federal Register Citations

From: Kevin Pfingsten [mailto:kpfingsten@bankmidwest.com]
Sent: Thursday, September 16, 2004 9:45 AM
To: Comments
Subject: Proposed CRA Changes

Dear FDIC,

Bank Midwest is a community banking organization operating in 7 location in Southwest Minnesota and Northwest Iowa. We 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 small banks under the current regulation, which are required to meet the standards imposed on the nation’s largest $1 trillion banks. Community banks would still be required to help meet the credit needs of their entire communities and would continue to be so evaluated by their regulator.
Additonally, we support the addition of a community development criterion to the small bank examination for larger community banks, but we believe the new community development (CD) criterion should be applied only to banks greater than $500 million up to $1 billion. Community banks up to $500 million now hold about the same percent of overall industry assets as community banks up to $250 million did a decade ago when the revised CRA regulations were adopted, so this adjustment in the CRA threshold is appropriate. As bankers and 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. This result certainly was not intended by Congress when it enacted CRA. We strongly oppose making the CD criterion a separate test from the bank’s overall CRA evaluation. Such differentiation creates the impression that CD lending is different from the provision of credit to the entire community. The current small bank test considers the institution’s overall lending in its community. A separate test would create an additional CD obligation and regulatory burden, eroding the intent of the streamlined exam. We 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. This change will go a long way toward eliminating the current distortions in the regulations that result in a small rural bank being told to invest in regional affordable housing bonds for an urban area not in the bank’s community.

Kevin Pfingsten
Bank Midwest
P.O. Box 611
Fairmont MN. 56031