| M C BANK & TRUST COMPANY
September 16, 2004
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 a Loan Officer of M C Bank & Trust Company, located in Morgan
City, Louisiana, a community of approximately 14,000 residents. My bank
is $185 million in assets. 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 may small banks, 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 small banks, such as M C
Bank, would still have to help meet the credit needs of its entire
community and be evaluated by my regulator.
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
FCIC 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.
Sincerely,
M C BANK & TRUST COMPANY
Lisa G. Pellerin
Loan Officer |
