MidWestOne Bank & Trust
From: Steve Hicks [mailto:STEVEH@mwofg.com]
Sent: Monday, September 13, 2004 6:47 PM
To: Comments
Subject: RIN No. 3064-AC50
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 Executive
Vice President of MidWestOne Bank & Trust, located
in Oskaloosa, IA; a county seat of 10,000 people located deep in
the heart of Iowa agriculture. My bank is $285,000,000. 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 substantially
lower my current regulatory burden in dealing with CRA.
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. The bank
is deeply entrenched in agriculture and our success is directly proportional
to the success of Iowa farmers. Our current market covers most of
Mahaska County, a large portion of which is rural farmland. With
Mahaska County considered a low to moderate income County, all lending
we do within the county should clearly meet the goals of what CRA
was initially designed for.
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,
Steve Hicks
Executive Vice President
MidWestOne Bank & Trust
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