Katahdin Trust Company
From: Charlene Brownlee [mailto:c.brownlee@katahdintrust.com]
Sent: Friday, September 17, 2004 9:26 AM
To: Comments
Cc: psmith@aba.com
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 CRA Officer of Katahdin Trust Company, located in Patten, Maine,
We are a small town in Northern Penobscot County and our assessment
area is this small town and Aroostook County, which consists of an
approximate population of 75,000 residents. My bank is now subject
to a large bank CRA exam and our total assets are approximately $333
million. 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 reducing
the hours required for the additional record keeping requirements.
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. The
majority of our real estate loans are to low income borrowers. We
also participate with Rural Development to make homes available to
the very low income.
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. We are located in a very
rural and economically depressed area of the State. I feel that all
of our loans would meet the goal for CRA lending.
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,
Charlene Brownlee
Vice President, CRA Officer
Katahdin Trust Company
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