FARMERS & MERCHANTS BANK & TRUST
From: Kent Gaudian
[mailto:kmg@fmbanktrust.com]
Sent: Wednesday, March 31, 2004 7:14 PM
To: Comments
Subject: Comments on CRA Revisions
Kent Gaudian
221 Jefferson Street
Burlington, Iowa 52601
March 31, 2004
Dear FDIC:
I am writing on behalf of Farmers & Merchants Bank & Trust, a
state-chartered bank located in Burlington, Iowa. Our customer base is
primarily agricluture and moderate income households with lending
activities that include real estate, consumer and commercial lending.
Our current asset size is $234,000,000 with a loan portfolio of
$83,000,000. We applaud and appreciate the proposed amendments to the
Community Reinvestment Act being made by the Office of Comptroller of
the Currency, Federal Reserve Board, Federal Deposit Insurance
Corporation and Office of Thrift Supervision, “the Agencies.” We also
appreciate the Agencies’ recognition and understanding of the challenges
faced by community banks in meeting the requirements of the ever-growing
number of compliance regulations.
Increasing the asset size of banks eligible for the small bank CRA
exam from $250 million to $500 million and eliminating the holding
company size limitations will go along way in reducing the regulatory
burden of many small banks, including my institution. It is ridiculous
to compare a bank with a few branch locations and total assets of $250
million to a bank with hundreds of locations and billions of dollars in
assets under the same exam process. Small banks simply do not have the
resources (money, manpower, technology) to compete with these large
institutions under the large bank test. To many times a community bank,
that has served its local community well, is not afforded the
recognition it deserves simply because it is compared with huge
multi-million dollar organizations. Just as the community investment
abilities of small and large banks differ, so do the needs of the small
and large communities they serve. The ripple affect of smaller dollar
projects in a rural community may far outweigh a multi-million dollar
investments’ impact a metropolitan area, yet the small community bank’s
CRA rating often does not reflect this.
The reporting requirements under the large bank CRA exam process are
staggering for a small bank. Under the current rules, due to our state’s
rural population an institution may not be a HMDA reporter because it is
not located in a MSA, could still be subject to the large bank CRA test
and data collection due solely to having assets in excess of $250
million. While community banks still must comply with the general
requirements of CRA, this asset-size increase will eliminate some of the
most problematic and burdensome elements of the current CRA regulation.
I also support the elimination of the bank holding company asset size
threshold. Many banks maintain their own charter, management and
operational processes when purchased by a large holding company. They
“inherit” the regulatory requirements of the holding company but do not
always benefit from the holding company’s resources for complying with
these requirements.
Increasing the size of banks eligible for the small-bank streamlined
CRA exam does not relieve banks from CRA responsibilities. The growth
and survival of the bank is intertwined with the growth and survival of
the community. The change merely reduces the reporting requirements and
costs for small bank, freeing up more time and money that can be better
spent in service to the community the bank is located.
Today’s community banks are drowning in regulatory red tape,
utilizing valuable resources to meet regulatory compliance
mandates that could be put to much better use for economic and community
development purposes in the communities they serve. Thank you for
recognizing this and proposing the changes to the Community Reinvestment
Act.
Sincerely,
Kent M. Gaudian
Farmers & Merchants Bank & Trust
Burlington, IA
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