Mid-Missouri Bank
To: Robert E. Feldman
Executive Secretary, FDIC
From: David E. Wright, CRA Officer
Mid-Missouri Bank, Springfield, Missouri
Date: March 29, 2004
Subject: Joint Notice of Proposed Rulemaking
Community Reinvestment Act Regulations
Thank you for the opportunity to comment on the Notice of Proposed
Rulemaking for the Community Reinvestment Act implementing regulations.
I serve as the CRA Officer for a $330 million bank in Springfield,
Missouri. Though larger than many banks in the U.S., we are a relatively
small player in terms of the overall financial institution landscape,
especially compared to some of our “peers” who are
also evaluated under the Large Bank Test for CRA purposes – peers
like Bank of America and Citigroup.
While the current
$250 million asset threshold may have been a good proxy for what
constitutes
a “large” institution in 1995,
the industry has outgrown this threshold through record growth and
through mergers and acquisitions. We are fast approaching having
three U.S. banks with in excess of $1 trillion in assets, according
to recent American Banker articles. Our bank would not be considered “similarly
situated” for CRA purposes when compared with these three banks,
but our CRA performance is, in fact, currently judged using the exact
same rules.
Regulators quoted
in the recent American Banker articles have pointed out that the
largest
U.S. financial institutions have small “footprints” compared
to WalMart and Starbucks. It seems inconsistent for the same regulators
who claim Bank of America is a “small” U.S. business
when compared to Starbucks to then place our $330 million bank in
the same category as Bank of America, with $970 billion in assets,
when sending their examiners out to evaluate our CRA performance.
Another way of looking at this issue is to determine whether there
is available to our bank the ability to be judged fairly under the
existing rules, regardless of whether we are compared to Citigroup
and Bank of America. Springfield, Missouri is a stable community
in southwest Missouri with a city limit population of 140,000 and
a metropolitan area population of approximately 250,000. Lending,
service, and investment opportunities are readily available in Springfield
and we are very involved in these opportunities.
However, although our bank is headquartered in Springfield, most
of our deposit base and five of our six offices are located in rural
communities outside of Springfield. The community development lending,
service, and investment opportunities in these communities are much
less apparent.
Our bank, like many community banks our size, was formed by the
merger of smaller banks into one larger institution. However, we
still function as a collection of small rural banks, not as a large
metropolitan bank. Our branches are all located in towns of fewer
than 10,000 people, including one in a town of 507 people. Most
of the communities we serve are too small for our CRA Large Bank “peers” to
even consider doing business in.
We are serving
these communities in ways the largest banks don’t
want to or can’t. We bolster their economies, we make the loans
that support their small businesses, and we lead their community
service and development projects. But the opportunities for qualified
investments just aren’t there. To meet the litmus test for
Investments, we have to search for all available investments in Springfield
and create new ones where we can. But in doing so, we aren’t
addressing the real needs of the communities we actually serve. Rather,
we are often funneling money into investments where they are available
to comply with the CRA regulation.
The regulatory
response to this scenario has often been that banks should be creating
investment
opportunities in these smaller communities.
My reaction to this is twofold. First, a bank alone cannot create
these opportunities – there has to be an identified need and
there has to be a willingness in the community to address that need.
The community affairs staffs of each of the regulatory agencies have,
at times, tried to create partnerships between banks and community
groups to address supposed community development needs and met with
failure because there wasn’t enough community backing. What
is true for the regulators is true for banks - you can’t create
something that isn’t needed or wanted.
Second, the regulation
discourages many of the types of investments, loans, and services
that are wanted and needed in small communities
because they don’t meet the definitions of community development,
small business, or small farm established by the regulatory agencies.
One example would be investments in the local YMCA because the organization
supposedly places too much emphasis on exercise and too little on
financial literacy or some other qualifying activity. In fact, most
rural YMCA’s have valuable and necessary community programs
such as after school programs that should meet the qualification
test but usually don’t with examiners.
Additionally,
volunteering for the local Habitat for Humanity typically doesn’t
receive credit from examiners unless the work is done on bank time.
Even
then, the focus is on whether bank officers (not
merely employees) are conducting financial literacy training for
Habitat, not on whether they pound nails and paint walls. In short,
the current regulation has made it too hard for community banks who
meet the CRA Large Bank definition to meet the true needs of their
communities and be judged as having done so for CRA purposes.
Most organizations and individuals who care to have an opinion on
CRA could come to a compromise agreement that the CRA performance
of larger financial institutions should be judged on a broader
scale than that of smaller community banks. Moreover, most would
agree that the streamlined Small Bank CRA evaluation accurately
reflects the fact that smaller community banks are meeting the
needs of their communities in the most basic way by simply making
loans. The main point of discussion and disagreement is at what
level the asset threshold should be set in creating pools of institutions
that are deemed to be Large Banks and Small Banks for CRA purposes.
I support the current proposed threshold of $500 million and the
elimination of the holding company rule for the reasons outlined
above. Raising the threshold to this level will more accurately outline
the differences between larger financial institutions and those smaller
banks that have grown significantly over the past few years in asset
size but which are still essentially small community banks.
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