FDIC Federal Register Citations

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St, NW
Washington, DC 20429

RE: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold ford for the Small Bank CRA Streamlined Examination

Dear Sir or Madam:

I am the Operations Officer of First National Bank in Montevideo, located in Montevideo, Minnesota which is a small town of 5,700 residents. My bank’s assets are $135,000,000, and we are part of a nine bank holding company with total assets over one billion dollars. All of the banks in the holding company are below the $500,000,000 threshold. 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. As a National Bank our governing body is the OCC and my hope is that FDIC will support the higher threshold and that the OCC will follow this lead. The higher threshold 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 one day per month.

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. Because of our location in a rural community we have had no qualified investment opportunities in our community during the last two CRA Examinations.

I strongly oppose making the CD criterion a separate test from the bank’s overall CRA evaluation. Such differentiation creates the impression that CD lending is 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 additional 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, eroding the intent 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,

Heather Beukhof
Operations Officer
First National Bank in Montevideo
Montevideo, MN 56265