Wednesday, May 23, 2018
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New guidelines would ease reporting rules for small banks

A dozen smaller banks in northwest Ohio and southeast Michigan may benefit soon from the loosening of federal reporting guidelines showing that they make investments in their communities.

But the proposal worries some consumer activists because of concerns that fewer low-income people will receive loans.

"We're keeping our fingers crossed and hoping for the best," said Lisa Rice, chief executive officer of the Fair Housing Center in Toledo.

As required by federal law since the late 1970s, banks must meet the credit needs of their entire communities and are subject to periodic evaluations of their record of community reinvestment. A satisfactory rating is needed before a bank is allowed to open a new branch or make an acquisition.

But a proposal by the Federal Reserve Bank, Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency calls for the creation of an "intermediate small" banking category for those with assets between $250 million and $1 billion.

Banks in this new category still will have to show what loans and investments they are making in their communities and the breakdown of customers' income levels and will be able to get credit for development efforts in rural and disaster areas.

But those banks no longer will be required to detail what services they offer or to specifically list small farm loans and small business loans, both of which large banks will have to track.

A 60-day public comment period is under way on this latest proposal, which has been modified from one introduced in August after more than 11,000 comments were received.

Paul Kaboth, assistant vice president in the Cleveland office of the Federal Reserve, said he anticipates that intermediate banks will list such loans anyway because that can help boost a satisfactory rating for an institution.

"For many of these banks in rural areas, making farm loans is one of the primary ways they make money," he said. "They're not going to be required to report them, but they're going to make them anyway as a way to make money."

Undetermined under the proposal is how often banks with $250 million to $1 billion in assets will be evaluated. Under current community reinvestment rules, small banks are to be evaluated every four to five years and large banks every two years.

Jim Adams, executive vice president and chief financial officer of State Bank and Trust Co. in Defiance, which has nearly $400 million in assets, said he does not expect many changes in how the bank caters to low and middle-income customers, especially in the form of offering specific programs to finance low-income housing.

"We are a community bank, so the focus is still going to be on investing in the community," he said. "We have a vested interest in making sure that we help the community expand and grow."

Mr. Adams added, however, he is not convinced that philosophy is shared by all lending institutions.

"I'm just concerned there will be some segments of the population that will fall between the cracks."

Contact Mary-Beth McLaughlin at

or 419-724-6199.

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