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FIRST NATIONAL BANK OF BASTROP, TEXAS
From: Brook Hurta [mailto:Bhurta@fnbbastrop.com]
Sent: Wednesday, September 15, 2004 4:33 PM
To: Comments
Subject: RIN No. 3064-AC50
September 15, 2004
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:
My name is Brook Hurta and I am an Executive Vice President of the
First National Bank of Bastrop, Texas. Bastrop has a population of 5,000
people and is located in Central Texas. We have been in business in our
community since 1889. Our bank’s assets will cross the $250 million mark
the end of this year and we will be subject to the big bank CRA
examination beginning January 2006. Frankly, the increased regulatory
burden of this milestone scares me to death.
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 ours under the current regulation, which are required to meet the
standards imposed on the nation’s largest banks. I understand that this
is not an exemption from CRA and that our bank would still have to help
meet the credit needs of our entire community and be evaluated by our
regulator. Currently we devote several days per year complying with the
reporting requirements of the small bank CRA examination. It is our
estimation that under the big bank requirements, an additional full time
employee will have to be hired to collect, organize and analyze the data
and to maintain the public file.
I also support the addition of a community development (CD) 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 our own communities. This takes money out of
our community and I am sure this was 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 like ours 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 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 our bank,
and far better than subjecting our 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. We have on
our books nearly $5,000,000 in USDA and SBA program loans, $3,500,000 in
loans to local churches, government entities, and other non-profit
organizations. For us, Community Development lending is no different
than providing credit to the entire community. A separate test would
create an additional CD obligation and regulatory burden, eroding the
intent of the streamlined exam.<
I also 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 that result in a small rural
bank being told to invest in regional affordable housing bonds for an
urban area not in the bank’s community. 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. I will
be happy to discuss these issues further with you, if that would be
helpful.
Sincerely,
Brook Hurta
Executive Vice President
First National Bank of Bastrop, Texas
cc: The Honorable John D. Hawke, Jr.
Comptroller of the Currency
Independence Square, 250 E Street, S.W.
Washington, DC 20219-0001
The Honorable Alan Greenspan
Chairman
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551 |
