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FDIC Federal Register Citations

First National Bank of Bastrop

From: David Lewis
Sent: Wednesday, September 08, 2004 5:30 PM
To: Comments
Subject: RIN No. 3064-AC50

September 8, 2004

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS

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 David Lewis and I am Sr. 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 has caused a good deal of concern in our bank.

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 and assessment requirements of the small bank CRA examination. It is our estimation that under the big bank requirements, the equivalent of a full time employee will be necessary to collect, organize, find appropriate investments, and analyze the data necessary to comply with the large bank requirements.

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,

David Lewis
Vice President
First National Bank of Bastrop

 

Last Updated 09/09/2004 regs@fdic.gov

Last Updated: August 4, 2024