NORTHWEST GEORGIA BANK
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:
I am the Chief Executive Officer of Northwest Georgia Bank,
headquartered in Ringgold, Georgia, a small town of 2,500 residents.
Ringgold is located in Catoosa County, which has a total population of
53,000. The Bank has been subject to the large bank CRA exam since 1999
and currently has an asset size of $459 million.
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 Northwest Georgia Bank 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 the Bank would still be required to help meet the credit needs of
its entire community and be evaluated by the Bank’s regulator. Further,
the 100 years of success of Northwest Georgia Bank is due in great part
to the contributions, both monetary and non-monetary, it has made to the
community. The Board of Directors, management and staff do not view it
just as a requirement of the CRA but as a responsibility and privilege.
However, I believe that raising the threshold would lower the Bank’s
current regulatory burden by countless man-hours and immeasurable costs.
Over 500 hours are spent each year training personnel, collecting and
maintaining the required data, and verifying the validity of the data
prior to transmission, at a minimum cost of over $20,000.00.
Additionally, many hours are spent each year seeking qualified
investments that would benefit our community. The investments
recommended by regulators during a recent exam would benefit a much
larger area than the Bank’s current assessment area. I do not feel that
it was the intent of Congress when CRA was enacted to require small
community banks to assist in the development of communities outside
their own community.
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 the banks' own communities. That was
certainly not the intent of Congress when it enacted CRA. Northwest
Georgia Bank has diligently sought out qualified investments that would
benefit low- and moderate-income areas within the Bank’s assessment
area. However, it is worth noting that there are no low- or
moderate-income census tracts in Catoosa County. Further, there are no
low-income census tracts and only three moderate-income census tracts in
the Bank’s entire assessment area. In an effort to benefit low- and
moderate-income citizens within the Bank’s area, qualified investments
in the past have consisted of the purchase of county revenue bonds.
These investments, of course, are considered on a pro rata basis to the
population of low- and moderate-income families in the county.
Therefore, the Bank does not receive 100 percent recognition for this
type of investment.
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.
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. Northwest Georgia Bank operates a
full-service branch and several ATMs in rural areas within the Bank’s
assessment area. However, none of the locations are low- or
moderate-income census tracts. As already stated, there are no
low-income census tracts and only three moderate-income census tracts
within the Bank’s entire assessment area. The intent of providing these
services in rural locations is to meet the needs of the entire
assessment area through convenient access to products and services. A
change in the definition of “community development” to include rural
residents would more accurately define the Bank’s record of helping to
meet the needs of the entire assessment area.
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,
L. Wesley Smith
Chief Executive Officer
Northwest Georgia Bank
Ringgold, Georgia
