UNITED COMMUNITY BANK
October 7, 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 Mr. Feldman:
I am President and CEO of United Community Bank, located in Gonzales,
Louisiana, a small town of 8,156 residents. My bank is $70,000,000 in
assets and not yet subject to large bank CRA exam. 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 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
and allow my Compliance Officer to spend more time on auditing and
monitoring.
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. 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 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 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 state nonmember
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 the bank,
and far better than subjecting the 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 also
recently received Volunteer Ascension’s Volunteer of the Year award
which recognized the bank’s support of many local service and civic
organizations, including
Habitat for Humanity. We have developed a loan program designed to help
low-to-moderate income consumers realize their dream of home ownership.
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. Our lending assessment area includes
low-to-moderate income as well as upper income residents. We have made
reasonable efforts to develop and market products and services to meet
the financial needs of all income levels.
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,
Paul A. Callais
President & CEO
