| FIRST BANK AND TRUST EAST
TEXAS
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 Jay Shands of First Bank & Trust East Texas located in Diboll,
Texas, a community of just over 5,000 residents. My bank has assets of
$540,000,000 and is currently subject ot the large bank CRA exam
procedures. . 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 by about 750 man hours a year and reduce the
cost of outside services provided for compliance by about $10,000 per
year.
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. 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. Prior to our last exam we spent a great deal of time
attempting to locate investments within our community and were unable to
do so. While we did make qualifying investments they did not directly
benefit our community and we did not receive full credit for them in our
last exam.
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.
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.
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,
_______________________
Jim Denman
Senior Vice President
First Bank & Trust East Texas
104 N. Temple Drive
Diboll, TX 75941
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