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FDIC Federal Register Citations
First Central 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 Compliance Officer of First Central Bank, located in Warrensburg,
Missouri, a community of approximately 16,000 residents. My bank is a
$108 million bank and is subject to the 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.
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.
As reported in our most recent CRA exam, the vast majority of community
investment money from our bank went to qualified municipal obligations.
With our predominantly rural assessment area, we struggle with finding
a significant quantity of suitable investment opportunities.
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.
A significant part of our bank’s assessment area is rural and
covers areas that are part of the Kansas City Metropolitan Statistical
Area and areas that are outside of the MSA. 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. One of our three branches does a large portion of their lending
in the rural and agriculture areas. Since this community is dependent
upon the agriculture industry, our branch is assisting community development
through agriculture related loans.
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.
Sincerely,
____________________
Emily Yankee
Compliance Officer
First Central Bank
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