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NORTHSTAR BANK OF TEXAS
October 4, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
55017th 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 Compliance Officer of Northstar Bank of Texas, located in Denton,
Texas, a suburb of Dallas, with 89,000 residents. My bank's asset size
is $267MM and we are subject to a large bank CRA exam beginning next
year. 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 the 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 -mil lion, it must completely
reorganize its CRA program and begin a massive new reporting, monitoring
and investment program. We are currently faced with this issue today. We
estimate that this change in process will consume the Majority of our
time for the balance of the year and into next year. It is extremely
difficult to quantify the financial impact this process will have on our
institution.
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.
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 Y 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.
Allie Wadley, Vice President/Compliance Officer/CRA Officer
Northstar
Bank of Texas
Denton, TX |
