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FIRST STATE 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 Mr. Feldman:
I am Senior Operations Officer for First State Bank, located in
Tennessee with markets in the rural counties of Weakley, Obion, Benton,
Carroll, Gibson, Henderson, and Henry. We also have markets in the MSA’s
of Memphis-Shelby County, Nashville and Jackson, Tennessee. My bank size
is approximately $700 million in assets. In 2004 we are being examined
as a small bank but in 2005 we will be 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. We understand that this is not
an exemption from CRA and that our bank would still have to help meet
the credit needs of its entire market 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. 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. It has been impossible for us to find qualified
investment opportunities in our rural communities.
With the regulation as it is currently, at year end we must totally
reorganize our CRA program and begin massive new reporting, monitoring
and investment program. If the FDIC adopts its proposal, we as 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 our
organization, and far better than subjecting us 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
currently have a Community Development Corporation and are currently
developing new loan relations with the New Market Tax Credit program.
A significant part of our assessment area is rural; 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 include 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 rural areas have suffered greatly with the
closing of loss of many factory jobs. These jobs were lost to our area
when plants moved out of the country. We need to be able to help our
local economies create more jobs to replace the great many that we have
lost.
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,
Jennifer R. Reavis, Senior Ops Officer
First State Bank |
