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SABINE STATE BANK & TRUST COMPANY
October 12, 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 Sir or Madam:
I am Chairman of the Board of Sabine State Bank and Trust Company,
located in Many, Louisiana. Our bank is $400 million in total footings
with 41 locations. Of those, 27, including our Main Office, are located
in communities with populations of less than 5,000; seven are located in
communities of 5,000 to 10,000; and seven in communities with
populations over 10,000.
I am writing to strongly support the FDIC’s proposal to raise the
threshold for the streamlined small bank CRA examination to $1 billion.
This would greatly relieve the regulatory burden imposed on many smaller
banks such as my own under the current regulation. The standards are the
same as those imposed on the nation’s largest banks; those with billions
of dollars of assets.
I understand that this is not an exemption from CRA. My bank would still
help meet the credit needs of our entire communities and be evaluated by
my regulator.
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. I urge the FDIC to
adopt the 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
community banks, especially those in rural areas, to find appropriate
CRA qualified investments in their communities. Many of those 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 million, it must completely reorganize
its CRA program and begin a massive new reporting, monitoring and
investment program. This was certainly true in our case!
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 multi billion dollar 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 in favor of
affluent residents of rural areas.
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. I urge the FDIC to adopt its proposal
with the recommendations above.
Sincerely,
James R. Cole, Sr.
Chairman of the Board & CEO
P. O. Box 670
Many, La. 71449
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