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SIMMONS FIRST BANK
From: Lori ORRELL [mailto:Lori.ORRELL@simmonsfirst.com]
Sent: Friday, October 01, 2004 11:19 AM
To: Comments
Subject: 3064-AC50
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 Janice Thomas of Simmons First Bank, located in Hot Springs,
Arkansas, a community of approximately 35,000 residents. My bank is $154
million in assets, but was recently purchased by a bank holding company
with assets exceeding $1 billion, and would be subject to large bank
reporting 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 regulatory burden in the way of costs and
man-hours.
I also support the addition of a community development ("CD")
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 bank’s 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. 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-income 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.
Sincerely,
Janice Thomas
Simmons First Bank of Hot Springs
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