Simmons First Bank of Hot Springs
From: Gayle Breitenfeld
[mailto:Gayle.Breitenfeld@simmonsfirst.com]
Sent: Thursday, September 30, 2004 2:13 PM
To: Comments
Subject: 3064-1c50
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 Gayle Breitenfeld 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,
Gayle Breitenfeld
Simmons First Bank of Hot Springs
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