First State Bank
October 28, 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 Mr. Feldman:
I am Senior Vice President 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,
_______________________
Mark A. Winfree, SVP
First State Bank
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