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FIDELITY HOMESTEAD ASSOCIATION
September 17, 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 President and Chief Executive Officer of Fidelity Homestead
Association, located in New Orleans, Louisiana. My bank has $712 million
in assets. Fidelity is an OTS regulated institution and we are pleased
they have taken the initiative in increasing the threshold to $1 billion
in assets and we encourage the FDIC to follow suit. 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 current
regulatory burden significantly.
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. 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 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. 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 servicing the whole community.
A separate test would create an additional CD obligation and regulatory
burden that would erode the benefit of the streamlined exam.
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,
FIDELITY HOMESTEAD ASSOCIATION
Boyd R. Boudreaux
President / CEO
cc: Allain C. Andry, III
Chairman of the Board,
Fidelity Homestead Association
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