First State Bank and Trust Company
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 Executive
Vice President of First State Bank and Trust Company, located in
Fremont, NE,
a micropolitan community of 26,000 residents.
My bank is $150,000,000 and we are not subject to the large bank
examination. 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 help lower current regulatory burden in
our industry.
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 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. Our
previous two examinations indicate that we are doing what is possible
to be done to serve our community.
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,
Charles P. Johannsen
Executive Vice President
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