| HILLSBORO BANK
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 Vice President/CRA/Compliance Officer of Hillsboro Bank, located
in Plant City, Florida. Plant City is ideally located in the heart of
Central Florida situated in the northeastern corner of Hillsborough
County. Our community is delineated as the northeastern section of
Hillsborough County. The area surrounding our community consists of
pasturelands, citrus groves, produce fields, and nursery farms. The
majority of all the winter strawberries in the US are grown on 6,000
acres of farmland surrounding Plant City. Our other agricultural
activities include cattle, poultry, agriculture, horticulture, and
aquaculture. We also have industrial parks for light, high-tech industry
and distribution centers. Hillsboro Bank has an asset size of
approximately $68 million and is not yet subject to the 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, if applicable.
This would greatly relieve the regulatory burden imposed on many small
banks, which are, or will be, 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 small banks would still have to help meet
the credit needs of its entire community and be evaluated by regulators.
However, I believe this would lower current regulatory burden for small
banks currently subject, or will become subject as they increase in
asset size, to large bank CRA examinations.
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 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- 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. The majority of our loans are to farms and
small businesses, which benefits the economy of our entire 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,
Marcia Baker
Vice President/CRA/Compliance Officer
Hillsboro Bank
509 West Alexander St.
Plant City, FL
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