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LEGACY BANK
From: Terry Hague [mailto:TerryH@legacybank.com]
Sent: Tuesday, September 14, 2004 2:35 PM
To: Comments
Subject: CRA $1 Billion FDIC Letter .doc
I am writing to strongly support the FDIC’s proposal to raise the
threshold for the streamlined small bank CRA examination to $1 billion.
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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 Senior Vice President of Legacy Bank, headquartered in Hinton,
Oklahoma a small western Oklahoma town of less than 2,000 residents. My
bank’s total assets are $370 million and we are already subject to large
bank CRA examinations. I am writing to strongly support the FDIC’s
proposal to raise the threshold for the streamlined small bank CRA
examination to $1 billion. This would greatly relieve the regulatory
burden imposed on many small banks like ours. As you know, we 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. This would lower my
current regulatory burden by hundreds of man-hours and save my bank
thousands of dollars which we could use to serve the small communities
and small borrowers that are the lifeblood of our small community bank.
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 like ours in rural areas to find appropriate CRA
qualified investments in their communities. We have been informed by
examiners that our investments will not qualify for CRA credit and that
we will be required to make regional or statewide investments that are
unlikely to ever benefit our 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, as we did last year, 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.
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. Along with the
above recommendations, I strongly urge the FDIC to adopt its proposal to
raise the small bank CRA threshold to $1 Billion. I will be happy to
discuss these issues further with you, if that would be helpful.
Sincerely,
Terry Hague
Senior Vice President
Legacy Bank
Hinton, Oklahoma |
