First National Bank
From: Reid Sharp
Sent: Wednesday, September 08, 2004 1:48 PM
To: 'comment@fdic.gov'
Subject: RIN No. 3064-AC50
September 8, 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:
My name is Reid
Sharp and I am President of the First National Bank of Bastrop,
Texas.
Bastrop has a population of 5,000 people and is
located in Central Texas. We have been in business in our community
since 1889. Our bank’s assets will cross the $250 million mark
the end of this year and we will be subject to the big bank CRA examination
beginning January 2006. Frankly, the increased regulatory burden
of this milestone scares me to death.
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 ours under the current regulation, which are
required to meet the standards imposed on the nation’s largest
banks. I understand that this is not an exemption from CRA and that
our bank would still have to help meet the credit needs of our entire
community and be evaluated by our regulator. Currently we devote
several days per year complying with the reporting requirements of
the small bank CRA examination. It is our estimation that under the
big bank requirements, an additional full time employee will have
to be hired to collect, organize and analyze the data and to maintain
the public file.
I also support the addition of a community development (CD) 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 our own communities.
This takes money out of our community and I am sure this was 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 like ours 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 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 bank, and far better than subjecting
our 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. We have
on our books nearly $5,000,000 in USDA and SBA program loans, $3,500,000
in loans to local churches, government entities, and other non-profit
organizations. For us, Community Development lending is no different
than providing credit to the entire community. A separate test would
create an additional CD obligation and regulatory burden, eroding
the intent of the streamlined exam.
I also 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 that result
in a small rural bank being told to invest in regional affordable
housing bonds for an urban area not in the bank’s community.
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 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,
Reid Sharp
President/CEO
First National Bank
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