First Bank & Trust East Texas
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 Jay Shands
of First Bank & Trust East Texas located in
Diboll, Texas, a community of just over 5,000 residents. My bank
has assets of $540,000,000 and is currently subject ot the large
bank CRA exam procedures. . 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 lower
my current regulatory burden by about 750 man hours a year and reduce
the cost of outside services provided for compliance by about $10,000
per year.
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. 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. Prior to our last exam
we spent a great deal of time attempting to locate investments within
our community and were unable to do so. While we did make qualifying
investments they did not directly benefit our community and we did
not receive full credit for them in our last exam.
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.
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,
_______________________
Jay Shands
President & CEO
First Bank & Trust East Texas
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