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FDIC Federal Register Citations

FIRST BANK AND 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,

_______________________
Jim Denman
Senior Vice President
First Bank & Trust East Texas
104 N. Temple Drive
Diboll, TX 75941
 

Last Updated 09/09/2004 regs@fdic.gov

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