Federal Deposit
Insurance Corporation

September 10, 2004

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429

RE: RIN number 3064-XXXX, request for comment

Dear Mr. Feldman:

This letter is in response to the FDIC’s request for comment (RIN number 3064-XXXX) concerning proposed revisions to 12 CFR 345, commonly and herein referred to as the Community Reinvestment Act (CRA). In your press release dated August 16, 2004 announcing your request for comment you stated your agency’s proposal as: “We now propose amending the ‘small bank’ definition to $1 billion. In addition, we are proposing to add a mandatory community development criterion for those small banks with assets over $250 million and we are proposing to amend the community development definition to emphasize the importance of investments and services in rural communities.”

We are in favor of increasing the ‘small bank’ definition to $1 billion. As a member of one of the most heavily regulated industries in our economy we enthusiastically support any opportunity to lessen the record keeping and compliance burden such regulation imposes. Characterizing a bank as “small” does not lessen its obligation to provide quality and equitable banking services to its entire community, nor should it have any effect on its commitment to support its native community. Any bank that is successful in its community is going to recognize the primacy of community support and raising the ‘small bank’ definition to $1 billion will not lessen their commitment to these ideals. The main effect of the proposed change would be to allow the FDIC to continue to place primary emphasis on loans when assessing a bank’s attention to its community support responsibilities. It is through the lending process that banks have had and will continue to have the most important impact on the communities they serve. Continuing emphasis on this most important aspect of a bank’s activities would have the most solicitous effect on communities and their residents.

We do object to the portion of your proposal that says, “…amend the community development definition to emphasize the importance of investments….”. There are problems for smaller banks with the investment aspect of CRA in the first place, and to further emphasize this criterion will place these banks in a position of being almost certainly unable to fulfill the act’s expectations. First, such projects are “few and far between” in all except the largest urban communities so that a typical bank has little opportunity for participation regardless of its desire to do so. Second, financing for such projects is almost always awarded based on the lowest bid price. Smaller banks simply cannot compete with larger banks based on price and, thus, will nearly always lose the opportunity to finance the few projects that do exist on this factor alone. Unless regulations are promulgated requiring such projects to utilize a smaller bank with its higher pricing, small banks will continue to be routinely ‘shut out’ of such opportunities by their larger counterparts. While it is unrealistic to expect regulations requiring such projects to accept more expensive sources of financing, it is also unrealistic to expect a small bank to take a loss on a loan or an investment just to help meet a CRA qualification. Unfortunately, that is exactly the choice many smaller banks must frequently make when considering these kinds of opportunities. Therefore, we strenuously object to any part of a regulation that would make the investment criteria more prominent than it already is.

We do not object to the part of the recommendation that would place more emphasis on community service. We do feel that the definition of service should be broadened as to qualifying activities and expanded to include employee service activities before and after regular work hours. Service (products, locations, employee involvement in the community, etc.) is an area where the small banks can and do effectively compete with larger institutions. Smaller banks well understand the imperative to ‘give back’ to the communities they serve, and typically contribute hundreds of hours of employee time to their communities annually. Being naturally more involved in their communities, they are also usually more aware of community needs. And, because they are typically more nimble than their larger competitors, they can fashion products and services attuned to community needs more readily.

In summary, we support your initiative to raise the ‘small bank’ definition to $1 billion and are convinced that such a move will not reduce the affected banks’ commitment to community support or compliance with CRA. We object to the proposed increased emphasis on community investment as we believe it is most difficult for most banks to comply with this test as it currently stands, and to ‘raise the bar’ on this particular criterion would be to set most banks up for foreordained failure with regard to this important aspect of the regulation. We do not object to your recommendation to increase emphasis on community service as we believe the majority of banks would already qualify under this criterion whether the change was made or not.

We thank you for this opportunity to respond to the proposed changes, and applaud your effort to make the regulations more pertinent to today’s economic climate. If we may be of any further assistance regarding this matter, please do not hesitate to call on us.

Sincerely,

Richard A. Collinsworth
President
Security Bank of Bibb County
P.O. Box 4748
Macon, GA 31208
478-722-6216 (office)
478-722-6250 (fax)
collinsworth@securitybank.net (e-mail)