Federal Deposit
Insurance Corporation

First Bank of San Luis Obispo

October 13, 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 Mr. Feldman:

I am the AVP/Compliance Administration and CRA Officer for First Bank of San Luis Obispo, located in San Luis Obispo. CA. San Luis Obispo is a small town which has a population of about 40,000 people but a strong small business contingency and is very community-minded. My institution has $285 Million in total assets and became subject to CRA large bank examination rules in January of 2003.

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. 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;

something my institution has always been committed to in the past and will continue to be in the future. However, I believe that this- change would lower my current regulatory burden by significantly reducing the number of man-hours and resources required to comply. For our institution this is at least 100 hours per month at an annual estimated cost of about $45,000 and rising.

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 to find appropriate CRA qualified investments in their communities. This has proven especially true for our community. With only a handful of moderate-income tracts and no low-income tracts, the availability of qualified investments is very minimal. Thankfully, in each of our last two CRA Performance Evaluations, FDIC examiners recognized our specific investment environment and made comments to that effect within the performance context. However, as we get larger, we have also been cautioned that such allowances may not be sufficient and that we will need to make greater efforts to meet investment obligations, with only limited regard to opportunity.

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. From personal experience, the transition process is costly and time consuming and in effect netted no greater benefit to our surrounding community which we have faithfully and consistently served well for almost 25 years!

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.

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
Ann Marie Wood
AVP/Compliance Administration/CRA Officer
First Bank of San Luis Obispo