Federal Deposit
Insurance Corporation

From: dstaehling@coastcommunitybank.com [mailto:dstaehling@coastcommunitybank.com]
Sent: Monday, September 20, 2004 12:26 PM
To: Comments
Subject: Proposed CRA Regulations

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 Vice President of Coast Community Bank, located in Biloxi, MS. My bank is approximately $150 million in assets and currently subject to the large bank CRA exam requirements. 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. Under the current threshold, we are required to meet the same 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 on that performance. However, I believe that this would lower our current regulatory burden significantly without lowering performance.

I also support the addition of the 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 threshold of $500 million for small banks and only apply the new CD criterion to community banks greater than $500 million. 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). Therefore, this adjustment in the CRA threshold is very appropriate. As FDIC examiners know, it is often extremely difficult for small banks to find prudent qualified CRA investments, especially in small communities. In an effort to meet the existing criteria, many small banks have had to make outside investments that are unlikely to ever benefit the banks? own communities. That was probably 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 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. It would also give us 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.

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 above recommendations.

Sincerely,
M. David Staehling, Jr.
Vice President
Coast Community Bank