Federal Deposit
Insurance Corporation

From: Randy Edge [mailto:randyedge@citizensbankna.com]
Sent: Tuesday, September 21, 2004 5:36 PM
To: Comments
Cc: psmith@aba.com
Subject: Comments on FDIC CRA thresholds

Dear FDIC representative:

I strongly support raising the CRA threshold to $1billion for the following reasons:

1. Small banks support the communities we serve (mostly rural) in many ways. We donate money, volunteer time, provide credit to lower income people, etc. Under the large bank CRA requirements, we would have to significantly increase our investment in people, processes and technology to accommodate the burdensome CRA reporting requirements. A recent example: Our bank assembled and distributed bags of back to school supplies to students at local schools. In order for us to count that as a CRA activity, we would have to prove that a certain percentage of those students were low income. We then need to maintain those records for a period of time so that when examiners come in and perform their CRA review, we can prove to them we are giving back to the communities we serve. The more we have to spend on data collection, auditing and record keeping, the less we will be able to give back to the communities. In the example above, if we had to prove (through documentation) that a certain percentage of those students were low income in order for it to count as a CRA activity, we probably wouldn't have done it.

2. We are seeing more emphasis placed on records accuracy with the threat of severe fines for mistakes e.g. HMDA. Error free records are very costly to produce. If we were faced with the choice of making a low income apartment loan and knowing that we need to be able to accurately prove that a certain percentage of occupants were low income residents, and face fines if the records are inaccurate, what would be our incentive to make the loan? This is a dis-incentive and I think fewer of those loans would be made.

3. Banks of all size are having more and more regulations placed on them. Many require substantial reporting and auditing investments as in the new HMDA regulations which increase the degree and complexity of the regulation, and therefore the cost to administer. Small banks less than $1billion, are hit disproportionably hard because we do not have the economies of scale to make the process of collecting, reporting, monitoring, or auditing to comply with regulations an efficient process.

I think you will agree that the more our costs go up to manage the regulatory compliance component of our business, the less we will have to give back.

Please consider this perspective. After all, it is our best interest to give back to our communities, but don't make it so costly that our desire to give back is overcome by the threat of fines if our records are not 100% accurate.

Randy Edge
Vice Chairman & CEO
Citizens Bank N.A.
200 S. Main Street
Fort Scott, KS 66701