Federal Deposit
Insurance Corporation

Ref: FDIC –PR-28-2005

Proposed Classification of Commercial Credit Exposures

I recently received an e-mail regarding the above referenced proposal, after discussing the e-mail with our chief lending officer, who use to work for a large institution that used a grading system that you refer to in the proposal. The institution that I work for is a community bank, assets of around $180 million, my concern is that smaller community banks [less than $500 million] in my opinion may have difficulties in implementing a grading system such as the one indicated in the proposal. Some of the issues I think is ability of the computer / tracking system to handle the grading of the loans / relationship, and the staffing requirements in order to monitor the loans / relationships. For our loan grading system we use the standard 1 thru 8 as defined by FDIC, and have established standard reserve requirements for the various loan grades and historical losses, based upon this formula our Allowance for Loan Loss has been indicated during recent examinations by regulators and our external auditors as adequate. I think if you are going to implement this proposed grading system then it should be implemented for the larger banks that have the ability both technical and staffing to implement such a grading system. We have been using our grading system for 5 years now and it is working fine for a bank our size and with the technology available to use, and staffing, and as stated before our last examination went well, and during our latest examination from our external auditors they even commented on how well they thought we were grading loans according to the grade definitions in our loan policy, and how well we are doing on the allowance for loan loss calculations.

Basically “if it is not broke do not try to fix it”

Thank you.

Kevin A. Canan, Vice President / Auditor / Loan Review Officer
The Citizens Bank of Logan
740-385-8561 Ext. 241