Federal Deposit
Insurance Corporation

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 Vice President for First State Bank, located in Tennessee with markets in the rural counties of Weakley, Obion, Benton, Carroll, Gibson, Henderson, and Henry. We also have markets in the MSA’s of Memphis-Shelby County, Nashville and Jackson, Tennessee. My bank size is approximately $700 million in assets. In 2004 we are being examined as a small bank but in 2005 we will be subject to large bank CRA exam.

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. We understand that this is not an exemption from CRA and that our bank would still have to help meet the credit needs of its entire market and be evaluated by my regulator. However, I believe that this would lower my current regulatory burden.

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. As FDIC examiners know, it has proven extremely difficult for small banks, especially those in rural areas, to find appropriate CRA qualified investments in their communities. Many small banks have had to make regional or statewide investments that are extremely unlikely to ever benefit the banks' own communities. That was certainly not intent of Congress when it enacted CRA. It has been impossible for us to find qualified investment opportunities in our rural communities.

With the regulation as it is currently, at year end we must totally reorganize our CRA program and begin massive new reporting, monitoring and investment program. If the FDIC adopts its proposal, we as 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 our organization, and far better than subjecting us 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. We currently have a Community Development Corporation and are currently developing new loan relations with the New Market Tax Credit program.

A significant part of our assessment area is rural; I strongly support the FDIC's proposal to change the definition of "community development" from only focusing on low- and moderate-income area residents to include rural residents. I think that this change in the definition will go a long way toward eliminating the current distortions in the regulation. We caution the FDIC to provide a definition of "rural" that will not be subject to misuse to favor just affluent residents of rural areas. Our rural areas have suffered greatly with the closing of loss of many factory jobs. These jobs were lost to our area when plants moved out of the country. We need to be able to help our local economies create more jobs to replace the great many that we have lost.

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,
Chet A. Alexander, VP
First State Bank