Federal Deposit
Insurance Corporation

September 16, 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 Chairman and Chief Executive Officer of Palmetto Bancshares, Inc., the parent holding company of The Palmetto Bank headquartered in Laurens, South Carolina. The Palmetto Bank is a $950 million bank that has been subject to the $250 million "large bank threshold" since its inception. I am writing to strongly support the FDIC's proposal to raise the threshold for the streamlined small bank CRA examination to $1 billion. While the proposed change would have very little impact on my bank because of our size and growth, our experience over the last decade gives me a personal understanding of the regulatory burden imposed on many community banks by the large bank threshold. At present, there is virtually no difference between the regulatory burden imposed on a $300 million bank and that on a $300 billion bank. I understand that the proposed change is not an exemption from CRA and that community banks would still have to help meet the credit needs of their entire community and be evaluated by their regulators. However, I believe that the proposal will dramatically lower the regulatory burden imposed on America's community banks.

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 do urge the FDIC to apply the new CD criterion only to those banks of $500 million asset size or more. Banks under $500 million now hold about the same percentage 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, especially those in rural areas like Laurens, 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 the intent of Congress when it enacted CRA.

I believe that the FDIC has proposed a major improvement in the CRA regulations, one which 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:
L. Leon Patterson
Chairman and Chief Executive Officer
Palmetto Bancshares Inc.
Laurens, SC