Federal Deposit
Insurance Corporation

Troy Thompson
102 S. Clinton St.
Iowa City, IA 52240

October 8, 2004

Comment Site FDIC
,

Dear Comment Site FDIC:

Robert E. Feldman, Executive Secretary
Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429

Re: RIN 3064-AC50

Dear Mr. Feldman,

Iowa State Bank & Trust Company is a $500 million institution located in
Iowa City, Iowa. We appreciate this opportunity to comment on the notice
of proposed rulemaking regarding the Community Reinvestment Act (CRA).
Until our last CRA examination, we had been rated "Outstanding" for all
preceding exams. During our last examination, we were given a rating of
" Satisfactory" for our lack of adequate CRA Qualified Investments. Since
that examination, I have spent a tremendous amount of time in search of
these qualified investments. This task has been a relatively difficult one
and taken time away from serving the customers within my community.

We have been a locally owned community bank since 1934 in a county with a
population less than 100,000. Our bank is certainly committed to serving
the needs of the community and have done so for over 70 years. It is our
livelihood. The current CRA examination procedures create a tremendous
amount of work and cost for our bank.

We support the Federal Deposit Insurance Corporation’s (FDIC) proposal to
change the definition of “small bank” from the current asset threshold of
$250 to the proposed total assets of $1 billion, without regard to holding
company affiliation. This change would significantly decrease the
regulatory compliance burden for our institution, affording us the ability
allocate resources previously dedicated to regulatory compliance to
delivery of products and services within our community.

However, we do not support the proposed changes to the small bank
performance standards, which would include a “community development
criterion” for institutions with assets greater than $250 million and up
to $1 billion. This additional performance standard would defeat an
original intent of the February 6, 2004 interagency Notice of Proposed
Rulemaking (NPR), that being to “reduce unwarranted burden consistent with
ongoing efforts to identify and reduce regulatory burden where appropriate
and feasible…” Banks hoping to take advantage of channeling new-found
resources into lending, investment and services available to their local
communities would instead channel those resources back into regulatory
compliance efforts to evidence the banks’ participation in community
development loans, investments and services.

Under existing examination practices, small institutions are evaluated on
their records of lending to borrowers of different income levels and
businesses and farms of different sizes, focusing primarily on lending
activity within the institutions’ delineated assessment area. The FDIC’s
own discussion in this proposal admits its concern that smaller
institutions presently covered by the large bank tests have noted
difficulties with making qualified investments, including the difficulty
in competing with larger banks for limited investment opportunities and
maintaining staff and resources to do so. The addition of the “community
development criterion” for small banks would place these institutions
right back into the difficult position they have historically found
themselves when being evaluated previously under the large bank tests.

In addition, under existing interagency CRA Q&A’s, examiners can consider
“ lending-related activities,” including community development loans and
lending-related qualified investments, when evaluating the first four
performance criteria of the small institution test.” Q&A 26(a)-1, 66 FR at
36637. Another Q&A states that examiners will consider these types of
lending-related activities “when it is necessary to determine whether an
institution meets or exceeds the standards for a satisfactory rating” or
“ at an institution’s request.” Q&A 26(a)-2, 66 FR at 36637. Yet another
describes that the “small institution performance standards focus on
lending and other lending-related activities. Therefore, examiners will
consider only lending-related qualified investment for the purposes of
determining whether the small institution receives a satisfactory CRA
rating.” Q&A 26(a)-5, 66 FR at 36637. So the “community development
criterion” already exists under existing interagency examination guidance,
allowing small institutions’ performance in making community development
loans and qualified investments to positively impact their overall CRA
ratings. We find little to be gained by adding express “community
development criterion” to small bank performance standards.

Iowa State Bank & Trust Company takes seriously the spirit and intent of
the Community Reinvestment Act, recognizing that no community bank will
survive without meeting the needs of its customers and communities. We
urge you to allow banks to dedicate as much of their resources as possible
to meeting those needs, affording banks with total assets up to $1 billion
to be considered “small banks” and enjoy the existing streamlined test for
“ small bank” CRA performance.

Thank you for the opportunity to comment, and your consideration of such.
Feel free to contact me should you have questions related to these
comments.

Sincerely,

Troy R. Thompson