Federal Deposit
Insurance Corporation

Tower Bank

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

Email: Comments@FDIC.gov

Re: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold for the Small Bank CRA Streamlined Examination

Dear Mr. Feldman:

I am CRA Officer of Tower Bank, located in Fort Wayne Indiana, which is a city of approximately 205,727 residents. Tower Bank is a five-year old community bank. Our assessment area is Allen County with an estimated population of 331,849. The bank assets reached $473.6 million at June 30, 2004, a 16.4 percent increase over the $407.0 million reported 12 months ago. Tower had assets over $250 million for two consecutive years in 2003, which was our first year to report CRA as a Large Bank. We are currently engaged in the complete reorganization of our program and preparation for our first Large Bank on Site review in December.

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, which are required to meet the standards imposed on the nation's largest $1 billion banks. I understand that this is not an exemption from CRA and that my bank would still have to help meet the credit needs of its entire community and be evaluated by my regulator. However, I believe that this would lower my current regulatory burden by allowing the time and resources necessary (both human and financial) to establish an efficient internal system to collect & compile data, evaluate and implement a plan that supports my bank’s CRA Lending, Investment and Services criterion for Large Bank Reporting. Our intent is to provide outstanding financial services to the LMI community. The opportunity to make a gradual transition into a Large Bank will reduce the burdens unique to Small Community Banks with less than 500 million dollars in assets. The cost for this transition is hard to determine while we’re still in our first reporting cycle. The resources necessary to make the transition are on going with staff, officers and consultants. The greater cost cannot be determined until the exam is complete and a permanent monitoring and reporting system has been designed, developed, tested and implemented.

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 urge the FDIC to adopt its original $500 million threshold for small banks without a CD criterion and only apply the new CD criterion to community banks greater than $500 million up to $1 billion. Banks under $500 million now hold about the same percent 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, 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.

An additional reason to support the FDIC's CD criterion is that it significantly reduces the current regulation's "cliff effect." Today, when a small bank goes over $250 million, it must completely reorganize its CRA program and begin a massive new reporting, monitoring and investment program. If the FDIC adopts its proposal, 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 the bank, and far better than subjecting the community bank 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.

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,

Jomare Bowers-Mizzell
CRA Officer, Tower Bank