FDIC Federal Register Citations

September 16, 2004

Mr. Robert E. Feldman, Executive Secretary
Attn: Comment/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, D. C. 20429

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

Dear Sir or Madam:

I am a Portfolio Assistant and Lender at Community Bank, DeSoto County in Hernando, Mississippi, a small town of approximately 10,000 residents.  Our bank has total assets of approximately $175 million. However; due to the fact that we are part of a holding company (Community Bancshares of Mississippi, Inc.) that has over $1 billion in assets, we are subject to large bank CRA examination procedures. Our first examination under these procedures was recently completed.

I am writing to strongly support your agency'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 lessen the regulatory burden that is imposed on small banks under current regulations. DeSoto County, Mississippi, our primary market has a population of approximately 126,000; yet, we are required to meet CRA standards imposed upon the nation's largest banks under the current regulations. These CRA standards are very difficult to meet due to the size of our bank and market area. I am not requesting an exemption from CRA regulations, and we understand our bank would still have to meet the credit needs of its entire community, and would be subject to examination in this regard. However, I believe raising the threshold would result in a fairer CRA regulatory standard for smaller banks like ourselves.

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 your agency to adopt its original $500 million threshold for small banks without a CD criterion and only apply the new CD criterion to banks with assets of more than $500 million and up to $1 billion. Banks with assets of $500 million or less have the same percentage of overall industry assets as banks with assets of $250 million or less did when the revised CRA regulations were adopted a decade ago. So, increasing the CD threshold seems fair, appropriate and consistent. It is often extremely difficult for small banks, especially those in rural areas, to find appropriate CRA qualified investments in their communities. We are one such bank. In connection with our most recent compliance examination, it was suggested that we consider investing in securities issued by municipalities in other parts of our state to improve our rating on the investment test. Not only would investing in this manner fail to benefit our own community, the type of securities involved conflict with our overall asset liability strategy and philosophy. I do not believe this was the intent of the CRA, when it was enacted by Congress.

I also oppose making the CD criterion a separate test from the bank's overall CRA evaluation and rating. In community banks, CD lending is part of the overall lending effort. Currently, the small bank test considers the institution's overall lending in its community, and I believe the addition of a CD component or category to that test is appropriate. However, giving CD lending its own separate test and rating would create an additional regulatory burden and offset the benefit of the streamlined examination.

I also support your agency's proposal to change the definition of "community development" so the focus is not on just low and moderate income area residents, but includes rural residents. Our primary market has no low and moderate income tracts, but has plenty of rural residents. By lending to those residents, we are serving our entire community, which is what CRA was enacted to insure.

In conclusion, I believe your agency's proposed changes to CRA regulations will greatly improve the banking environment and will result in those regulations being more consistent with the spirit and intent of the Act itself. I hope you will adopt your proposal regarding CRA, with the recommendation above.

Thank you for your consideration of this matter. If I can provide any further information or you would like to discuss these issues, please do not hesitate to call me.

Sincerely,
Tracy Duff, Portfolio Assistant
Community Bank, DeSoto
Southaven, MS 38671