Federal Deposit
Insurance Corporation

From: Albert Kelly [mailto:akelly@SpiritBank.com]
Sent: Friday, June 24, 2005 2:05 PM
To: Comments
Subject: Interagency Proposal on the Classification of Commercial Credit Exposures

To Comments:

I oppose the proposed change to the classification system of commercial credit exposures primarily because any possible benefits, such as reduction of inefficiencies in the examination process, an increase in efficiently and properly classified credits, or a significant decrease in risk do not significantly outweigh the cost and effort of implementation, the cost and effort of re-training, and the burden of reworking loan and accounting procedures to comply with the proposed system. Furthermore, banks are already regulated and it is doubtful that the proposed change will significantly increase the safety and soundness of banks.

Our bank is a community orientated bank with assets of approximately $700 million. We have streamlined our credit classification system to work within the current standard and find the current standard not only familiar, but adequate.

See the following for responses to the specific questions put forward by the agencies for comment.

1. The agencies intend to implement this framework for all sizes of institutions. Could your institution implement the approach?
Yes, but with significant retraining, software and documentation expense, time and effort.
2. If, not, please provide the reasons

3. What types of implementation expenses would financial institutions likely incur? The agencies welcome financial data supporting the estimated cost of implementing the framework.
Training for all levels of employees, board members and management. Rewriting of policies, forms, and reformatting and reworking of reporting procedures. In addition, the banking software would require modification and additions to screen displays and reporting features, as well as coding changes to the software itself.

4. Which provisions of this proposal, if any, are likely to generate significant training and systems programming costs?
The rating of the borrower in coordination with the value of the assets. Reformating reports based on the dual relationship between numbers. Assessing active accounts and updating the loan category. Significant time to track the types of loan from previous years to the years that use the proposed system and make projections or comparisons between the years with differing systems.

5. Are the examples clear and the resultant ratings reasonable?
Yes.

6. Would additional parts of the framework benefit from illustrative examples?
Illustrative examples are always beneficial.

7. Is the proposed treatment of guarantors reasonable?
It would seem that the proposed guarantor treatment suggests to include the guarantor in evaluating credit strength and proper ratings. This is more realistic than the current system which ignores guarantors unless they are called upon to act.

8. Other information to be considered.
The extensive change proposed will cost alot and provide little significant benefit. Also, the Law of Unintended Consequences is ripe for execution here given the broad base interpretation possible.

Thank you for the opportunity to comment.
Sincerely,

Albert C. Kelly, Jr.
President & CEO
SpiritBank
601 N. Main
Bristow, OK 74010
(918) 367-4153