Federal Deposit
Insurance Corporation

RE: Proposed Revisions to the Community Reinvestment Act Regulations

Bank of Commerce supports the federal bank regulatory agencies' (Agencies) proposal to increase the asset threshold from $250 million to $500 million and to eliminate any consideration of whether the small institution is owned by a holding company. Adopting this proposal would be a major step toward greatly reducing the regulatory burden on financial institutions.

When the CRA regulations were rewritten in 1995, the banking industry recommended that community banks of at least $500 million be eligible for a less burdensome small institution examination. The most significant improvement in the new regulations was the addition of that small institution CRA examination, which actually evaluated the bank's loans to assess whether the bank was helping to meet the credit needs of its entire community. It imposed no investment requirement on small banks, it added no data reporting requirements on small banks, and it created a simple, understandable assessment test of the bank's record of providing credit in its community.

Since then, the regulatory burden on small banks has only grown larger, including massive new reporting requirements under HMDA, the USA Patriot Act and the privacy provisions of the Gramm-Leach-Bliley Act. But the nature of community banks has not changed. To comply with the requirements of the large institution CRA examination, the costs and burdens on community banks has increased dramatically. In reviewing our bank, converting to the large institution examination requires additional staff to document services and investments, the purchase of additional equipment to transmit the documentation and additional costs in providing additional training to implement these new requirements. This imposes a dramatically higher regulatory burden that drains both money and personnel away from helping to meet the credit needs of our community.

I believe that it. is as true today as it was in 1995, and in 1977 when Congress enacted CRA, that a community bank meets the credit needs of its community if it makes a certain amount of loans relative to deposits taken. Like other small institutions, our community bank's business activities are focused on a small,. defined geographic area where the bank is known in the community. The small institution examination accurately captures the information necessary for examiners to assess whether a community bank is helping to meet the credit needs of its community, and nothing more is required to satisfy the Act.

As the Agencies state in their proposal, raising the small institution CRA examination threshold to $500 million makes numerically more community banks eligible. However, in reality raising the asset threshold to $500 million and eliminating the holding company limitation would retain the percentage of industry assets subject to the large retail institution test. It would decline only slightly, from a little more than 90% to a little less than 90%. That decline, though slight, would more closely align the current distribution of assets between small and large banks with the distribution that was anticipated when the Agencies adopted the definition of "small institution." Thus, the Agencies, in revising the CRA regulation, are really just preserving the status quo of the regulation, which has been altered by a drastic decline in the number of banks, inflation and an enormous increase in the size of large banks. I believe that the Agencies need to provide greater relief to community banks than just preserve the status quo of this regulation.

The small institution test was the most significant improvement of the revised CRA. However, it deprived many community banks from any regulatory relief. A bank with more than $250 million in assets faces significantly more requirements that substantially increase regulatory burdens without consistently producing additional benefits. In today's banking market, even a $500 million bank often has only a handful of branches to serve its local community. It is recommended raising the asset threshold far the small institution examination to at least $1 billion. Raising the limit to $1 billion is appropriate for two reasons:

• First, it would keep the focus of small institutions on lending, which the small institution examination does.

• Second, raising the limit to $1 billion will have only a small effect on the amount of total industry assets covered under the more comprehensive large bank test. The additional relief provided would be a substantial reduction in the compliance burden for more than 500 additional banks and savings associations compared to a $500 million limit.

Accordingly, I urge the Agencies to raise the limit to at least $1 billion, providing significant regulatory relief while not diminishing the obligation of all insured depository institutions subject to CRA to help meet the credit needs of their communities. Instead, the changes are meant only to address the regulatory burden associated with evaluating institutions under CRA."

Bank of Commerce strongly supports increasing the asset-size of banks eligible for the small bank CRA examination as a significant step in improving the CRA regulations and reducing regulatory burden. Community banks would be examined for their record of helping meet the credit needs of their communities. This change would eliminate some of the most problematic and burdensome elements of the current CRA regulation.

Thank you for your consideration in this matter.

Sincerely,

John W. Sarver President/ CEO
Bank of Commerce and Trust Company
326 North Avenue G
Crowley, LA 70527