Charles L. Stoner is breathing a sigh of relief.

Mr. Stoner, chief executive of $48 million-asset Welch State Bank in tiny Welch, Okla., was worried that changes in Community Reinvestment Act exams would jeopardize his bank's prized "outstanding" rating.

"I was under the assumption that home loans that we had on farms we did not get to count ... under CRA," Mr. Stoner said in an interview. About 40% of Welch's portfolio is in farm loans.

Though Welch State kept its top rating, Mr. Stoner's concerns highlight the confusion surrounding the new guidelines' effect on rural agricultural banks.

But B.J. Norris, chief of the Federal Deposit Insurance Corp.'s fair- lending section, said that like all lending, farm loans are taken into account during CRA exams.

For rural agricultural banks, "ag lending is the heart of their business," she said. "Obviously, that should be an important part of the CRA assessment."

Under the CRA rules, small banks are judged on four lending criteria: loan-to-deposit ratios, lending within a bank's defined "assessment" area (its main market), distribution of loans throughout that area, and lending to borrowers of different income levels and farms and to businesses of different sizes.

According to its exam report, Welch State got above-average marks in loans-to-deposits and geographic loan distribution. It was average in lending in its assessment area and to various borrowers and businesses.

A fifth criterion looks at response to complaints about a bank's lending, of which Welch State had none.

But lending is king under the new CRA exams. The agencies are checking that a bank is making enough loans throughout its assessment area. That poses another concern for small ag banks, which often lend over much larger regions than do their urban counterparts.

The new CRA rules are prompting some bankers to consider broadening their assessment areas. Welch State already has widened its delineated lending area under the new guidelines.

As at many rural banks, Welch State's loan growth is coming from outside its traditional market. "Welch is a town of 499 people," Mr. Stoner said. "Our growth is not going to come from our banking locale."

Mr. Stoner aired his concerns about whether all the bank's farm loans would get CRA credit in a March letter to the Federal Reserve Board's Consumer Advisory Council. Welch State had just finished a CRA exam by the FDIC that left Mr. Stoner with the impression that its rating might be in jeopardy.

In fact, Mr. Stoner's letter may have helped the bank's rating, said Kenneth H. Thomas, a Miami-based CRA consultant who is studying exam results under the new guidelines. Banks should question regulators on bad ratings they think are undeserved, he said. "When you've got everything going for you, you can write a letter like this."

Welch State had a loan-to-deposit ratio of 81.35% last year, according to Sheshunoff Information Services Inc. The bank's 1.85% return on assets and 18.89% return on equity made it a top performer among its peers.

The FDIC's Ms. Norris said bankers should discuss any confusion over the new guidelines with examiners. "It is a big change," she said. "Where there are problems, whether they are real or perceived, we need to address them."

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