Given the tremendous volume of comments from industry participants regarding the Basel III capital rules and the mounting political pressure regarding adoption of the rules, many industry observers had speculated that the Federal Reserve, FDIC, and OCC would be challenged to adopt the final rules before January 1, 2013 (the date established for effectiveness of portions of the rule in the release of the proposed rules). On November 9, 2012, the agencies announced that they indeed will not be able to meet that deadline.   This announcement runs contrary to the recently renewed directive by the Basel Committee on Banking Supervision for all members of the committee to adopt final rules prior to January 1, 2013. However, we believe it is appropriate for the U.S. regulatory agencies to carefully consider the impact of the rules on the U.S. banking system, particularly in light of our unique community banking system, and support the agencies delay in adopting the rules.

It is our understanding that the regulatory agencies are working through the comment letters submitted to them and are well aware of the concerns of community bankers, including the inclusion of unrealized gains and losses in the available-for-sale securities portfolio in Common Equity Tier 1 capital and the changes in risk-weighting for mortgage loans. We will continue to carefully monitor the progress of the rulemaking process as the agencies consider the impacts of the Basel III rules on the industry.