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Notice of Annual Adjustment of the Cap on Average Total Assets That Defines Community Financial Institutions

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Federal Housing Finance Agency.




The Federal Housing Finance Agency (FHFA) has adjusted the cap on average total assets that defines a “Community Financial Institution” based on the annual percentage increase in the Consumer Price Index for all urban consumers (CPI-U) as published by the Department of Labor (DOL). These changes took effect on January 1, 2010.

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Patricia L. Sweeney, Division of Federal Home Loan Bank Regulation, 202-408-2872,, Federal Housing Finance Agency, 1625 Eye Street, NW., Washington, DC 20006-4001.

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I. Statutory and Regulatory Background

Section 2(10)(A) of the Federal Home Loan Bank Act (Bank Act) defines a “Community Financial Institution” (CFI) as any Federal Home Loan Bank member the deposits of which are insured by the Federal Deposit Insurance Corporation and that has average total assets below a statutory cap. See 12 U.S.C. 1422(10)(A); 12 CFR 1263.1 (defining the term Community financial institution or CFI). In 2008, section 1211(a) of the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110-289, 122 Stat. 2654 (2008), amended the definition of CFI to increase the average total assets cap for CFIs to $1 billion. Section 2(10)(B) requires the FHFA Director annually to adjust the statutory cap to reflect inflation over the prior year. See 12 U.S.C. 1422(10)(B); 12 CFR 1263.1 (definition the term CFI asset cap). In 2009, FHFA adjusted the statutory cap for inflation by applying the CPI-U adjustment resulting in a 1.1 percent increase to the CFI asset cap. Accordingly, as of January 1, 2009, the adjusted CFI asset cap was $1,011,000,000. See 74 FR 7438 (Feb. 17, 2009). This Notice announces the annual CPI-U adjustment for the CFI asset cap, effective January 1, 2010.

II. Calculating the Annual Adjustment

Consistent with the practice of other federal agencies and past agency practice, FHFA bases the annual adjustment to the CFI asset cap on the percentage increase in the CPI-U from November 2008 to November 2009. Specifically, the annual adjustment to the CFI asset cap reflects the percentage by which the CPI-U published for November of the preceding calendar year exceeds the CPI-U published for November of the year before the preceding calendar year.

The DOL encourages use of CPI-U data that have not been seasonally adjusted in “escalation agreements” because seasonal factors are updated Start Printed Page 9602annually and seasonally adjusted data are subject to revision for up to five years following the original release. Unadjusted data are not routinely subject to revision, and previously published unadjusted data are only corrected when significant calculation errors are discovered. Accordingly, FHFA uses data that have not been seasonally adjusted.

For 2010, applying the unadjusted CPI-U, the current CFI asset cap has been increased by 1.8 percent to reflect inflation over the prior year. Thus, as of January 1, 2010, the CFI asset cap is $1,029,000,000, which amount was obtained by rounding to the nearest million, which has been the practice for all prior adjustments.

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Dated: February 18, 2010.

Edward J. DeMarco,

Acting Director, Federal Housing Finance Agency.

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[FR Doc. 2010-4337 Filed 3-2-10; 8:45 am]