FDIC San Francisco Region Bankers’ Forum

1
FDIC San Francisco Region Bankers Forum

• Community Reinvestment Act
• Recent Amendments
• August 31, 2005

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Overview

• Provide an overview of the Amendments
• Provide tips on how to achieve your banks
  optimal CRA performance
• Questions Answers

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Amendments

• 1) Increased small bank threshold
• 2) New category Intermediate Small Banks
• 3) Expanded definition of Community
  Development
• 4) Clarified the effects of discriminatory or
  certain credit practices on CRA rating

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Existing CRA Tests

• Small Banks TA less than 250M
• Streamlined lending test
• Large Banks TA gt 250M
• Includes small banks affiliated w/holding co.
  exceeding 1B in TA
• 3 part Test Lending, Investments, Services
• Collected and reported data on small business and
  small farm loans

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New CRA Tests

• Small Banks No change
• Intermediate Small Banks New Test
• TA 250M to 1 billion
• Subject to small bank streamlined lending test
  and new flexible community development test
• No collection of data for small business/farm
  loans
• Large Banks over 1 billion
• No change

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Intermediate Small Banks

• Two Separately Rated Tests
• Must receive Satisfactory in both tests
• New Flexible Community Development Test
• Innovative and Complexity
• Asset Size based on Changes to CPI

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Intermediate Small Banks

• Not required to collect and report small business
  and small farm loans
• Not required to collect and report location of
  HMDA loans outside MSA

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HMDA Data

• An important note for HMDA reporters
• The collection of borrowers race, ethnicity,
  gender, and income are still required for loans
  made outside an MSA.

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Community Development

• Important to identify and participate
• Activities must have primary purpose

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Community Development Existing Rules

• Primary Purpose
• Affordable housing
• Community services targeted to LMI individuals
• Activities that promoted economic development
• Activities that revitalize or stabilize LMI
  geographies

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Community Development (expanded)

• Revitalize and Stabilize Revisions to Include
• Distressed or Underserved non-MSA middle income
  rural areas
• Disaster areas to be eligible
• FFIEC to publish eligible areas
• Expanded definition is responsive

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Discriminatory or Illegal Credit Practices

• Could Adversely Impact CRA Rating
• Evidence of Discrimination
• Illegal Referral Violating Section 8 RESPA
• TIL Concerning Right of Rescission
• Unfair or Deceptive Practices violating Section 5
  of FTC

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Discriminatory or Illegal Credit Practices
(continued)

• Compliance Management System may be impacted
• Banks policies/practices
• Consumers being harmed
• Managements corrective actions
• Historical performance

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Performance Context

• Opportunities in assessment area for lending,
  investments services
• Banks product offerings and business strategy
• Banks capacity constraints
• Size
• Financial condition
• Economic climate
• Safety Soundness limitations

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Performance Context (cont.)

• Past performance
• Performance of similarly situated lenders
• Written comments in banks Public File
• Demographic Data

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Achieving Optimal CRA Performance

• Only 15 are rated Outstanding
• Review your assessment area boundaries
• New branches or office
• Changes in product mix
• Review in light of 2000 census tract designations

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Achieving Optimal CRA Performance (continued)

• Review your lending distribution
• Make sure majority of lending is within
  assessment area
• Review those areas outside the assessment area

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Achieving Optimal CRA Performance (continued)

• Establish and communicate goals for CRA
  performance
• Are we striving for an Outstanding?
• Help examiners understand your area and
  performance context
• You know your market better than examiners
• Explain anomalies and unique characteristics of
  your assessment area

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Achieving Optimal CRA Performance (continued)

• Ensure your organization understands the
  definition of community development
• Remember activities must meet definition and
  primary purpose
• Develop a mechanism to identify track community
  development activities
• Dont get credit if you dont provide for
  examiners to review
• Missed or forgotten

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Achieving Optimal CRA Performance (continued)

• Promote strong HMDA CRA (if applicable) loan
  data integrity
• Potential civil money penalties
• Affect compliance management system
• Strong controls and audit
• Determine how much community development activity
  is enough?
• Every institution is different
• Compare to performance context
• Compare to similarly situated banks in your
  market

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Achieving Optimal CRA Performance (continued)

• Measure your bank against similarly situated
  banks and the market
• Review banks w/Outstanding CRA rating
• Ensure that your fair lending program and credit
  practices are in order
• Consider CRA implications for opening and closing
  offices

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Achieving Optimal CRA Performance (continued)

• Partnership with Community Groups
• Be proactive

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Achieving Optimal CRA Performance (continued)

• Serving your community
• Expansion Plans
• Reputation
• Opportunities
• Increase profits

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Resources

• Joint Final Rule http//www.fdic.gov/news/news/fi
  nancial/2005/fil7905.html
• CRA Exam Procedures http//www.ffiec.gov/cra/exam_
  overview.htm
• Need Help?
• Jimmy Nguyen (hinguyen_at_fdic.gov) or (415)
  808-8071

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Questions?