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CRA NUTS & BOLTSFIVE STEPS TO PASS THE EXAM

JUNE 2, 20151:30-3:30

Presented by:

Susan Costonis, C.R.C.M.Compliance Training & Consulting for Financial Institutions

E-mail: [email protected]

1CRA – Five Steps to Pass the Exam© Susan Costonis, C.R.C.M.Compliance Training and Consulting

TABLE OF CONTENTS

OVERVIEW FOR CRA- FIVE STEPS TO PASS THE EXAM .............................................. 3

OVERVIEW................................................................................................................................4CRA HISTORY, THRESHOLDS FOR 2015, AND LENDING TEST FACTORS..................5CRA RATINGS...........................................................................................................................8FIVE STEPS TO PASS THE EXAM.......................................................................................12STEPS TO SUCCESSFUL CRA PERFORMANCE................................................................16MONITORING AND TRACKING PROGRESS.....................................................................17CRA LOAN DATA COLLECTION GRID..............................................................................20SEARCHING FOR PUBLIC EVALUATIONS OF COMPETITORS....................................28

ASSESSMENT AREA ISSUES .................................................................................................. 29

ASSESSMENT AREAS OVERVIEW AND DEFINITION....................................................30HOW CAN YOU BEGIN TO SELECT THE ASSESMENT AREAS?..................................33

PREPARING FOR A CRA EXAM ........................................................................................... 36

PREPARING FOR A CRA EXAM..........................................................................................37RESPONDING TO THE REGULATOR..................................................................................39STEPS FOR ASSESSING LENDING PERFORMANCE.......................................................40CRA COMPLAINTS.................................................................................................................44SAMPLE COMPLAINT AND INQUIRY POLICY................................................................45

CRA RESOURCES .................................................................................................................... 51

CRA TOOL KIT........................................................................................................................52INTERAGENCY CRA QUESTIONS......................................................................................53FFIEC DEMOGRAPHICS........................................................................................................582014 DISTRESSED OR UNDERSERVED GEOGRAPHIES.................................................62FEMA FEDERAL DISASTER DECLARATIONS.................................................................63DISASTER RECOVERY FAQ’S FROM THE FEDERAL RESERVE..................................64DOES YOUR BANK MEASURE UP?....................................................................................66WHAT”S NEW – FFIEC- CRA................................................................................................67SOURCES OF INFORMATION FOR MANAGING CRA.....................................................68


Overview for CRA- Five Steps to Pass the Exam


OVERVIEW

CRA Game Plan –How to Define an Assessment Area, Collect Data, and Pass the Exam

Our topic for the module will focus on several simple steps to ensure a successful CRA (Community Reinvestment Act) exam outcome. Writing a dynamic CRA context report can show examiners not only that your bank understands the community credit needs, but that you are effectively meeting the needs in the assessment areas you serve.

We will review the steps required to establish your case and demonstrate why your CRA program qualifies for a "Satisfactory" or possibly an “Outstanding” rating. The only way you can be sure that your performance context tells the right story is to tell the story yourself. Topics covered in this session will include:

The importance of developing a CRA strategy and steps for successful implementation What’s included in a performance context? Learn how to describe your institution,

quantify the ability and capacity of the institution to meet credit needs based on financial data, and any issues that should be highlighted about a holding company, affiliate or subsidiary.

Learn how to highlight the positive outcomes of your lending focus and business strategy

Tips to describe your assessment area including demographic and economic data resources

“Best practices” to deal with CRA-related complaints and potential fair lending issues that can threaten a successful exam.

Steps for managing a CRA exam, including a review of the components of the rating process

Helpful CRA compliance resources and regulatory guidance


CRA HISTORY, THRESHOLDS FOR 2015, AND LENDING TEST FACTORS

The Community Reinvestment Act (frequently referred to as CRA) was enacted by Congress in 1977 (12 U.S.C. 2961) and implemented by Regulations 12 CFR parts 25, 228, 345, and 563e.

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound banking operations.

The Community Reinvestment Act states that “regulated financial institutions have continuing and affirmative obligations to help meet the credit needs of the local communities in which they are chartered.” The act then establishes a regulatory regime for monitoring the level of lending, investments, and services in low- and moderate-income neighborhoods traditionally underserved by lending institutions. Examiners from three federal financial regulatory agencies assess and “grade” a lending institution’s activities in low- and moderate-income neighborhoods. The federal agencies conducting CRA examinations are: the Office of the Comptroller of the Currency that examines nationally chartered banks and formerly any Office of Thrift Supervision institutions that examined savings and loan institutions; and the Federal Deposit Insurance Corporation and the Federal Reserve Board, both of whom examine state chartered banks.

CRA regulations establish various tests for lending institutions of different sizes. Under each test, examiners rate banks according to their lending records and responsiveness to community needs. Banks receive a score based on their evaluations of “outstanding”, “satisfactory”, “needs to improve”, or “substantial non-compliance.” The last two scores can result in delays or denials of mergers, acquisitions, or expansions of services.

Lending institutions with assets greater than $1 billion are subjected to the most rigorous exams. They are evaluated under a lending test that considers the number and percentages of loans made to low- and moderate-income individuals and communities. Likewise, they are evaluated under an investment test and a service test that consider, respectively, the number and types of investments and services (branches and bank accounts) in low- and moderate-income communities. When conducting the evaluations, examiners are to consider the “performance context” of the lending institutions. In other words, examiners are advised to consider factors such as the business opportunities available to a lending institution and the size and financial condition of the lending institution.

In 2005, the federal agencies established a streamlined exam for “intermediate small banks” defined as institutions with assets of $250 million to $1 billion (the asset range is adjusted annually to take inflation into account). These intermediate small banks or mid-size banks undergo a lending test and a community development test. The community development test incorporates elements of the large bank’s investment and service test. The community development test scrutinizes the amount and responsiveness of a mid-size bank’s community development lending, investing, and services. The mid-size banks are no longer required to


report small business or community development lending data. Small banks, as defined as institutions with less than a threshold that is adjusted for inflation annually, are not subjected to an investment and service test. THESE THRESHOLDS CHANGE EACH YEAR.

CRA Asset Size for 2015 The regulators have published a joint final rule making technical amendments to their respective CRA regulations to adjust the asset-size thresholds used to define “small bank” or “small savings association” and “intermediate small bank” or “intermediate small savings association.” The amendments are effective January 1, 2014

2015 CRA Asset Size Thresholds

Assets less than $1.221billion are “small banks”

Assets of at least $305 million and less than $1.221billion are “ intermediate small banks”

Assets greater than $1.221billion are “large banks” and must report CRA activity

Their lending test consists of the following five criteria: a “reasonable” loan-to-deposit ratio, the percentage of loans in the bank’s assessment area, the bank’s distribution of loans to individuals of different income levels and businesses and farms of different sizes, the geographic distribution of loans, and the bank’s record of responding to written complaints about its lending performance in its assessment area.

LENDING TEST FACTORS1. “Reasonable” loan-to-deposit ratio

2. The percentage of loans in the bank’s assessment area

3. The bank’s distribution of loans to individuals of different income levels and businesses and farms of different sizes

4. The geographic distribution of loans,

5. Record of responding to written complaints about its lending performance in its assessment area; this includes fair lending and UDAAP issues.

Wholesale and limited purpose banks are assessed under a test tailored to their capabilities. These banks provide services such as offering credit cards or specialize in large commercial deposits. Lending tests cannot adequately assess wholesale and limited purpose banks because many of them do not accept consumer deposits or make home loans. Instead examiners focus their evaluation of these banks on the number of community development loans and investments (such as affordable housing rehabilitation loans, low-income housing tax credits, or investments in organizations that finance small businesses). The tests for mid-size and large banks also


consider community development loans and investments. Any lending institution can opt for developing a strategic plan in lieu of a regulator evaluation. Developed in conjunction with neighborhood organizations, a strategic plan seeks to satisfy the credit needs of a bank’s assessment area and must address the lending, investment, and service criteria that would have been part of the usual evaluation. Federal regulators must approve the strategic plan and rate it at least “satisfactory.” If a bank receives a lower rating on its plan, it has the option of submitting to the applicable tests for large, small, or limited purpose banks.

A CRA rating can be downgraded if a federal agency uncovers evidence of illegal, abusive or discriminatory lending on fair lending exams that occur at about the same time as the CRA exam.


CRA RATINGS

Please see the CRA Resources section at the end of the manual for a link to the Interagency CRA FAQ’s. The FAQ’s are forty pages and contain very useful information.

There are five possible ratings for CRA performance.

OUTSTANDING

HIGH SATISFACTORY

LOW SATISFACTORY

NEEDS TO IMPROVE

SUBSTANTIAL NONCOMPLIANCE

There is a table on page 25 of the FAQ’s that shows how regulators determine the performance rating for a financial institution.


Your Bank's Overall CRA RatingSource: http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm

Examiners assign your bank an overall CRA rating based on factors included in the performance standards described above. The table shows how these specific factors contribute to a large bank's overall rating of outstanding, satisfactory, needs to improve, or the lowest rating—substantial noncompliance. A small bank receives one of these four ratings based on its performance under the standards for small banks.

Regardless of whether your bank is large or small, any evidence of discriminatory or illegal credit practices will have a negative effect on examiners' evaluation of your bank's performance and could lower its overall CRA rating.

Criteria for a Large Bank's CRA Ratinga

CRA Ratings

Performance Criteria Outstanding Satisfactoryb Needs to Improve Substantial

Noncompliance

Lending c

Responsiveness to credit and community development needs through lending practices, qualified investments, and services

excellent good or adequate poor very poor

Percentage of loans made in the assessment area

substantial majority high or adequate small very small

Distribution of loans among geographic areas, people of different income levels, and businesses of different sizes

excellent good or adequate poor very poor

Quality of excellent good or adequate poor very poor


http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm#sup_a

http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm#sup_b

http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm#sup_c

http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm#table

http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm

service for credit needs of extremely economically disadvantaged areas, low-income individuals, and small businesses

Use of creative lending practices to address credit needs of low- or moderate-income people or neighborhoods

extensive limited little no

Investment

Use of innovative or complex qualified investments to support community development needs

extensive extensive or occasional rare no

Service

Accessibility of services to all geographic areas and people of different income levels

readily accessible

reasonably accessible

unreasonably inaccessibled

unreasonably inaccessibled

Way in which openings and closings of branches have affected access to services,

have made more accessible

have not adversely affected

have adversely affected

have significantly adversely affected


http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm#sup_d

http://www.frbatlanta.org/pubs/cra/your_banks_overall_cra_rating.cfm#sup_d

particularly for low- or moderate-income areas or individuals

Way in which services are provided throughout the assessment area for the convenience and needs of customers

services are tailored

services do not vary in a way that inconveniences

services vary in a way that inconveniences

services vary in a way that significantly inconveniences

a The performance criteria for small banks are simpler. See "Standards for Small Banks."

b Banks receive an underlying rating of "high satisfactory" or "low satisfactory," but the public record reflects only a single rating.

c A bank's lending practices carry nearly twice as much weight as either its investment or service practices in the overall rating.

d Particularly to low- or moderate-income areas or individuals.


http://www.frbatlanta.org/pubs/cra/standards_used_to_evaluate_your_banks_cra_performance.cfm#SmallBank

FIVE STEPS TO PASS THE EXAM

What are the advantages and steps to developing a CRA strategy? One of the advantages to adopting a CRA strategy is that is helps your financial institution to treat CRA efforts as a line of business. Creating this focus for CRA will help your institution to plan CRA related activities and develop methods to measure their success. A CRA strategy should also be reviewed and approved by the Board of directors.

Here are the five steps to creating a CRA strategy that will help your bank PASS THE NEXT CRA EXAM:

STEP ONE Understand CRA Performance Evaluation CriteriaSmall, Intermediate Small and Large Bank criteria with YOUR primary regulator

STEP TWO Assess Financial Institution Performance ContextSTEP THREE Assess Community Credit NeedsSTEP FOUR Match Financial Institution Products and Services with Community Credit NeedsSTEP FIVE Develop performance rating goals and objectives

STEP ONE: Understand CRA Performance Evaluation Criteria. There are two parts to this step.

PART ONE Determine if your institution is a Small, Intermediate Small or Large BankPART TWO REVIEW YOUR LAST PERFORMANCE EVALUATION AND THE

PERFORMANCE EVALUATIONS OF YOUR COMPETITORS!!!

Small Institution $305 Million or less

"Small bank" or "small savings association" means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.221billion. This is $305 million or less.

Intermediate Small Institution $305 Million and less than $1,221 Billion

"Intermediate small bank" or "intermediate small savings association" means a small institution with assets of at least $305 million as of December 31 of both of the prior two calendar years, and less than $1,221billion as of December 31 of either of the prior two calendar years.

$1,221Billion or greater$1,221billion or greater as of December 31 of either of the prior


Large Institution two calendar

Small Institution, $305 million or less

Lending Test in the AA CRA Reporting Optional

Intermediate Small Institution$305 million and less than $1,221billion

Lending and Community

Development Test in the AA

CRA Reporting Optional

Large Institution$1,221Billion or greater

Lending, Services, and Investments Test

CRA Reporting Required

This is a link to the interagency Small Institution CRA Exam procedures; it’s 13 pages. (All exam procedures can be found on this site or from your primary regulator). http://www.ffiec.gov/cra/examinations.htm#EX_PROCEDURES

STEP TWO: Assess Financial Institution Performance Context

There are six parts to this step.

PART ONE Identify and build on your financial institution capacity, strengths, and business model.

PART TWO Analyze your bank’s loan to deposit ratio and HMDA and Small business data to determine in/out ratio and loans to borrowers of different incomes.

PART THREE Track economic and demographic trends in your community housing stock, costs and income levels.

PART FOUR Read local revitalization plans, such as HUD consolidated plans and those reports prepared by the Federal Home Loan Banks and others to help determine community credit needs

PART FIVE Develop a peer analysis of similarly situated institutions

PART SIX Catalogue CD opportunities to lend, invest or provide services


STEP THREE: Assess Community Credit Needs

There are six parts to this step

PART ONE Review written reports and publications on credit needs and programs to serve LMI families

PART TWO Become knowledgeable of reports by entities that specifically research and analyze policies affecting underserved areas

PART THREE Explore needs of the least-served areas, where opportunities may be greatest and the competition is least.

PART FOUR Compare and contrast products and services provided to best served areas.

PART FIVE Community Contacts Make contact and develop relationships with community groups,

CD practitioners Develop relationships with local and state government officials. Make contact with small business advocates Make use of bank regulatory resources

PART SIX Competitive Analysis What are other financial institutions doing that are evaluated by

your regulator? HOT TIP!! READ THEIR PEFORMANCE EVALUATIONS!!

STEP FOUR: Matching Financial Institution Products and Services with Community Credit Needs. There are ten parts to this step.

PART ONE Compare performance context, products and services to community needs.PART TWO Identify gaps in lending and service by borrower income, geography or

product PART THREE Evaluate products and service offeringsPART FOUR Evaluate products and service offeringsPART FIVE Develop and maintain a relationship with bank business units and branch

managers

PART SIX Train staff to be aware of CRA objectives and CD lending, investment and service opportunities

PART SEVEN Consider developing new loan products to meet needsPART EIGHT Explore option for CD product delivery by establishing a bank-owned CDC

or investment in a multi-bank CDC, loan fund or loan poolPART NINE Use government loan programs as resources to manage and mitigate risk.PART TEN Match contributions and grants with CRA objectives


STEP FIVE: Develop performance rating goals, objectives

There are four parts to this step.PART ONE Performance Benchmarks

Lending Mortgage Lending (Consumer optional) Commercial/Small Business Lending Community Development Lending

Investments – Qualified Community Development InvestmentsServices - Qualified Community Development Services

PART TWO Consider establishing goals for business units and staff within each unit Review and adjust incentive and compensation plans Devote sufficient resources to CD activity Allow time for products marketing and delivery mechanisms Be patient and allow time for relationships to mature

PART THREE Look at the CRA process for internal inefficiencies and obstacles! Make periodic reports to the Board regarding the progress in achieving the goals.

PART FOUR Understand and communicate the role of community development activities CD products generate revenue CD initiatives can expand your bank’s market CD initiatives complement existing product lines CD initiatives may require special knowledge CD risks can be managed and mitigated


STEPS TO SUCCESSFUL CRA PERFORMANCE

There’s an old adage about “Plan your work and work your plan”. In order to a CRA program to be successful it’s necessary to not only develop and workable plan but also to actively monitor and track the progress being made in achieving these goals.

This process begins with Board approval of the plan and any amendments that may be made to the plan.

Many financial institutions find it helpful to have a formal CRA committee to manage this process. The composition of the CRA committee depends on the structure and culture of the financial institution. Typically the members may include representatives from these areas:

Board representation (this may be a single member or a member that serves on a rotating basis)

Senior management (CFO and others) Senior lender Branch operations Loan operations Compliance Marketing Human resources (especially if CRA performance is a component of an incentive plan)


MONITORING AND TRACKING PROGRESS

There are multiple considerations for developing adequate monitoring and tracking systems. Depending on the asset size of the institution and the need to formally report CRA loans for business and community development, some of these systems may include:

Loan approval sheets (that detail loan purpose, borrower information, gross revenues of the business, geo-coding)

Loan application register for CRA reporting* Loan origination system or software

*NOTE: Only LARGE banks are required to submit an annual CRA reporting LAR; the guide for CRA REPORTING can be found on the FFIEC website and is 64 pages. Here is the link:

http://www.ffiec.gov/CRA/pdf/cra_guide.pdf

In addition to the raw data that may be provided for lending activity, it’s important to engage in a process of self-evaluation. Some of the areas to consider include:

Impact and effectiveness of the marketing efforts for the CRA strategy Periodically reviewing and documenting the performance (these reports will be the basis

for your CRA “Context” Report) Prepare internal reporting to identify any performance weaknesses Prepare exam preparation reports that calculate penetration rates , especially in low and

moderate income census tracts; calculate inside and outside of assessment area percentages

Use data management systems like CRA Wiz, Tactician or others Analyze the CRA performance strengths and weaknesses Modify the CRA plan if needed based on changing market conditions or other factors

It’s important to understand what “counts” for consideration in the lending test for a CRA evaluation. Community development loans and community development services receive special CRA “credit”. Here are the definitions:

(g) Community development means:

(1) Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;

(2) Community services targeted to low- or moderate-income individuals;


(3) Activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration's Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less;

(4) Activities that revitalize or stabilize

(i) Low- or moderate-income geographies;

(ii) Designated disaster areas; or

(iii) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, based on—

(A) Rates of poverty, unemployment, and population loss; or

(B) Population size, density, and dispersion. Activities revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals; or

(5) Loans, investments, and services that —

(i) Support, enable or facilitate projects or activities that meet the “eligible uses” criteria described in Section 2301(c) of the Housing and Economic Recovery Act of 2008 (HERA), Pub. L. 110-289, 122 Stat. 2654, as amended, and are conducted in designated target areas identified in plans approved by the United States Department of Housing and Urban Development in accordance with the Neighborhood Stabilization Program (NSP);

(ii) Are provided no later than two years after the last date funds appropriated for the NSP are required to be spent by grantees; and

(iii) Benefit low-, moderate-, and middle-income individuals and geographies in the bank’s assessment area(s) or areas outside the bank’s assessment area(s) provided the bank has adequately addressed the community development needs of its assessment area(s).

(h) Community development loan means a loan that:

(1) Has as its primary purpose community development; and

(2) Except in the case of a wholesale or limited purpose bank:

(i) Has not been reported or collected by the bank or an affiliate for consideration in the bank's assessment as a home mortgage, small business, small farm, or consumer loan, unless it is a multifamily dwelling loan (as described in Appendix A to Part 203 of this chapter); and


(ii) Benefits the bank's assessment area(s) or a broader statewide or regional area that includes the bank's assessment area(s).

(i) Community development service means a service that:

(1) Has as its primary purpose community development;

(2) Is related to the provision of financial services; and

(3) Has not been considered in the evaluation of the bank's retail banking services under Sec. 228.24(d).


CRA LOAN DATA COLLECTION GRID




This information is from the Federal Reserve Bank of Dallas. It was included in a publication called “CRA Loan Data Collection Grid” and can be found at this link: http://dallasfed.org/ca/pubs/craloan.pdf


http://dallasfed.org/ca/pubs/craloan.pdf




CRA COMMUNITY DEVELOPMENT LOAN REPORT FORM

CRA Community Development Loan Report Please use this form to report each community development loan made.

Please send completed forms to the CRA Compliance Officer. Be sure to keep a copy in the credit and collateral loan files for examiners to review.

Loan Recipient: ____________________ __________________ ________ _______ __ Date loan made: _______ /_______ /____ ___ Loan Number: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Original loan or commitment amount: $_______ ,______ _ ,_______ Renewals count as new originations. Only one renewal can count for the year unless there is an increase in the loan amount. Then only the amount of the increase will count. I f applicable: Date of renewal: _____ /_____ /_____ Amount of increase this renewal: $_____ ,_____ ,_____ Primary purpose of the loan: (Please check all that apply.) [ ] Affordable housing (including multifamily rental housing) for low- or moderate-income people [ ] Community services targeted to low- or moderate-income people (such as health care, educational, job training, social, child care, credit or financial services) [ ] Revitalization or stabilization of low- or moderate-income areas [ ] Promoting economic development by financing small businesses or small farms [ ] Other: _____________ _______ ___ ______________ ______ Description of Loan Recipient: (Please check all that apply.) [ ] Borrower for affordable housing rehabilitation and construction, including construction and permanent financing of multifamily rental property serving low- and moderate-income persons. [ ] Not-for-profit organizations serving primarily low- and moderate-income housing or other community development needs. [ ] Borrower to construct or rehabilitate community facilities that are located in low- and moderate-income areas or that serve primarily low- and moderate-income individuals. [ ] Financial intermediary that primarily lends or facilitates lending to promote community development. Examples include Community Development Financial Institutions (CDFIs), Community Development Corporations (CDCs), minority- or women-owned financial institutions, community loan funds or pools, and low-income or community development credit unions. [ ] Local, state, or tribal government for community development activities. [ ] Borrower to finance environmental clean-up or redevelopment of an industrial site as part of an effort to revitalize the low- or moderate-income community in which the property is located. [ ] Other: _____________ _______ ______ ___________ _____ Who ultimately benefited from this community development loan? (Check all that apply.) [ ] Low- or moderate-income persons/areas [ ] Females [ ] Disabled individuals [ ] Senior citizens [ ] Small businesses and/or small farms [ ] Other: __________ ________ ____ Originating Officer: ______ _______ _________________ _______ ________ _ Originating Office: __ ________ _______ ______________ _______ ________ _ IBERIABANK Compliance Department J anuary 2006


ABC Bank – CRA Form

SEARCHING FOR PUBLIC EVALUATIONS OF COMPETITORS

This is the link to the FFIEC website for CRA Public Evaluations. You can search YOUR primary regulators website to see other institutions that are under the same supervision as your financial institution. It’s a good exercise to search for institutions that are a similar asset size and will be subject to the same “test” as your institution. Look for evaluations that have been done recently. Look at evaluations in outstanding, satisfactory, and needs to improve to better understand the “benchmarks” that are currently used by YOUR regulator.

http://www.ffiec.gov/craratings/default.aspx



Assessment Area Issues


ASSESSMENT AREAS OVERVIEW AND DEFINITION

Assessment areas are the backbone of a bank’s performance under the Community Reinvestment Act (CRA). The bank is responsible for choosing its assessment area and must review and affirm that choice every year. Every bank’s CRA performance is measured against its lending to low- and moderate-income (LMI) areas and LMI individuals within their assessment area. Because lending outside the assessment area is ignored, it is important to capture as much of the bank’s lending area as the bank reasonably can be expected to serve.

LOANS MADE INSIDE THE ASSESSMENT AREA

LOANS MADE OUTSIDE THE ASSESSMENT

AREA Are considered in the rating based on

income and geographic distribution Are compared to the competition’s

market penetration Assessment areas must include the

locations for your bank: main office, branches and deposit-taking ATMs.

Are not considered in the rating


Each regulatory agency has adopted a similar regulation to implement the provisions of CRA.

AGENCY CITATION

Federal Reserve Board 12 CFR Part 228

Federal Deposit Insurance Corporation 12 CFR Part 345

Office of the Comptroller of the Currency 12 CFR Part 25

ASSESSMENT AREA DEFINITION

(c) Assessment area means a geographic area delineated in accordance with Sec. 228.41.

Sec.228.41 Assessment area delineation. (a) In general. A bank shall delineate one or more assessment areas within which the Board evaluates the bank's record of helping to meet the credit needs of its community. The Board does not evaluate the bank's delineation of its assessment area(s) as a separate performance criterion, but the Board reviews the delineation for compliance with the requirements of this section.

(b) Geographic area(s) for wholesale or limited purpose banks. The assessment area(s) for a wholesale or limited purpose bank must consist generally of one or more MSAs or metropolitan divisions (using the MSA or metropolitan division boundaries that were in effect as of January 1 of the calendar year in which the delineation is made) or one or more contiguous political subdivisions, such as counties, cities, or towns, in which the bank has its main office, branches, and deposit taking ATMs.

(c) Geographic area(s) for other banks. The assessment area(s) for a bank other than a wholesale or limited purpose bank must: (1) Consist generally of one or more MSAs or metropolitan divisions (using the MSA or metropolitan division boundaries that were in effect as of January 1 of the calendar year in which the delineation is made) or one or more contiguous political subdivisions, such as counties, cities, or towns; and (2) Include the geographies in which the bank has its main office, its branches, and its deposit-taking ATMs, as well as the surrounding geographies in which the bank has originated or purchased a substantial portion of its loans (including home mortgage loans, small business and small farm loans, and any other loans the bank chooses, such as those consumer loans on which the bank elects to have its performance assessed)

(d) Adjustments to geographic area(s). A bank may adjust the boundaries of its assessment area(s) to include only the portion of a political subdivision that it reasonably can be expected to serve. An adjustment is particularly appropriate in the case of an assessment area that otherwise would be extremely large, of unusual configuration, or divided by significant geographic barriers.

(e) Limitations on the delineation of an assessment area. Each bank's assessment area(s): 32

CRA – Five Steps to Pass the Exam© Susan Costonis, C.R.C.M.Compliance Training and Consulting

(1) Must consist only of whole geographies; (2) May not reflect illegal discrimination; (3) May not arbitrarily exclude low- or moderate-income geographies, taking into account the bank's size and financial condition; and (4) May not extend substantially beyond an MSA boundary or beyond a state boundary unless the assessment area is located in a multistate MSA. If a bank serves a geographic area that extends substantially beyond a state boundary, the bank shall delineate separate assessment areas for the areas in each state. If a bank serves a geographic area that extends substantially beyond an MSA boundary, the bank shall delineate separate assessment areas for the areas inside and outside the MSA.

(f) Banks serving military personnel. Notwithstanding the requirements of this section, a bank whose business predominantly consists of serving the needs of military personnel or their dependents who are not located within a defined geographic area may delineate its entire deposit customer base as its assessment area.

(g) Use of assessment area(s). The Board uses the assessment area(s) delineated by a bank in its evaluation of the bank's CRA performance unless the Board determines that the assessment area(s) do not comply with the requirements of this section.


HOW CAN YOU BEGIN TO SELECT THE ASSESMENT AREAS?

You can look at your assessment area in a number of ways. Imagine using a telescope to see the farthest edges of your assessment area and a microscope to view individual census tracts.

Let’s start with the telescope. Take a look at all the locations for your bank: main office, branches and deposit-taking ATMs. The CRA Regulation requires that the assessment area cover all of those locations for your bank. In addition to locations, your bank should include any geographical areas in which you have made or purchased a substantial portion of your loans. Do you have a loan production office (LPO) that results in significant lending in a specific area? While it is not required to be included in your assessment area, an LPO may generate enough loan activity that your bank should include that office’s geographic area.

An assessment area will generally consist of one or more metropolitan statistical areas or metropolitan divisions, or one or more contiguous political subdivisions, such as counties, cities, or towns. A bank may adjust the boundaries of its assessment area to include only the portion of a political subdivision that it can reasonably be expected to serve based on its business model and asset size.

The assessment area delineation is based solely on geographic considerations and must consist only of whole geographies. It may not reflect illegal discrimination, arbitrarily exclude low- or moderate-income geographies, and may not extend substantially beyond an MSA boundary. Also, the assessment area may not extend beyond a state boundary unless the assessment area is located in a multistate MSA. Although the assessment area is not separately evaluated as an aspect of CRA performance, the delineation is reviewed for compliance with the assessment area requirements of the regulation at the outset of the CRA examination. An assessment area that is not in compliance with regulatory requirements will be redrawn by the examiners and the CRA evaluation will be based on this new delineation

It is important to note that a minority-owned bank may not identify a specific ethnic group rather than a geographic area as its assessment area and should ensure that it does not exclude other minorities or non-minorities that reside within its assessment area. Section 228.41 of Regulation BB addresses assessment area delineation.

A bank is permitted to limit its assessment area to the portion of a political subdivision it can reasonably be expected to serve. But, the assessment area may not reflect illegal discrimination and may not arbitrarily exclude low- or moderate-income geographies, taking into account the bank’s size and financial condition.


Next consider how far you should be able to reach. Look at the broadest possible area that the bank could serve, which is a good starting point for considering what would be an appropriate assessment area.

Next, identify the relevant political subdivisions. An assessment area must generally consist of one or more metropolitan statistical areas (MSAs) or one or more contiguous political subdivisions. Is your bank large enough and geographically spread out enough to manage one or more MSAs? Or do you have a small, single-location bank in a rural area? In that case, an MSA won’t be an option and the relevant assessment area may be as small as a township. Most banks fall somewhere in the middle. In that case, you may want to look at a county or counties as the basic political subdivision.

Once you’ve settled on the appropriate political subdivision, it’s time to see if it needs to be adjusted for assessment purposes to reduce the size. Here, we switch from looking through a telescope to looking through a microscope to compare the size of the chosen political subdivision to the bank’s ability to serve that area.

Finally, the regulation limits the reasons and ways that an assessment area can be adjusted. The area must consist only of whole geographic areas (i.e., census tracts), and may not reflect illegal discrimination, arbitrarily exclude low- or moderate-income geographies or extend substantially beyond an MSA boundary or state boundary unless the assessment area is located in a multistate MSA.

Look at the entire picture, including the shape of your assessment area and what is beyond its borders. Is it irregularly shaped? Does it appear to avoid low- and moderate-income geographies? Are there high-minority populations near, but just outside, your assessment area? These are flags for further review and analysis.

Once your review is complete, be sure to document the reasons for choosing the assessment area that you did so that next year’s review can build upon the work you just completed.


INTERAGENCY CRA QUESTIONS

There was a March 18, 2013 joint press release requesting revisions to the interagency CRA questions. Here’s a link: http://www.federalreserve.gov/newsevents/press/bcreg/20130318a.htmThe proposed revisions address community development activities, investments, community development services, qualified investments, and community development lending.

Agencies Release Proposed Revisions to Interagency Questions and Answers Regarding Community Reinvestment The federal bank regulatory agencies today requested comment on proposed revisions to "Interagency Questions and Answers Regarding Community Reinvestment." The Questions and Answers document provides additional guidance to financial institutions and the public on the agencies' Community Reinvestment Act (CRA) regulations. The proposed revisions focus primarily on community development. Community development activities are considered as part of the CRA performance tests for large institutions, intermediate small institutions, and wholesale and limited purpose institutions. Small institutions may use community development activity to receive consideration toward an outstanding CRA rating. Among other things, the proposed amendments would:

Clarify how the agencies consider community development activities that benefit a broader statewide or regional area that includes an institution's assessment area.

Provide guidance related to CRA consideration of, and documentation associated with, investments in nationwide funds.

Clarify the consideration of certain community development services. Address the treatment of qualified investments to organizations that use only a portion of

the investment to support a community development purpose. Clarify that community development lending should be evaluated in such a way that it

may have a positive, neutral, or negative impact on the large institution lending test rating.

The proposed revisions are being issued by the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency. The notice that will be published in the Federal Register is attached. Comments will be due 60 days after that publication, which is expected shortly. For more information on the CRA, including these Questions and Answers and the agencies' CRA regulations, visit the Federal Financial Institutions Examination Council website at: http://www.ffiec.gov/cra.


http://www.ffiec.gov/cra

http://www.federalreserve.gov/newsevents/press/bcreg/20130318a.htm

Preparing for a CRA Exam


PREPARING FOR A CRA EXAM

Your financial institution should have at least a three month notice period prior to the actual examination because the schedules are published by the primary regulators. However, your institution should have a consistent monitoring program in place for CRA oversight throughout the calendar year.

The first step to prepare for the exam to review your institution’s prior CRA Public Evaluation. This will help you to become familiar with the applicable test criteria, your prior performance and ratings.

Next, confirm that test type and criteria for the current examination. If your asset size has increased and placed you into the next “tier” for examination make sure that you will be able to satisfy all the new requirements. These are the examination types:

Small Intermediate Small Large Wholesale/Limited Purpose (limited applicability) Strategic Plan (although this is not a common choice)

Become familiar with the performance context for your financial institution. Hopefully you have been gathering data and information on an ongoing basis since the lasts exam.

It is prudent to complete a self assessment to determine your institution’s likely rating and anticipate any weaknesses.

Regardless of size or the type of exam test, all institutions are evaluated upon these seven performance context factors:

1. Demographic data on median income levels, distributions of household incomes, nature of housing stock and costs;

2. Information about lending, investment and service opportunities;3. The financial institution’s product offerings and business strategies;4. The financial institution’s capacity, constraints, size and financial condition5. The financial institution’s past performance and comparable performance of similarly

situated lenders operating in the assessment areas;6. Contents of the CRA Public File (comments and/or complaints), and;7. Any other relevant information.


Make sure to involve all appropriate staff with CRA-related activities. These are some of the possible participants:

1. Loan origination personnel;2. Investment (CFO) personnel3. Financial institution officials who approve/process donations;4. Financial institution officials who perform Community Development services:5. Branch staff, Directors, Officers

Your financial institution should have a “game plan” for meetings with the regulators. One or more individuals should be as familiar as possible with all the CRA activities (public file contents, self-assessments, internal audits, board involvement, as well as senior management and staff activities)


RESPONDING TO THE REGULATOR

You will receive a written notification from your regulator that includes requests for information. The notifications are typically 60-90 days in advance and include a detailed list of all the requested information. CHECK THE WEBSITE OF YOUR PRIMARY REGULATOR FOR MORE INFORMATION

Typically this list includes:

1. Information relative to your financial institution’s lending and operating niches.2. Community development opportunities.3. Competitive, economic and housing conditions in your assessment area.4. Other factors that impact your financial institution’s ability to serve local area credit

needs.

Plan now to consider how you will provide this requested information and identify those responsible for this data as if YOU were conducting the examination and preparing the evaluation.

Collect and provide everything that is requested. Most regulators will accept hardcopy and/or an electronic format of the data. Be as comprehensive, detailed and complete as possible. Consider using logical separations of information (for example the lending activity would be the first section of a “chapter” in your story followed by community development loans. Next you would include investments as a chapter, followed by services if you are subject to these tests.

The data should be organized by each assessment area component (metropolitan divisions, states, multi-state MSAs).

If you are a NON-HMDA reporter you may only provide basic lending data. DISCUSS THIS WITH YOUR REGULATOR AND MANAGEMENT SHOULD MAKE A DECISION ABOUT THE TYPE OF LENDING DATA THAT IS PROVIDED. CONSUMER LENDING DATA MAY BE OPTIONAL.

For lending and investments you should provide specific and detailed data (amounts, dates, loan or investment purposes and descriptions).

Respond to the ongoing information requests and keep a line of communication open throughout the pre-exam and onsite portion of the exam. Respond promptly to all information requests because the exam time is very concentrated. KEEP COPIES OF EVERYTHING THAT YOU HAVE PROVIDED TO THE REGULATOR.


STEPS FOR ASSESSING LENDING PERFORMANCE

Measures level of lending within all of your assessment areas Use your loan originations. Consider using a sample of loans for primary products Or use your whole portfolio, or HMDA loans Geo-code loans Determine percentage within assessment area by # and $ Goal is to have 50% or higher in the assessment area

Number of Loans in AA Dollar of Loans in AA

Loan Type # % $ %

Home Purchase 125 69 13,971 45

Home Improvement 15 68 924 72

Home Refinance 99 85 12,355 87

Commercial 26 87 3,659 79

TOTAL 265 77 30,909 61

WHAT TO LOOK FOR:

Majority of loans by number and dollar should be inside the assessment area If not, be able to explain why

Borrower Distribution:

Measures how well you have met credit needs for low-or moderate-income individuals and small businesses and farms

Most complex factor to analyze Compare your performance to demographic information Only look at loans in your assessment area If you have more than one assessment area, analyze each separately


Borrower Distribution – What do you need for your data?

Individualso Income used for the credit decisiono Determine income category for each using HUD updated MFI for each year loan

originatedo HUD UPDATED MFI http://www.ffiec.gov/cra/censusproducts.htm#censusdatao HUD released the FY13 income limits and median family income (MFI)

estimates on December 5, 2012. These data are used to determine eligibility for households applying for federally assisted housing programs.The FY13 MFIs are calculated using the 2006-2010 five-year American Community Survey (ACS) data, but in areas with a valid 2010 one-year ACS survey median family income, HUD incorporated these more recent data. These data were updated with Consumer Price Index (CPI) data through the end of 2011. HUD used a new 1.67% factor to trend the 2011 estimates to the midpoint of 2013. The trend factor reflects the annualized change in the national median family income as measured by comparing the 2005 one-year ACS and the 2010 one-year ACS. HUD income limits are based on the MFIs and are adjusted for family size. Very low income limits for four-person families are used to form the basis of income limits for households of other sizes. Income limits are also adjusted for areas with unusually high or low housing costs. Annual changes are capped at 5% in either direction, or limited to at most twice the national change.For FY13, the estimated MFI for the United States is $62,400. Between FY12 and FY13, the MFI fell, on average, 1.5%, and income limits fell on average by 2%

o IMPORTANT – THE FFIEC UPDATED THE 2010 CENSUS DATA; THERE ARE 3 KEY CHANGES THAT AFFECT INCOME CLASSIFICATION:

1. Income updates2. Revised geographic dimensions of census tracts3. Revisions to MSA designations by the OMB (Office of Management and

Budget).

NOTE: There is an excellent presentation made on June 21, 2012 available from the Federal Reserve; download it here: http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/outlook-live/2012/census-data.cfm

See the next page for some comparison slides from that presentation


http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/outlook-live/2012/census-data.cfm

http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/outlook-live/2012/census-data.cfm

http://www.ffiec.gov/cra/censusproducts.htm#censusdata

Commercial/Farm – Gross annual revenues Income used for credit decision Determine if small business or small farm Income levels for Individuals

o Low-income < 50% o Moderate-income 50% to < 80% o Middle-income 80% to < 120% o Upper-income 120% and higher

Business/Farm Sizeso Gross Annual Revenues of less or equal to $1 million = small business/farm

Borrower Distribution – What do you compare your data with?

Loan Type Comparables Comparator Data Source

Residential RE Families US Census

Consumer Households US Census

Commercial % of AA businesses with revenues of $1million or less

Dun and Brandstreet

Farm % of AA businesses with revenues of $1million or less

Dun and Brandstreet

If you are a HMDA or CRA reporter, also refer to aggregate data as comparator (FFIEC website)

Borrower Distribution – What to look for

Focus is on originations to LMI borrowers and small businesses and farms

Loan originations should mirror or exceed demographic figures If gaps are noted, be able to explain why


Geographic Distribution

Measures how well loans are distributed throughout your assessment area and among tracts of varying income levels

Only look at loans within the assessment area Compare your lending to demographic information at the tract level If you have more than one assessment area, analyze each separately

Geographic Distribution – What do you need for your data?

Geo code your loans in the assessment area Determine income-levels for each census tract -you can use the Census information on

the FFIEC website FFIEC Census Reports http://www.ffiec.gov/webcensus/default.aspx FFIEC Windows Application http://www.ffiec.gov/census/winApp.aspx

Geographic Distribution – What do you compare your data with?

Loan Type Comparables(By tract Income Level)

Comparator Data Source

Residential RE % Owner-Occupied Housing US Census

Consumer % Households US Census

Commercial % of businesses US Census

Farm % of Farms US Census

If you are a HMDA or CRA reporter, also refer to aggregate data as compared to competitors (FFIEC website)

Geographic Distribution – What to look for

This test focuses on the LMI tracts If AA contains only middle-and upper-income tracts, this will also be reviewed Review loan distribution in these tracts compared to demographic data If gaps are noted, be able to explain why

Community Development Loans Review loan trial Flag loans in amounts in excess of $1 million that meet a CD purpose Flag multi-family loans that meet a CD purpose If you are an Intermediate Small Bank, you may also flag loans under $1 million if they

are not reported under HMDA44

CRA – Five Steps to Pass the Exam© Susan Costonis, C.R.C.M.Compliance Training and Consulting

http://www.ffiec.gov/census/winApp.aspx

CRA COMPLAINTS

General Any complaint which addresses the Bank’s CRA performance is to be given prompt, courteous and fair attention. This includes complaints from customers, non-customers, community groups, or a banking regulator.

Examples of complaints relating to the Bank’s CRA performance are as follows:

1. A complaint that the Bank has demonstrated discriminatory practices in making a credit decision or in making credit available;

2. A complaint of any nature received from a community organization;

3. A complaint that refers directly or indirectly to the Community Reinvestment Act;

4 A complaint that a particular credit product is not offered by the Bank;

5. A compliant referencing the Bank’s activities in a particular geographic area;

6 A complaint that in any way alludes to discrimination, other than strictly in the employment context;

7.A complaint about the Bank’s business days or hours or branch location(s);

8. A complaint concerning the Bank’s response to a real estate secured loan request, in particular a residential mortgage, residential construction, home improvement or home equity loan or line of credit; and

9. A complaint concerning the Bank’s response to an applicant for small business credit.

Complaint Procedures for CRA

Verbal or written complaint(s) received that impact the Bank’s CRA performance are to be immediately referred to the Bank’s Chief Operations Officer. The Chief Operations Officer is responsible for handling the complaint and issuing a response to the complaint. It is the Bank’s policy to respond in writing to any written CRA complaint. Any complaint affecting the Bank’s CRA performance is a serious matter and is to be provided immediate attention until the problem is resolved to the satisfaction of all parties to the extent possible. The Chief Operations Officer is to ensure that the written complaint and response are routed to the Bank’s CRA Public File at all branch office locations.


SAMPLE COMPLAINT AND INQUIRY POLICY

In addition to a normally scheduled exam, it’s possible for examiners to contact the bank for an investigation. Investigations are conducted primarily to follow-up on particular consumer inquiries or complaints, including fair lending complaints. The investigation of consumer complaints has become an INCREASED FOCUS for all regulators and is a central concern of the new Consumer Financial Protection Bureau (CFPB) under Dodd Frank. Additional discussion is included in the Fair Lending section.

It’s a prudent practice to have a complaint policy so that all employees understand the difference between Mrs. Jones complaining that the free coffee was cold or implying that she was denied credit on a prohibited basis or that a disputed transaction wasn’t handled within the allowed time limits. Employees should also understand that the bank is required to place comments or complaints about the bank’s CRA performance in the Public File.

SAMPLE COMPLAINT AND INQUIRY POLICY

ANYBANK

Subject : Complaints and InquiresItem Number : CP-106 Effective Date : 09-01-13Revision Date : 09-01-13 Page Number :

I. PURPOSE

This is to establish a formal and centralized system of response to complaints and inquiries (C&I) which may have compliance consequences. Regulations E and Z establish required procedures for debit and credit card disputed or unauthorized transactions. This policy and the procedures are not intended to apply to the Reg E and Reg Z disputes which have already been established. The Community Reinvestment Act (CRA) requires pertinent documents to be placed in the bank's Public File. The bank’s Fair Lending Policy requires immediate attention to any allegations of discrimination or violations of the ECOA (Equal Credit Opportunity Act), the Fair Housing Act (FHA) and related consumer protection laws. Any complaints regarding UDAAP (Unfair, Deceptive or Abusive acts and Practices) will require immediate investigation and notification to Senior Management. The Real Estate Settlement and Procedures Act (RESPA) have established requirements for handling complaints pertaining to mortgage servicing. The FACT ACT data integrity rules require that the bank responds to inquiries about incorrect information that may have been reported to a credit reporting agency. The following will all but ensure that time constraints are adhered to and that the cause of a problem is sought and corrected. As an internal control, the inquiry will be handled by someone other than the person involved in the area of the inquiry. Managed through one central point, any frequency, pattern and practice of C&I's can be monitored and responses will be consistent.


Management will be informed immediately of any complaint or inquiry that alleges a violation of law or act of discrimination. This type of complaint requires immediate action.II. STATEMENT OF POLICY

We will adhere to C&I procedures prescribed by regulations. When not prescribed, we will use our resources to investigate and satisfy all C&I's in as timely a manner as possible. All complaints and inquiries regarding compliance and regulatory issues will be sent through one central point either after it is resolved or for the resolution process. The Bank President has the option of resolving the complaint and notifying the Compliance Officer or of having him/her handle the resolution. Because the Compliance Officer maintains the CRA file and oversees the compliance audits, (s)he will be the repository for all C&I correspondence.

The officer handling the C&I will direct it to areas of responsibility and insure that proper individuals are involved in the resolution, that it is timely and that the source of the problem is examined and corrected.

III. PROCEDURE

A. All employees will be advised in routine training that C&I's will be handled only by specific persons. Types of C&I's will be explained so as to avoid needlessly directing complaints not deemed significant or compliance related through these persons.

B. C&I's received in a department will be date stamped for verification of receipt. They will immediately be sent to the Compliance Officer for handling or a copy will be sent with a notation of the original complaint’s routing for resolution, with the approval of the Compliance Officer. If any delay is anticipated in forwarding the C&I, a telephone call to the Compliance Officer should be made so as to inform him/her of the C&I.

C. The Compliance Officer will review the inquiry to determine:

• the customer's name, address, telephone number and account number(s)• the nature of the complaint• if a regulation requires a specific response time• whether it was directed to or came from a regulatory body (which automatically

requires notification to the President of that center)• required research• resolution requested by the customer• if legal counsel should be involved due to potential liability/litigation• whether it is transactional or operational in nature

(An example of a transactional complaint is a customer who writes to complain that we reported their credit in error. An operational


complaint is a customer who says we paid them a lower than published interest rate on a savings account.)

D. The Compliance Officer will establish an internal time frame for a response considering the following:

• research• minimum time frames established by regulation• if needed, review by management and/or counsel

E. The reviewer (and management or counsel, if involved) will determine if a verbal, written or combination response is required.

• Written responses will be composed as though they will be read in court or by a regulator.

• Responses should be stand alone documents summarizing the facts or circumstances of the inquiry, our investigation and resolution.

• Verbal responses are less desirable than written. If a response is verbal, it should be completely documented and notes retained with the original complaint. A follow-up letter may be advised.

• If more information is required, the reply should be sent back to the compliance officer.

F. The Compliance Officer will determine if this problem could recur. If so, additional internal controls will be developed along with appropriate training. Any corrective actions will be documented and reported to the Board of Directors.

G. The Compliance Officer will insure that all C&I's and responses are retained in accordance with applicable procedures and are properly maintained, such as in the CRA Public File. A central file will be maintained for regulatory review. See the Appendix on the last page of the policy for a tracking log.


COMPLAINT TRACKING FORMDate Complaint Received:___/__/___

Complaint was given to: Date Complaint was given to management

Customer Name Customer Address Customer Contact information

Customer Account HistoryComplaint was written; see copy

Complaint was oral, see summary

Complaint was on social media, see copy

Customer requested information

Customer requested refund Customer requested apology

Did customer make any of these claims? EXPLAINa. The information I received was misleading b. It was unfair c. It’s not what I expected d. I didn’t get what was advertised e. I didn’t get what the bank employee told me I’d receive f. It was more expensive than I expected it to be g. I don’t understand all the charges and fees h. No one listened to my complaint i. I couldn’t find anyone to answer questions about my problem j. I experienced discriminatory practices k. I had a problem with making payments and didn’t receive help l. I didn’t get approved for a loan/renewal/increase m. My payment wasn’t credited properly n. My interest rate was increased in error o. I was charged late fees, service fees in error p. I didn’t receive disclosures, agreements, statements q. My funds weren’t available as expected r. My debit card was declined s. My balance transfer wasn’t processed t. My dispute wasn’t processed u. I had a problem with online banking/ATM/wire/bill pay v. I had problems with overdrafts/bounced checks w. I had a problem with my credit report information x. I was harassed by the collector y. My property was repossessed in error z. I’ve contacted an attorney aa. I’ve filed a complaint with a government agency

Did the complaint involve a particular product or service; what was it?

Did the complaint involve a product or service offered by a vendor?

Did the complaint involve an employee who is not longer with the bank?

Does the complaint involve the Community Reinvestment Act?

URGENT – REPORT any claims of discrimination to your supervisor immediately!

Did the complaint involve potential SAR activity?


Summary of oral complaint or additional information

EMPLOYEE NAME Signature E-mailCOMPLIANCE REVIEW COMMENTS:

Referred to Legal Counsel:


COMPLAINT AND INQUIRY LOGDATE OF

C&ICUSTOMER NAME AND

INFO

NATURE OF C&I DETERMINATION AND CORRECTIVE ACTION REQUIRED

DATE COMPLETED


CRA Resources


CRA TOOL KIT

The FFIEC Home Pagewww.ffiec.gov

LOOK FOR “What’s New”

CRA Exams - Schedules, Evaluations, Distressed Geographies, Procedureshttp://www.ffiec.gov/cra/examinations.htm

Market Share Reporthttp://www2.fdic.gov/sod/sodMarketBank.asp?barItem=2

Can be used to develop bank’s performance context, means of determining your peers in the market or weigh in your level of investment or loans compared to peer.

Median Family Income

Used to determine low, moderate income for bank’s assessment area.

http://www.ffiec.gov/hmda/censusproducts.htm#MSAincome

Median Family Incomes/

“American Fact FinderCensus Information to be used to develop performance context or determine assessment of needs of community.

http://factfinder.census.gov/home/saff/main.html?_lang=

U.S. Census

Geocoding System – FFIECMethod to determine if address is Low, Moderate, Middle, or Upper Income tract

Geocoding by Address Linkhttp://www.ffiec.gov/Geocode/default.aspx

FAQ’s for CRAhttp://www.ffiec.gov/cra/pdf/2010-4903.pdf

www.fedstats.gov – great resource of 100 Federal agencies, search by state


http://www.fedstats.gov/

http://www.ffiec.gov/cra/pdf/2010-4903.pdf

http://www.ffiec.gov/Geocode/default.aspx

http://factfinder.census.gov/home/saff/main.html?_lang

http://www.ffiec.gov/hmda/censusproducts.htm#MSAincome

http://www2.fdic.gov/sod/sodMarketBank.asp?barItem=2

http://www.ffiec.gov/

INTERAGENCY CRA QUESTIONS

The most recent interagency response to CRA questions was published November 20, 2013 in the Federal Register. There was a very good summary article in the First Quarter 2014 Compliance Outlook publication. The Philadelphia Federal Reserve publishes a quarterly Compliance Outlook; this is the link:

http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/

New and Revised Interagency Questions and Answers Regarding Community Reinvestment: Updates to Community Development Guidance. -y Cathy Gates, Senior Project Manager, Federal Reserve Board

IntroductionThe Community Reinvestment Act (CRA or act) requires the federal agencies that implement the act — the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of the Comptroller of the Currency (agencies) — to assess the record of financial institutions in meeting the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations.1 The CRA’s implementing regulations provide different methods of evaluating performance, corresponding to differences in institutions’ asset sizes, structures, and operations.2The agencies publish Interagency Questions and Answers Regarding Community Reinvestment (Interagency Q&As) to provide guidance on how the regulations are interpreted and applied. The agencies periodically update the Interagency Q&As based upon changes in the banking industry. This article describes the most recent update, which was published in the Federal Register on November 20, 2013.3

BackgroundThe agencies regularly receive comments and questions from financial institutions, their trade groups, and community organizations regarding how community development activities are considered in CRA examinations. Periodically, the agencies also hold public hearings to gather information about the effectiveness of the regulations. The most recent public hearings were held in 2010. Comments received at those hearings covered a wide range of issues, including community development.4 The Interagency Q&As published in November 2013 address a number of concerns and questions raised by commenters about community development activities, which are discussed in more detail below.5

New and Revised Interagency Q&AsCommunity Development Activities Outside an Institution’s Assessment area(s)


http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/2014/first-quarter/new-revised-interagency-questions-answers-regarding-community-reinvestment.cfm#footnotes





http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/

Broader Statewide or Regional AreaThe CRA regulations allow for consideration of community development activities that benefit an institution’s assessment area(s), or a broader statewide or regional area that includes its assessment area(s). The updated Interagency Q&As revise two Q&As addressing community development activities outside of financial institutions’ assessment areas. Some bankers and community organization representatives have misinterpreted the pre-November 2013 Q&As to limit consideration of such activities.First, revised Q&A §__.12(h)—7 was shortened to clarify the meaning of “regional area.” The revised answer explains that a regional area may be an intrastate area or a multistate area that includes the institution’s assessment area(s) and that typically involves some geographic, demographic, and/or economic interdependencies within the regional area. The revised answer includes two examples and explains that regions “are often defined by the geographic scope and specific purpose of a community development organization or initiative.”Second, revised Q&A §__.12(h)—6 clarifies that community development activities in a broader statewide or regional area that includes an institution’s assessment area will receive full CRA consideration under the quantitative criteria (i.e., the number and amount of such activities) — even if the institution’s assessment area(s) does not receive immediate or direct benefit — as long as the purpose, mandate, or function of the organization or activity includes serving geographies or individuals located within the institution’s assessment area(s). This revised Q&A further clarifies that even if the institution’s assessment area(s) will not benefit from the community development activities, they will still be considered as long as the activities benefit geographies or individuals located somewhere within a broader statewide or regional area that includes the institution’s assessment area(s) and the institution has been responsive to community development needs and opportunities within its assessment area(s).6 Accordingly, an institution that has been responsive has the flexibility to engage in, and receive consideration for, community development activities that benefit areas within the broader statewide or regional area, even if there is no benefit to its assessment area(s).When an examiner considers an institution’s responsiveness to community development needs, he or she will review the volume and mix of the institution’s community development activities that benefit its assessment area(s) and broader statewide or regional areas that include its assessment area. The examiner will also review the qualitative aspects of those activities in light of the institution’s performance context, including the community development needs and opportunities in the assessment area(s) and the broader statewide or regional areas that include the assessment areas, the institution’s business strategy, capacity, and constraints.

Nationwide FundsNationwide funds are important sources of investments that can help to meet community development needs in low- and moderate-income and underserved areas throughout the country. These investments can be particularly efficient vehicles for certain institutions, especially those with a nationwide branch network. The agencies revised Q&A §__.23(a)—2 in response to



concerns that the existing Q&A could be interpreted to require financial institutions to obtain side letters or written documentation from nationwide funds earmarking or allocating funds to a particular area, which deterred some institutions from making otherwise appropriate community development investments. The revised answer confirms that nationwide funds may be suitable community development investments, particularly for large institutions with a nationwide branch footprint. Further, it explains that a nationwide fund may be used by other institutions to meet community development needs, but that the other institutions should review the fund’s investment record to determine whether the fund’s activities are consistent with their own investment goals and geographic focus. The geographic focus refers to the institution’s assessment area or the broader statewide or regional area that includes the assessment area(s).

Examination ProceduresThe agencies published revised large bank examination procedures on April 18, 2014, to incorporate the updates to the Interagency Q&As and to clarify how examiners consider community development activities related to regional and nationwide funds.7 The examination procedures clarify that activities are to be considered at the appropriate geographic level. Specifically:

1. If an activity benefits and is targeted to an institution’s assessment area(s) the activity will be considered first at the assessment area level.

2. If the activity benefits or is targeted to the broader statewide or multistate MSA area that includes the assessment area(s) and supports organizations or activities with a purpose, mandate, or function that includes serving the geographies or individuals located within the assessment area(s), the activity will be considered first at the state or multistate MSA level.

3. If the activity benefits or is targeted to a regional area of two or more states (which are not part of a multistate MSA) that includes the assessment area(s) and supports organizations or activities with a purpose, mandate, or function that includes serving the geographies or individuals located within the assessment area(s), the activity will be considered first at the institution level.

In addition, if an institution has been responsive to community development needs and opportunities in its assessment area(s), the examination procedures also require consideration of community development activities in the broader statewide or regional area that includes the assessment area(s), even if the organizations or activities do not have a purpose, mandate, or function that includes serving geographies or individuals located within the institution’s assessment area(s). In other words, as long as an institution is responsive to the community development needs in its assessment area, community development activities outside its assessment area, but in the broader statewide or regional area, will be considered. All of these community development activities will be considered when rating an institution, but they will not be artificially attributed to assessment areas or states where benefits cannot be measured. Similarly, the public performance evaluation will discuss community development activities at



the assessment area, state, or institution level as appropriate, based on the benefits received at the various levels and their performance context.

Community Services Targeted to Low- or Moderate-Income IndividualsThe updated Interagency Q&As expanded Q&A §__.12(g)(2) to include new examples of ways to determine that services are community services targeted to low- or moderate-income individuals. The revised Q&A clarifies that detailed income information is not required when recipients of community services are (1) students or their families from a school at which the majority of students qualify for free or reduced-price meals, (2) individuals who receive or are eligible to receive Medicaid, or (3) recipients of government assistance programs that have income qualifications equivalent to, or stricter than, the definitions of low- and moderate-income defined by the CRA regulations.

Community Development ServicesThe updated Interagency Q&As provide guidance about whether activities conducted by an institution’s employees will be considered community development services. Q&A §__.12(i)—3 explains that providing services to a community development organization reflecting a financial institution’s employees’ areas of expertise at the institution, such as human resources, information technology, and legal services, constitutes a technical assistance activity that is a community development service. Additionally, the revised answer indicates that service on the board of directors of a community development organization is an example of a community development service.

Consideration of Investments Using Alternative Funding StructureNew Q&A §__.12(t)—9 was added to address a funding structure used by a limited number of community development organizations. If loans or investments are made to organizations that invest in security instruments that do not have a community development purpose, and only the income from the investments is used to support the organization’s community development purpose, then only the amount of the investment income used to benefit the organization or activity that has a community development purpose will be considered. The new Q&A makes clear that in such situations, quantitative consideration of a qualified investment should be consistent with the amount supporting a community development purpose rather than the full amount provided to the organization. Alternatively, consideration is to be given to the dollar amount of qualified investments provided to community development organizations when the funds are placed in instruments without a community development purpose solely as a means of securing capital for leveraging purposes, securing additional financing, or of generating a return with minimal risk until funds can be deployed toward the originally intended community development activity.


Community Development Lending Under the Large Bank Lending TestNew Q&A §__.22(b)(4)—2 addresses concerns that community development lending activities were undervalued and not given sufficient weight in a large bank’s lending test component. The new Q&A clarifies that community development lending performance is always considered in an institution’s lending test rating. An institution’s community development lending record may have a positive, neutral, or negative impact on the lending test rating depending on the level of the institution’s performance and the performance context.For more information on the CRA, including these Interagency Q&As and the agencies’ CRA regulations, visit the Federal Financial Institutions Examination Council website (www.ffiec.gov/cra ). Specific issues and questions should be raised with your primary regulator.

1 12 U.S.C. §§2901(b), 2906(a)(1) . 2 In addition to the small bank, intermediate small bank, and large bank CRA

examination procedures (which are based on asset size), institutions may be examined pursuant to the wholesale and limited-purpose bank methodology or under a strategic plan. See 12 C.F.R. §§228.25, 228.27.

3 Interagency Questions and Answers Regarding Community Reinvestment, 78 Fed. Reg. 69671 (Nov. 20, 2013).

4 See www.federalreserve.gov/communitydev/cra_hearings.htm for information about the hearings.

5 The Interagency Q&As also redesignated one question and answer about activities undertaken by majority-owned institutions in cooperation with minority- or women-owned financial institutions and low-income credit unions (MWLIs). It explains that activities undertaken with MWLIs, such as making a deposit or capital investment, purchasing a participation in a loan, or providing technical expertise to assist an MWLI, will be considered in a financial institution’s CRA evaluation. The activities do not need to benefit the majority-owned financial institution’s assessment area(s); however, they must help meet the credit needs of the local communities in which the MWLI is chartered. The redesignation reflects a regulatory change made in 2010 that clarified that these types of activities are considered for all types and sizes of financial institutions regardless of the CRA performance test and examination method used to evaluate performance.

6 Q&A §__.26(c)(4)—1, which explains responsiveness in terms of the intermediate small bank community development test, provides additional insight regarding responsiveness. This citation refers to the March 11, 2010, version of the Interagency Q&As, not the recent change .

7 See CA Letter 14-2, “Revised Interagency Large Institution CRA Examination Procedures and Consolidation of Interagency CRA Examination Procedures and Supporting Materials,” April 18, 2014.


http://www.gpo.gov/fdsys/pkg/FR-2013-11-20/pdf/2013-27738.pdf

http://www.federalreserve.gov/bankinforeg/caletters/caltr1402.htm



http://www.gpo.gov/fdsys/pkg/FR-2010-03-11/pdf/2010-4903.pdf

http://www.federalreserve.gov/communitydev/cra_hearings.htm

http://www.ecfr.gov/cgi-bin/text-idx?SID=5beb8ec82ccddb2ea983a64e64d02473&node=12:3.0.1.1.9.2.8.7&rgn=div8

http://www.ecfr.gov/cgi-bin/text-idx?SID=5beb8ec82ccddb2ea983a64e64d02473&node=12:3.0.1.1.9.2.8.5&rgn=div8

http://uscode.house.gov/view.xhtml?req=(title:12%20section:2906%20edition:prelim)%20OR%20(granuleid:USC-prelim-title12-section2906)&f=treesort&edition=prelim&num=0&jumpTo=true

http://uscode.house.gov/view.xhtml?req=(title:12%20section:2901%20edition:prelim)%20OR%20(granuleid:USC-prelim-title12-section2901)&f=treesort&edition=prelim&num=0&jumpTo=true

http://www.ffiec.gov/cra

FFIEC DEMOGRAPHICS





2014 DISTRESSED OR UNDERSERVED GEOGRAPHIES

The FFIEC publishes an annual list of Middle-Income Nonmetropolitan Distress or Underserved Geographies. This is the link to the FFIEC website: http://www.ffiec.gov/cra/distressed.htm


http://www.ffiec.gov/cra/distressed.htm

FEMA FEDERAL DISASTER DECLARATIONS

Check these listings to see if your financial institution has assessment areas that are located in these declared disaster areas. You will receive additional CRA credit for activities in these areas.

https://www.fema.gov/disasters/grid/state


DISASTER RECOVERY FAQ’S FROM THE FEDERAL RESERVE

Source: http://www.minneapolisfed.org/community_education/community/cra/disaster.cfm?

The Community Reinvestment Act (CRA), enacted in 1977, requires depository financial institutions to meet the credit needs of their communities, including low- and moderate-income neighborhoods, consistent with safe and sound banking practices. Under the regulations that implement the CRA, federal financial regulatory agencies give CRA consideration to financial institutions' activities that constitute "community development." In a round of revisions that took effect September 1, 2005, federal financial regulatory agencies expanded the definition of "community development" under the CRA to include, among other things, activities that revitalize or stabilize designated disaster areas. The questions and answers below, which are based on the Interagency Questions and Answers Regarding Community Reinvestment, are intended to provide financial institutions with general guidance about community development activities in designated disaster areas. Financial institutions that have questions about the CRA and disaster recovery should contact their federal financial regulatory agency.

What is a "designated disaster area"?A "designated disaster area" is a major disaster area designated by the federal government. In particular, the term refers to areas included in Major Disaster Declarations administered by the Federal Emergency Management Agency (FEMA). For more on disaster declarations, see the FEMA web site, which features a searchable list of declared disasters and information on the disaster-declaration process.What are "activities that revitalize or stabilize designated disaster areas"?A financial institution's activity will be considered to revitalize or stabilize a designated disaster area if it helps to attract new, or retain existing, businesses or residents and is related to disaster recovery. Additionally, an activity will be presumed to revitalize or stabilize the area if the activity is consistent with a bona fide government revitalization or stabilization plan or disaster recovery plan. Examples of activities that may qualify include providing financing to help retain businesses in the area that employ local residents, including low- and moderate-income individuals; providing financing to attract a major new employer that will create long-term job opportunities, including for low- and moderate-income individuals; and providing financing or other assistance for essential community-wide infrastructure, community services, and rebuilding needs.Are all financial institution activities relating to disaster recovery that revitalize or stabilize a designated disaster area considered community development activities?


http://www.fema.gov/media/fact_sheets/declaration_process.shtm

http://www.fema.gov/media/fact_sheets/declaration_process.shtm

http://www.fema.gov/news/disasters.fema

http://www.fema.gov/

https://www.ffiec.gov/agencies.htm

http://www.ffiec.gov/cra/pdf/2010-4903.pdf

http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=635f26c4af3e2fe4327fd25ef4cb5638&tpl=/ecfrbrowse/Title12/12cfr228_main_02.tpl

http://www.minneapolisfed.org/community_education/community/cra/disaster.cfm

Yes. However, regulators will give greater weight to activities that are most responsive to community needs, including the needs of low- or moderate-income individuals or neighborhoods.How long can a financial institution receive consideration for these activities?Examiners will consider revitalization or stabilization activities that take place within 36 months after the date of the disaster designation. In the event of a particularly severe and/or widespread disaster, the federal financial regulatory agencies may extend this time period in order to encourage financial institutions to assist in long-term disaster recovery efforts. For example, in October 2008, the agencies extended the disaster-activities time period by an additional 36 months for portions of the Gulf Coast that were hit by Hurricanes Katrina and Rita in 2005. For more on this, see Federal Reserve System Consumer Affairs Letter 08-9.Can a financial institution receive consideration for disaster-recovery activities conducted outside its local community? Yes, so long as the institution has first adequately met community development needs within its local community, or assessment area. For example, a bank that has adequately addressed community development needs in its assessment area may receive CRA consideration for donating to recovery efforts in a flooded area that lies outside the bank's assessment area but within the statewide or region-wide area that includes the assessment area. In limited and specific instances, as determined by the federal financial regulatory agencies, the geographic area has been expanded from state- or region-wide to nationwide. For more on this type of expansion, see Federal Reserve System Consumer Affairs Letter 06-5.


http://www.federalreserve.gov/boarddocs/caletters/2006/0605/caltr0605.htm

http://www.federalreserve.gov/boarddocs/caletters/2008/0809/caltr0809.htm

DOES YOUR BANK MEASURE UP?

This publication is from the Atlanta Federal Reserve. This is the link: http://www.frbatlanta.org/pubs/cra/

Introduction

As a financial consumer and a concerned citizen, you may be interested in how well your bank or savings and loan is helping meet the credit needs of your community, including low- and moderate-income areas. In fact, by law, the performance of every bank and thrift in meeting these needs is regularly evaluated and rated, and this rating is available to the public.

This document is intended to help you understand how this law—the Community Reinvestment Act (CRA)—affects the way your financial institution serves your community. It describes the factors federal regulators use when they review a bank's CRA performance and explains the rating the bank receives. It also tells you what information is available about a bank's CRA rating and where you can find it.

These are the sections:

What Is the Community Reinvestment Act?

Looking at Your Bank's CRA Performance—The Big Picture

Standards Used to Evaluate Your Bank's CRA Performance

Your Bank's Overall CRA Rating

What Your Bank's Public CRA File Must Show

Where You Can Find Your Bank's CRA Public File

How You Can Comment on Your Bank's CRA Performance


http://www.frbatlanta.org/pubs/cra/

WHAT”S NEW – FFIEC- CRA

Link: http://www.ffiec.gov/cra/whatsnew.htm

WHAT'S NEWMajor changes or additions to CRA for 2015 (most recent first):

4/30/15

The 2015 Guide To CRA Data Collection and Reporting is now available.IMPORANT!!!

2/18/15--The 2015 CRA/HMDA Reporter Newsletter is now available. It includes helpful information on collecting accurate HMDA and CRA data. In addition, guidance is given on successfully completing your data submission.

February 9, 2015--The 2015 FFIEC Geocoding System has been updated with the 2015 Census boundary definitions. Corresponding Census data will be included upon release by the U.S. Census Bureau.

Archives of major changes or additions to the FFIEC Web site:2014201320122011


http://www.ffiec.gov/cra/whatsnew_2011.htm




http://www.census.gov/en.html

https://geomap.ffiec.gov/FFIECGeocMap/GeocodeMap1.aspx

http://www.ffiec.gov/cra/newsletter.htm

http://www.ffiec.gov/cra/whatsnew.htm

SOURCES OF INFORMATION FOR MANAGING CRA

This is from the Richmond Federal Reserve; link at

http://www.richmondfed.org/banking/supervision_and_regulation/supervision/consumer_affairs/cra_exams/resources.cfm

: "Everything CRA at Your Fingertips"Find out more about the regulation and its interpretation and information on CRA examinations.

CRA Bank Ratings, Approved Strategic Plans, and Quarterly Exam SchedulesInformation on bank CRA ratings, strategic plans, and exam schedules.

A Guide to CRA Data Collection and ReportingGuidance on how institutions should collect and report data as required by CRA.

A Banker's Quick Reference Guide to the CRAThis publication is a guide to the CRA regulation and examination procedures. It is intended for bank CEOs, presidents, and CRA and compliance officers as a tool for accessing CRA information quickly.

CRA ExaminationsInformation regarding regulatory agencies' CRA exam schedules and access to the CRA examination procedures and to instructions for preparing CRA evaluations.

Survey of the Performance and Profitability of CRA-Related LendingFederal Reserve Board's report to Congress on default rates, delinquency rates, and profitability of CRA-related lending activities.

Tool designed to assist financial institutions in identifying the appropriate census tract for its CRA-reportable applications and loans.


http://www.federalreserve.gov/BoardDocs/Surveys/CRAloansurvey/

http://www.ffiec.gov/cra/examinations.htm

http://www.dallasfed.org/ca/pubs/quickref.pdf

http://www.ffiec.gov/cra/guide.htm

http://www.federalreserve.gov/DCCA/CRA/

http://www.ffiec.gov/cra/

http://www.ffiec.gov/cra/

http://www.federalreserve.gov/DCCA/CRA/

http://www.ffiec.gov/cra/guide.htm

http://www.dallasfed.org/ca/pubs/quickref.pdf

http://www.ffiec.gov/cra/examinations.htm

http://www.federalreserve.gov/BoardDocs/Surveys/CRAloansurvey/

Documents

Responsive and Adaptive Mobile Web Design | …ttsmedia.ttstrain.com/CRAcz060215.docx · Web viewCRA regulations establish various tests for lending institutions of different sizes