Whats in it for you? CRA for Community-Based Organizations he Texas Housing Association Conference Moody Gardens Hotel Galveston, TX August 14, 2019 Objectives Understand the purpose of the CRA and coverage area
Understand how banks are evaluated under CRA Learn how community organizations can work with banks and thrifts to meet community credit and banking needs 2 Purpose & Key Definitions Understanding CRA Purpose & Coverage 3
Institutions Subject to CRA Banks and thrifts supervised by: Office of the Comptroller of the Currency (OCC) Federal Deposit Insurance Corporation (FDIC) Federal Reserve Banks Excludes credit unions and non-bank financial providers How to determine a financial institutions regulator: https://www.ffiec.gov/consumercenter/ 4
Financial Institutions Must demonstrate that deposit facilities serve the convenience and needs of the communities in which they are chartered to do business. Includes credit services as well as deposit services. Continuing and affirmative obligation to help meet credit needs of their communities. 5 Supervisory Agencies (OCC, FDIC, FRB)
Encourage institutions to help meet the credit needs of the local communities in which they are chartered. Performance must be consistent with the safe and sound operation of the institution. Must take this record into account in the agencys evaluation of an application for a deposit facility by the institution. 6 How Banks are Evaluated Understanding CRA
How Banks are Evaluated 7 Key Elements Assessment area (AA) Geography Community development activities are responsive to community needs Low- and moderate-Income (LMI) persons or geographies Performance Context
Community Contacts 8 Evaluating Performance Five types of examinations Small bank (SB) Intermediate-small bank (ISB) Large bank (LB) Wholesale or limited purpose bank Banks operating under a strategic plan 9
Bank Type by Asset Size Small Bank < $1.284 Billion Intermediate Small Bank = > $321 Million and < $1.284 Billion Large Bank =>$1.284 Billion 10
Frequency of CRA Exam Banks with total assets <$250 million Based on CRA rating Outstanding Not before 60 months Satisfactory Not before 48 months Needs to Improve or Substantial Noncompliance Within 12 months Banks with total assets >=$250 million Outstanding or Satisfactory Not before 36 months Needs to Improve or Substantial
Noncompliance Within 12 months 11 Small Banks Lending test Loan-to-deposit Inside/outside assessment area Geographic distribution Borrower distribution Assessment Areas Complaints
CRA RATING Community Development Loans, Investments & Services (Optional) Public File Evidence of discriminatory or illegal practices 12 Intermediate Small Banks
Small bank procedures PLUS Community development test Loans Services Investments Responsiveness to community needs 13 Large Banks Lending test Lending activity In/Out
Borrower distribution Geographic distribution CD loans Innovative, complex, flexible lending practices Service test Retail CD services Innovative, complex
Investment test Innovative, complex 14 Wholesale or Limited Purpose Designation Must file a written request Community development test
CD loans CD services Qualified investments Innovativeness or complexity Responsiveness 15 Strategic Plan
Alternative election to small, intermediatesmall, or large bank examination processes Must: Include public participation in plan development Be submitted to, and approved by, the supervisory agency Include measurable goals 16 Exam Process Exam date set and published by supervisory agency Opportunity for public to comment on community
needs and bank performance Examiners conduct review Full-scope versus limited-scope Performance Evaluation (PE) is completed and made available to the public 17 Assessing Performance Conclude on performance factor in each assessment area
Rate performance under each test at the state or multi-state level Overall Bank Rating 18 Ratings Outstanding Satisfactory Needs to Improve Substantial Noncompliance
Record of meeting community needs is considered during applications for: New branch office Relocating main office Merger or acquisition Charter conversion 19
Community Development 20 Community Development Definitions Affordable Housing for low- or moderate-income (LMI) individuals Community Services for LMI individuals
Promoting Economic Development by providing financing for small businesses or farms Revitalize or Stabilize LMI geographies, distressed or underserved nonmetropolitan middle-income geographies, or designated disaster areas 21
Community Development CD regulation concepts CD Loans Qualified Investments CD Services Benefits the banks assessment area Responsive to community needs May be innovative or complex (large banks 22
Community Development Activities Must have a primary purpose of community development Benefits the banks AA(s) or a broader regional or statewide area that includes the banks AA(s) May be direct or indirect May be innovative or complex Large banks only 23 Community Development Loans
Examples of CD Loans Affordable housing: rehabilitation, construction, permanent financing for multi-family Loans for CD purposes to: Nonprofit organizations Construction or rehab of community facilities Financial intermediaries Local, state or tribal governments Finance environmental cleanup or redevelopment of industrial site
24 Qualified Investments Donation to an organization that provides emergency housing and services for the homeless. Investment in a Community Development Financial Institution (CDFI) that offers small loans to micro-businesses Donation of foreclosed property to an organization that develops affordable housing for LMI Deposit in a minority- or women-owned
financial institution 25 Community Development Services Bank employee teaches classes at a local junior high school to LMI students and their parents on how to budget and use credit wisely Bank contracts with a local organization to provide credit counseling to LMI families at risk of losing their homes to foreclosure Lender volunteers time with the local small business development center to provide technical assistance on financial services to small businesses Bank HR employee works with nonprofit to create a
HR manual 26 Food For Thought Bank Partnerships 27 Initiating a Relationship Where do you start? How to identify which banks need
to improve performance? How to know where a bank needs to improve? Who to contact? Where do you go from there? 28 What Banks Need in a Partner Understand the banks financial capacity and legal constraints. Provide documentation that
demonstrates how an activity qualifies under the definition of community development. Be proactive rather than reactive. Keep bank partners informed. 29 Bank Partnership Opportunities Deposit and other Services Affordable checking accounts Credit-builder loans IDA accounts
Organizational Capacity-Building Executives on loan as CD staff Board and loan committee membership Training for homebuyers/small business owners 30 Developing Effective Partnerships Pinpoint community development needs Understand your capacity and needs Understand the banks in your locale
Call reports, branch locations, PEs Ask other CD organizations in your area ID and call on the appropriate bank officer Be precise in your requests Provide full disclosure of your financials, personnel, systems, board, etc. Identify and share ways to help manage risk Provide documentation showing how an activity fits the CRA definition of community development Be honest and open in your communications 31 Resources
OCC Publications and Guidance: www.occ.gov Interagency Questions & Answers on Community Reinvestment http://www.ffiec.gov/cra/pdf/2016_QA_Federal_ Register_Notice.pdf Supervisory Agency Community Affairs Departments FFIEC - CRA resources, links to CRA Performance Evaluations: http://www.ffiec.gov FDIC - Deposit market share data, list of branches, Bank Call Reports, Money Smart: http://www.fdic.gov FRB of Dallas Publications and Guidance:
www.dallasfed.org/CD https://www.federalreserve.gov/consumersco mmunities.htm 32 Questions Scarlett Duplechain District Community Affairs Officer [email protected] 33
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