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FDIC San Francisco Region Bankers’ Forum

FDIC San Francisco Region Bankers’ Forum. Community Reinvestment Act – Recent Amendments August 31, 2005. Overview. Provide an overview of the Amendments Provide tips on how to achieve your bank’s optimal CRA performance Questions & Answers. Amendments.

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FDIC San Francisco Region Bankers’ Forum

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  1. FDIC San Francisco Region Bankers’ Forum Community Reinvestment Act – Recent Amendments August 31, 2005

  2. Overview • Provide an overview of the Amendments • Provide tips on how to achieve your bank’s optimal CRA performance • Questions & Answers

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

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

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

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

  7. Intermediate Small Banks • Not required to collect and report small business and small farm loans • Not required to collect and report location of HMDA loans outside MSA

  8. HMDA Data • An important note for HMDA reporters: • The collection of borrower’s race, ethnicity, gender, and income are still required for loans made outside an MSA.

  9. Community Development • Important to identify and participate • Activities must have primary purpose

  10. Community Development – Existing Rules • Primary Purpose: • Affordable housing • Community services targeted to LMI individuals • Activities that promoted economic development • Activities that revitalize or stabilize LMI geographies

  11. Community Development (expanded) • Revitalize and Stabilize Revisions to Include: • Distressed or Underserved non-MSA middle income rural areas • Disaster areas to be eligible • FFIEC to publish eligible areas • Expanded definition is responsive

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

  13. Discriminatory or Illegal Credit Practices (continued) • Compliance Management System may be impacted • Bank’s policies/practices • Consumers being harmed • Management’s corrective actions • Historical performance

  14. Performance Context • Opportunities in assessment area for lending, investments & services • Bank’s product offerings and business strategy • Bank’s capacity & constraints • Size • Financial condition • Economic climate • Safety & Soundness limitations

  15. Performance Context (cont.) • Past performance • Performance of similarly situated lenders • Written comments in bank’s Public File • Demographic Data

  16. Achieving Optimal CRA Performance • Only 15% are rated Outstanding • Review your assessment area boundaries • New branches or office • Changes in product mix • Review in light of 2000 census tract designations

  17. Achieving Optimal CRA Performance (continued) • Review your lending distribution • Make sure majority of lending is within assessment area • Review those areas outside the assessment area

  18. Achieving Optimal CRA Performance (continued) • Establish and communicate goals for CRA performance • Are we striving for an Outstanding? • Help examiners understand your area and “performance context” • You know your market better than examiners • Explain anomalies and unique characteristics of your assessment area

  19. Achieving Optimal CRA Performance (continued) • Ensure your organization understands the definition of community development • Remember – activities must meet definition and primary purpose • Develop a mechanism to identify & track community development activities • Don’t get credit if you don’t provide for examiners to review • Missed or forgotten

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

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

  22. Achieving Optimal CRA Performance (continued) • Partnership with Community Groups • Be proactive

  23. Achieving Optimal CRA Performance (continued) • Serving your community • Expansion Plans • Reputation • Opportunities • Increase profits

  24. Resources • Joint Final Rule: http://www.fdic.gov/news/news/financial/2005/fil7905.html • CRA Exam Procedures http://www.ffiec.gov/cra/exam_overview.htm • Need Help? Jimmy Nguyen (hinguyen@fdic.gov) or (415) 808-8071

  25. Questions?

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