Josh Silver | CRA Exam Breakdown

Breaking Down CRA Exams

Breaking Down the CRA ExamJosh Silver, Vice President of Research and Policy, NCRCApril 20, 2012

Breaking Down the CRA Exam

• Federal Reserve Board http://www.federalreserve.gov

• Federal Deposit Insurance Corporation http://www.fdic.gov

• Office of Thrift Supervision (ceased operations but still has exams on wepbage) http://www.ots.treas.gov

• Office of the Comptroller of the Currency http://occ.gov

• Federal Financial Institutions Examination Council http://www.ffiec.gov

Federal Agencies Conducting CRA Exams


• CRA exams scrutinize banks about once every two years for banks or thrifts with assets > $250 million. Once every four or five years for small banks with assets < $250 million

• Banks and thrifts receive one of four grades: Outstanding, Satisfactory, Needs-to-Improve, and Substantial Non-Compliance

• Possible Low- and High-Satisfactory Ratings for component tests and geographical areas

CRA Exams: Frequency & Ratings


• Every 3 months, the federal agencies publish a schedule of CRA exams. • Obtain the schedule from the federal agency websites or from NCRC.

• Locate regional office of agency conducting CRA exam – NCRC can help

How to Find Out About CRA Exams


• Less than $250 million

• Lending test only • Five factors including responses to public complaints

• No reporting of CRA data on small business or community development lending

Small Banks


• Banks and thrifts with assets between $250 million and $1 billion.

• Lending and community development (CD) test.

• Not required to report CRA data on small business or farm lending

Intermediate Small Banks


• Large bank exam – banks with assets above $1 billion

• Lending, investment, and service test.

• Large banks must report CRA small business, farm and CD loan data.

Large Bank CRA Exams


• Community Development Test

• Strategic Plan – in lieu of regular exam, mostly used by non-retail banks

Exams for Wholesale and Limited Purpose Banks


• Assessment Areas – Make sure do not exclude LMI areas

• Affiliates – Bank can choose to include/exclude affiliates

• Performance context – make sure examiners adequately asses needs; don’t excuse poor performance on poverty rates, or lack of investment opportunities

Parameters for CRA Exams


• Do the measures fairly and rigorously measure performance?

• Lending Test – Bank’s percent of loans to LMI compared to all lenders, as a group. Consistently above or below? OCC – Market share analysis – Bank’s share of loans in LMI market compared to bank’s overall market share

• Investment Test – investments to Tier 1 capital or assets; in addition to quantitative measures, are investments innovative or responsive

• Service Test – any quantitative information on number of bank accounts; percent of branches in LMI neighborhoods compared to peers or demographics?

Performance Measures


• Excellent - corresponds to Outstanding

• Good – corresponds to High Satisfactory

• Adequate – corresponds Low Satisfactory

• Poor – corresponds to Needs to Improve

• Very poor – corresponds to Substantial Noncompliance

Words Used by Examiners


• CRA has leveraged trillions of dollars in loans, investments, and services since 1977; studies have demonstrated positive impact in increasing safe and sound loans and investments: Federal Reserve, Harvard University, NCRC

• Comments on CRA exams can influence ratings overall or in one or more geographical areas or component tests; lower ratings on any of the exam components are motivation for banks to improve

• Merger application process – more likely bank will make reforms or make a specific pledge if members of public comment; $180 billion Capital One pledge, for example.

• On-going discussions with bank CRA officials in your community

Why Being Active on CRA Exams is Important

THANK YOU!

To follow up with the speaker:

Josh Silver, Vice President of Research and PolicyNational Community Reinvestment Coalition202-464-2708 or [email protected]

Presentations will be available at www.ncrc.org/conference by April 30, 2012

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Josh Silver | CRA Exam Breakdown